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DANGERS OF SELF-ISSUED USMCA CERTIFICATES

IMPORTERS MAY SIGN OWN CERTIFICATES – BUT AT OWN PERIL!

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One of the significant changes introduced by the Canada-United States-Mexico Agreement ("USMCA"), relative to the former NAFTA regime, was the expansion of who may complete and execute a USMCA Certification of Origin. In particular, importers are now permitted to complete and sign their own Certifications of Origin, rather than relying solely on exporters or producers.

While this additional flexibility can appear attractive, it brings with it significant compliance risks, with a spate of Canada Border Services Agency (“CBSA”) Verifications (Audits) highlighting the dangers associated with self-certifying your own USMCA imports.

In this Customs & Trade Report we review some of the significant problems associated with this practice, particularly when incorrect.

Importer-Issued Certification of Origin

Unlike the former NAFTA regime, the USMCA expressly permits an importer to complete and certify its own Certification of Origin.

Specifically, Article 5.2 of the USMCA provides that a certification may be completed by the importer, exporter or producer of the goods, provided it contains the nine required data elements prescribed by Annex 5-A .

While this change was intended to facilitate trade by giving importers greater flexibility in claiming preferential tariff treatment, it also places a clear evidentiary burden on the importer when it elects to self-certify the originating status of imported goods, and if that evidence is not “on hand”, puts the importer at great risk if an exporter or producer chooses not to cooperate later.

Hidden Risks

More specifically, the evidentiary burden becomes particularly significant during an Origin Verification conducted by CBSA or one of the other USMCA Parties. Origin Verifications allow the importing government (like Canada, in the case of imports to Canada, or the US in the case of imports to the US) to independently verify whether goods actually do qualify as USMCA originating, by effectively auditing the exporter or producer of the goods. If the foreign exporter or producer does NOT cooperate (e.g., refuses to fill out requested questionnaires or provide input-related documentation), or is otherwise unable to substantiate the originating status, the importing government (e.g., CBSA in the case of goods imported to Canada) is entitled to deny the importer’s claim for duty-free status – even if the importer at all times acted honestly and in good faith!

Once USMCA status is denied, the consequences are potentially DISASTEROUS for the importer – with up to four (4) or more years of liability for additional duties, interest and penalties.

Takeaways

An importer's ability to self-certify under the USMCA is a valuable trade facilitation measure – but not without SIGNIFICANT risk. Before signing any Certification of Origin – particularly for your own imported goods – one ought to ensure they possess sufficient supporting documentation to substantiate every applicable rule of origin requirement – and keep that information “on hand”.

Better yet, get Experienced Customs & Trade Counsel involved in the origin certification process, as the consequences of getting things wrong can be DISASTEROUS for a business!

For help with an Origin Verification, please click here.