In effect since January 1st, 1994, the North American Free Trade Agreement has greatly stimulated trade between Canada, the United States and Mexico and Canadian exporters are taking advantage of it. When it comes to shipping to these markets, there are commonalities and differences and we will look at both, focusing on the differences.
Trucks carry most of our exports to the U.S. and to Mexico but we have the additional option of using ocean freight to Mexico, as there are regular container services from both the East Coast and the West Coast, to the Atlantic ports of Vera Cruz and Altamira and the Pacific port of Manzanillo.
Regarding Commercial Invoices: since the 10-digit H.S. code varies from country to country, we should only show the 6-digit H.S. code on the commercial invoice, unless we know the full H.S. code of the destination country. For Mexico, it is good to have some of the information, like the goods’ description in Spanish. And speaking of language, the same NAFTA rules apply in both countries but for Mexico, it is a good practice to issue the NAFTA Certificate of Origin in Spanish.
Regarding terms of sales, the international Incoterms are used in both countries, although U.S. traders sometimes still refer to the old Revised American Foreign Trade Definitions (RAFTD) or to the International Commercial Code (ICC) and incorrectly use terms like ‘’FOB origin’’ or ‘’FOB destination’’.
The majority of Canadian exports to the U.S. are sold under DDP terms, with the Canadian exporter becoming the ‘‘importer of record’’ in the U.S., also referred to as a ‘’non-resident importer’’. This gives the Canadian exporter the burden of the border crossing and of conformity with U.S. laws, in addition to the costs. By contrast, our exports to Mexico are done mostly on CPT US-Mexican border terms (Laredo, El Paso, Tijuana, etc..) with the Mexican customer being the ‘importer of record’ and bearing the responsibilities and costs of customs clearance and conformity.
Import Customs entries (the ‘’Entry Summary’’ in the U.S. and the ‘’Pedimento’’ in Mexico) require relatively similar information and the FOB value is used for valuation in both countries. However, in the U.S., this applies to all imports whereas in Mexico, it applies only to NAFTA-eligible goods and for other products, the CIF value is used. Customs Brokers play a key role in both countries and require a Power of Attorney giving them the authority to file import declarations on behalf of importers. In Mexico, it is called a ‘’Carta de Encomendia’’ and it must be supported by a ‘’Poder notarial’’, attesting that the person who signed it has the authority to do so on behalf the company.
Another difference is that Mexico has a Value-Added Tax (similar to the GST in Canada and the VAT in Europe) called the ‘’Impuesto al Valor Agragado’’ (IVA), paid on imports, along with applicable duties, whereas the U.S. does not have one.
The additional requirements for Mexico, which we do not have when exporting to the U.S. are the obligations to file export declarations (B13A) and to use ISPM15 Wood Packaging Materials. When we export to the U.S., we are exempt from filing an export declaration (B13A) and U.S. exporters shipping to Canada do not file export declarations (SED) either. This is possible because the CBSA (Canada Border Services Agency) and the U.S. CBP (Customs and Border Protection), share the data from their respective import entries. There is no such exemption for Mexico, so we must file our export declarations with the same information and within the same deadlines as when we export overseas. This is usually done via the CAED Portal (Canadian Automated Export Declaration) operated by Statistics Canada.
As to Wood Packaging Materials (WPM), we have a similar situation in that there is a mutual exemption with the U.S but not with Mexico. So when we export to Mexico, the WPM used must be treated, stamped and documented in conformity with the ISPM15 regulations.
One last important point is Export Permits. Under a bilateral arrangement with the United States, export permits are not required for most ECL (Export Controls List) items shipped to the U.S. but when we export controlled goods to Mexico, we must have a valid individual Export Permit. For non-strategic U.S. origin goods, the provisions of the general export permit No. Ex.12 apply and it is sufficient to mention it accordingly on the B13A export declaration.
Contributed by: Christian Sivière, Import Export Logistics Solutions TM, Montréal