As a small business owner, it can be hard to know how to get started in international trade. The U.S. Small Business Administration (SBA) knows one of the biggest obstacles holding them back is understanding the costs and rules for trading products across borders. They want to know:
- “How will my product be classified?”
- “What tariff will apply?”, or
- “Will my product benefit under a free trade agreement?”
One of the best ways to find answers to these questions is to request an advance ruling from the customs authority in the destination country. Advance rulings are official guidance on how your product will be treated by the importing government. Having an advance ruling helps you ensure compliance and increases predictability, consistency, certainty, and efficiency. Advance rulings can also help you determine some of the trade-related costs before shipping; thereby, reducing exporting risks and trade costs for small businesses. Indirect exporters that sell into supply chains can also advertise to their buyers that the product has an advance ruling.
Many governments issue advance rulings, and when entering into free trade agreements, the United States works to get other countries to commit to this best practice. Small businesses may be particularly interested in the United States-Mexico-Canada Agreement (USMCA) that came into force on July 1, 2020. Under USMCA, the United States, Mexico, and Canada agree to provide rulings on tariff classification, customs valuation, the origin of goods, and quotas within 120 days of a complete request. USMCA provides that exporters, importers, and producers (i.e., manufacturers) can all request these free rulings without having a local representative do so on your behalf. USMCA also committed each government to have a searchable website of advance rulings.
To help small business understand processes for requesting an advance ruling, the SBA’s Office of International Trade (OIT), has partnered with the U.S. Customs and Border Protection (CBP), the United States Census Bureau, the U.S. Trade Representative, and the Governments of Mexico and Canada to host webinars on how each country provides advance rulings. In the webinars, the government experts walk through the steps on applying, where to find published advance rulings, and where traders can find additional resources. You can watch the webinars on SBA’s YouTube Channel.
Small businesses that want to get advance rulings for exporting to Mexico and Canada can start by filling out forms online provided by Mexico (See under “normatividad”) and Canada (Tariff Classification or Origin). If importing into the U.S., you can also apply for a ruling from U.S. CBP through the e-ruling requests online or write to the U.S. CBP Office of Trade.
With questions or to learn more, contact SBA OIT’s International Trade Inquiry Point at (855) 722-4877 or international@sba.gov, or points of contact outlined in the recorded remarks. You can also receive free small business counseling from your local SBDC and explore more tools at www.sba.gov/tradetools.