I. INTRODUCTION
Chapter 7 of the USMCA is dedicated specifically to customs and trade facilitation. In contrast, NAFTA did not include a chapter on customs and trade facilitation. The procedures included in Chapter 7 are intended to streamline international trade by means of increased transparency and the use of procedures for the expedited release of express shipments.
Chapter 7 of the USMCA is based on the Agreement on Trade Facilitation established in the Protocol Amending the Marrakesh Agreement Establishing the World Trade Organization of November 27, 2014.
II. EXECUTIVE SUMMARY
Customs and foreign trade operations, procedures and inspections are regulated under Chapter 7, particularly with respect to the standards and guidelines relating to trade facilitation, customs clearance, use of technology, customs procedures, customs audits and determinations, transit of goods, penalties and matters generally relating to customs and foreign trade. Accordingly, Chapter 7 is an important pillar for the facilitation and development of trade between the USMCA Parties.
III. LEGAL DISCUSSION
A summary of the key provisions of Chapter 7, which is comprised of Section A: Trade Facilitation, and Section B: Cooperation and Enforcement, is provided below.
Article 7.1: Trade Facilitation. The Parties affirm their rights and obligations under the Agreement on Trade Facilitation set forth in Annex 1A of the WTO Agreement. In order to minimize costs to traders, each Party must administer its customs procedures in a manner that facilitates the importation, exportation and transit of goods in compliance with its law. Moreover, the Customs and Trade Facilitation Committee established by the Parties under Article 7.24 must discuss additional measures to facilitate trade.
Article 7.2: Online Publication. Each Party must make available, on a free, publicly accessible website, updated information related to customs matters, such as: practical steps required to carry out customs clearance procedures, lists of the documentation and data required for such procedures, links to all applicable laws, regulations, duties, taxes, fees and charges related to such procedures, and, in general, information to duly carry out and/or correct any customs procedure.
Article 7.3: Communication with Traders. To the extent possible, in accordance with its law, each Party must publish, in advance, proposed regulations on trade and customs matters of general application and provide traders an opportunity to comment on such before their adoption. Each Party must also adopt a mechanism to regularly communicate with traders within its territory, regarding customs and trade procedures and regulations.
Article 7.5: Advance Rulings. Each Party must issue an advance ruling, prior to the importation of an article into its territory, that sets forth the treatment that it will provide to such article at the time of its importation. Anyone with a justifiable cause may request such advance ruling, even if the applicant does not have an existing relationship with a person located within the territory of such Party. Advance rulings will be issued regarding tariff classification, application of customs valuation criteria, the origin of an article, including whether such qualifies as originating in a USMCA Party, and whether an article is subject to a quota or a tariff rate quota, among other customs matters. Each Party must adopt a uniform procedure throughout its territory to issue such rulings. The rulings must be issued as expeditiously as possible and must take effect on the date of their issuance but may be modified or revoked if there is a change in circumstances or applicable legislation. However, no Party may retroactively apply such revocation or modification to the detriment of the party that requested such ruling.
Article 7.6: Advice or Information Regarding Duty Drawback or Duty Deferral Programs. Each Party must also provide, upon request from an importer in its territory, or an exporter or producer in the territory of another Party, advice or information relevant to duty drawbacks or duty deferral programs.
Article 7.7: Release of Goods. Each Party must adopt simplified procedures for the efficient release of goods, in order to facilitate trade and customs clearance. Such procedures must allow electronic submission of documents and must provide for the immediate release of goods upon compliance with the applicable requirements and procedures, or otherwise promptly notify the importer, to the extent permitted by its law, the reasons why the goods are not being released, and which border agency, if not the customs administration, has withheld the release of the goods. A Party may release goods conditioned on the granting of security, provided that the security amount is not burdensome and that the security is discharged as soon as possible after its customs administration is satisfied that the obligations arising from the importation of the goods have been fulfilled or, in the case of instruments covering multiple entries, is no longer required by the customs administration. Finally, the Parties must allow goods to be moved within their territories from one point of entry to another point at which the goods are intended to be released.
Article 7.8: Express Shipments. Each Party must provide expedited customs procedures for express shipments, and shipments valued at or below a fixed amount established under the Party’s law, while maintaining appropriate customs controls. Such procedure must allow, to the extent possible, for the release of such shipments immediately after arrival based on minimum documentation or a single submission of information. Under normal circumstances, no customs duties or taxes will be assessed at the time or point of importation of the shipment.
Article 7.9: Use of Information Technology. A significant new requirement of Chapter 7 is that the Parties must make use of information technology that: facilitates customs procedures, makes all required forms available, allows electronic payments and filings, uses electronic risk management systems, allows importers to correct declarations through its electronic systems and, in general, uses available technology in all customs matters.
