Customs Consultant Gives NAFTA Compliance Tips, Predicts India's GSP Exit Far Off

Many U.S. importers "tend to just assume things are on the up and up" with their vendors, said Pete Mento, vice president for global trade and managed services at Crane Worldwide Logistics. Mento, who conducted a webinar on free trade deals May 24, said that's a mistake. Mento said often "people are claiming free trade agreements simply because it was flown to the U.S." from a free-trade partner country. "You gotta be able to prove your stuff qualifies. Because if you can’t prove it, the government’s going to come down on you like the hammer of the gods," he said.

He said that importers should pull their ACE data, and tally the volume of imports the company is claiming free trade benefits for. He asked them to ask themselves if they are comfortable in justifying regional value content and country of origin for those goods. Can they show their work?

If not, he said, "Get up on that pony and ride. In the course of a focused assessment, [Customs officials] are going to catch up to it."

Mento gave an example of a time Crane was engaged in audit defense for a client. The company had been importing a steel product from Canada for years. Mento speculated that the Canadian manufacturer decided to stop producing locally in order to make a bigger profit. Mento said the Crane and client company officials walked into the warehouse to check on the steel CBP was asking about.

"Stamped on the side of it, it said, 'Made in China,'" he said. He said that Customs officials had probably seen that at the port, and that's why they were auditing.

While most cases probably won't be that dramatic, Mento reminded importers to recalculate qualification if they've changed vendors or re-engineered the product, because that can take the product out of qualification. Importers should keep paperwork five years -- but only five years, he said.

"If I came to your business right now," he said, and suggested, "'Hey let’s look at something you claimed NAFTA on.' Would you be able to pass that pop quiz?" He asked importers to think about how long it would take to put their hands on the documentation to prove the trade benefits were justified. "Are we talking 20 minutes or are you talking 20 days?"

Mento also talked about how trade deals and trade programs are changing under the Trump administration. He said because of Section 301 tariffs on China, "a tremendous amount of new business" has flowed to CAFTA-DR partner countries -- Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua and the Dominican Republic. He said that if the U.S. puts tariffs on nearly all other Chinese imports, more manufacturing will go to Central America.

He talked about the NAFTA rewrite, which he called "a makeover of sorts," and said, if ratified, it would benefit the U.S. automotive industry. He said going from 62.5 percent to 75 percent North American content for autos is a big deal. He said he still has a hard time wrapping his head around the labor wage provision, but said that 40 percent to 45 percent of auto and light truck content will have to be made by workers making at least $16 an hour by 2023.

Mento said that unless Republicans recapture the House majority, he doesn't think the new NAFTA will be ratified for the next five or six years -- and he said he doesn't think President Donald Trump will withdraw from NAFTA, either.

The Trump administration has said it will remove India from benefits under the Generalized System of Preferences, but did not do so, even as it removed Turkey, whose removal was announced at the same time as the India announcement. Mento said, "He probably won’t until we sort what’s going on with China." That's less because the U.S. wants importers to shift sourcing from China to India and more, Mento believes, because the U.S. is trying to use GSP to get export markets opened in India. Negotiators at the Office of the U.S. Trade Representative are consumed with China right now, he said. "So we’re not going to start negotiating changes with India until we have the people and resources to do that."