The NAFTA Producer Solicitation: The Producer Responds

John Goodrich | June 27, 2016 | NAFTA
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The NAFTA Producer Solicitation: The Producer Responds | Shipping SolutionsIn our last installment, a NAFTA participant issued a lengthy diatribe berating his producers for poor NAFTA documentation. Upon receiving this letter, the producers responded in kind.

Following is a summary of the responses received.

Oh Exalted Client, Ruler of Our Universe, in Whose Presence We Dare Not Breathe the Same Air and With Whose Wisdom We Dare Not Trifle:

We are in receipt of your snarky letter and would like to point out just a few issues you may have overlooked, you self-centered twits.

We are not stupid, thank you.

You have sent us a list of 250 items. You have not purchased 180 of these items from us within the past five years. Twenty of these included on the list are not items we stock or sell to you. Perhaps it is you who needs to get your act together before proceeding with your solicitation

If you are not placing commercial pressure on us, why have you charged us $10K for telling you the truth that one of our goods was imported from China? We outsourced this item to China at your request in order to meet competitive pricing pressures. This was done with full knowledge of and approval by your quality engineers.

You can't have it both ways. You may have the low-priced Chinese product or the higher-priced NAFTA-eligible product. Please make up your minds and we will source accordingly.

You do realize that many of your finished goods and our components are already duty free in Canada, right? Issuing a certificate of origin to you is not going to make them any freer. Can you please explain to us why you insist on proceeding with this senseless charade?

We also provide you the safety gloves and glasses used by your employees on the production line. These are considered indirect materials under the NAFTA and can be considered originating value regardless of any response from our company.

Without cooperation from your company, we are unable to classify your proprietary components. As a result, we are unable to identify the proper NAFTA rule of origin and to make a final determination. You help us with the HS codes, and we'll help you with a more accurate NAFTA certificate. Deal?

We estimate that responding accurately to your request for NAFTA certification will require us to expend at least four hours per item. This request for NAFTA certification is beyond the scope of work currently detailed within our contracts with you. We therefore respectfully request you compensate us for that time. At a modest $25 per hour, $100 per item, 250 items we will issue an invoice for $25K. Upon receipt of payment, we will release this year's NAFTA certificate to you.

Perhaps you are under some misconception that we need your paltry business. We are the single global supplier of the material for which you are requesting information. After some consideration we have determined that our business is not positively affected by participation in trade agreements. We therefore regret to inform you we will not be providing you a certificate of origin.

Regrettably Yours,
Your Soon to be Former Supplier

Obviously, an intervention is needed here.

As you read these letters you might recognize your own firm. You may find yourself identifying with one or both of the parties. Before resorting to either of these less-than-diplomatic letters, keep in mind the following the next time you send or receive a NAFTA solicitation.

NAFTA Is Voluntary

Even though there might be considerable commercial pressure to cooperate, there is nothing within the NAFTA that compels you to participate. Before resorting to sniping at each other, buyers and sellers should take a more collaborative approach. Buyers in particular should remember that their suppliers could choose to opt out of the program at any time.

NAFTA Has Rules

If you are going to play the game you have to play by the rules. Admittedly the rules are not intuitive. If the program is not clear to you, get yourself to a seminar before completing any documentation for your customers.

NAFTA Has Consequences

If you choose to ignore the rules, the regulators of Mexico, Canada and the United States have authority to get your attention. While the U.S. government can fine a U.S. company, the other governments have the authority to bar your participation in their countries.

NAFTA Has Benefits

Duty avoidance is the primary benefit of participation. As a non-importing supplier this may not be obvious to you. Your NAFTA originating goods, however, should be more competitive in the marketplace when compared with non-originating goods.

NAFTA Is a Process

The certificate of origin is the last step in that process. Prior to issuing a certificate of origin, companies must first certify that their goods originate under the NAFTA. This requires them to classify their goods and any material inputs used in manufacturing those goods. It also requires them to solicit certificates of origin from their producing suppliers.

This brings us full circle. Solicitation, while a nuisance, is just one of several important steps in the greater NAFTA process. Without dependable statements of origin from producers of goods and materials, parties may not be able to achieve the duty avoidance benefit of the NAFTA. Instead they risk the consequences.

This post was originally published in May 2013 and has been updated to include current information, links and formatting.

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