Article 7.10: Single Window. The USMCA requires the Parties to establish and maintain a single entry point system for the electronic filing of documentation and information for purposes of importation of goods into their territory, resulting in faster and more efficient customs clearance. Mexico has used this system since 2012.
Article 7.11: Transparency, Predictability, and Consistency in Customs Procedures. The customs procedures implemented by each Party must be generally transparent, predictable and consistent throughout each Party’s territory. Also, each Party must consider international standards and international trade instruments in order to develop its own customs procedures.
Article 7.12: Risk Management. Each Party is required to maintain a risk management system to focus on high-risk importations and simplify low-risk importations. Such systems may not be arbitrary or discriminatory and must be reviewed periodically.
Article 7.13: Post Clearance Audit. In order to ensure compliance with its customs and related laws and regulations, each Party must adopt post-clearance audits in a risk-based and transparent manner. Any party subject to a customs audit must be notified of the results, including the basis of the results and the audited party’s rights and obligations with respect to such audit.
Article 7.14: Authorized Economic Operator. The USMCA requires the Parties to maintain the internationally recognized Authorized Economic Operator or “AEO” program, intended to strengthen supply chain security in foreign trade through the implementation of minimum security standards in coordination with private companies.
The C-TPAT program was established as a result of the September 11, 2001 terrorist attacks in the United States. Similarly, in 2005, the World Customs Organization created the SAFE Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework), to ensure security of supply chains, whereby international traders were recognized by the customs administrations of each country as trustworthy, after having complied with certain minimum standards in certain areas of their operations.
Article 7.15: Review and Appeal of Customs Determinations. Each Party must guarantee that each party that receives a customs determination has access to uniform administrative, judicial or quasi-judicial appeals and reviews throughout the Party’s territory. The recipient of the customs determination must be notified of decisions relating to such procedures and provided with an explanation with respect to the same.
Article 7.17: Transit. Goods shall be deemed to be in transit across the territory of a Party when the passage across its territory is only a portion of the complete journey beginning and ending beyond the border of such Party. This does not apply to aircraft transit but does apply to the air transport of goods. The Parties may request only enough documentation and customs controls to identify the goods in transit and to ensure compliance with transit requirements imposed by the Party. Therefore, a Party may not apply customs charges, procedures, or inspections, other than those necessary for specific law enforcement purposes. If a guaranty, or other bond or security for traffic in transit is required, a Party shall cancel such guaranty or bond promptly once it determines that its transit requirements have been satisfied.
Article 7.18: Penalties. Each Party must implement measures that will allow for the imposition of penalties for breaches of its customs laws, regulations or procedures. Such penalties must be applied in a uniform manner and be proportional to the severity of the breach incurred by the sanctioned party. Clerical or minor errors in a customs transaction shall not be treated as a breach, and most errors may be corrected prior to their discovery by the authorities. An explanation must also be given whenever penalties are imposed for failure to comply with customs requirements.
Article 7.19: Standards of Conduct. Each Party must implement systems to deter their customs officials from engaging in any activities that would result in private gain or monetary benefits. Further, the Parties are required to implement systems to allow interested parties to submit complaints regarding perceived improper or corrupt policies or behavior.
Article 7.20: Custom Brokers. Under this provision of Article 7, companies or individuals are allowed, as they deem appropriate, to self-file customs declarations, without customs brokers. If special requirements are imposed to register as a customs broker, such requirements must be transparent and uniform. Also, a Party may not impose arbitrary limits on the number of ports or locations at which a customs broker may operate.
Article 7.21: Border Inspections. The Parties must cooperate with each other in order to facilitate trade, specifically by facilitating customs clearance procedures. As appropriate, they must coordinate to develop procedures or facilities adjacent to ports of entry for the efficient movement of goods.
Article 7.22: Protection of Trader Information. Each Party must apply measures to regulate the collection, protection, use, disclosure, retention, correction, and disposal of information collected from parties engaged in international trade. Also, each Party is required to protect confidential information.
Article 7.24: Trade Facilitation Committee. The USMCA establishes a Trade Facilitation Committee to facilitate the exchange of information, to allow a forum for expressing views and resolving customs conflicts, and, in general, for the purpose of engaging in any other customs activities the Parties may wish to conduct. The Trade Facilitation Committee will meet once per year.
Section B: Cooperation and Enforcement. Section B of Chapter 7 sets forth the obligations of the Parties to expand their trade enforcement efforts, their cooperation in international trade matters, and to exchange customs information. For such purposes, a Sub-Committee on Customs Enforcement is established under Chapter 7.
IV. CONCLUSION
Chapter 7 of the USMCA is intended to facilitate and expedite customs matters through the implementation of clearer and simpler customs rules, the improvement of cooperation among the Parties, and the optimization of customs procedures. Chapter 7 is also very focused on providing guidance and assistance to members of the general public who seek to carry out international trade transactions and stipulates the Parties’ use of new means of technology to allow for the facilitation of most customs procedures.
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