North American Free Trade Agreement in the United States

Introduction to the North American Free Trade Agreement

The North American Free Trade Agreement was signed between the Government of the United States of America, the Government of Canada, and the Government of the United Mexican States. NAFTA created the “North American Free-Trade Zone,” comprised of Canada, the United States and Mexico. The treaty is codified in U.S. law at 19 USC §3301 et. seq.

History

On December 17, 1992, Prime Minister Brian Mulroney in Ottawa, President Carlos Salinas de Gortari in Mexico City and President George Bush in Washington, D.C. signed the North American Free Trade Agreement (NAFTA). These three ceremonies marked the end of a process that began on February 5, 1991 when the three leaders announced they would negotiate the NAFTA.

As a result of the successful conclusion of these negotiations the NAFTA entered into force on January 1, 1994. One of the main results of the Agreement is the elimination of tariffs between Canada, Mexico and the United States on nearly all qualifying goods by the year 2003. Chapter 5 of the Agreement attempts to ensure that customs procedures will facilitate trade flows as much as possible.

Objectives

The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored-nation treatment and transparency, are to:

• eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties;
• promote conditions of fair competition in the free trade area;
• increase substantially investment opportunities in the territories of the Parties;
• provide adequate and effective protection and enforcement of intellectual property rights in each Party’s territory;
• create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes;
• establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

Tariff Phaseout

The NAFTA eliminates tariffs on most goods originating in Canada, Mexico and the United States over a maximum transition period of fifteen years. The schedule to eliminate tariffs already established in the Canada-United States Free Trade Agreement will continue as planned so that all Canada-United States trade is duty-free in 1998. For most Mexico-United States and Canada-Mexico trade, the NAFTA will either eliminate existing customs duties immediately or phase them out in five to ten years. On a few sensitive items, the Agreement will phase out tariffs over fifteen years. NAFTA-member countries have agreed to a faster phaseout of tariffs on certain goods.

During the transition period, rates of duty will vary depending upon in which NAFTA country the goods were produced. That is, the NAFTA may grant a Canadian good entering the United States a different NAFTA rate than the same Mexican good entering the United States. For most goods imported into Canada, there will be three NAFTA rates; the rate depends on whether the goods are of U.S. origin, Mexican origin or produced jointly with U.S. and Mexican inputs. To know which rate of duty applies, traders must first establish that the goods meet the NAFTA rules of origin and then use the tariff rules found in Annex 302.2 of the NAFTA.

Generally, tariffs will only be eliminated on goods that “originate” as defined in Article 401 of the NAFTA. That is, transshipping goods made in, say Guatemala, through Mexico will not entitle them to preferential NAFTA duty rates. The NAFTA does provide for reduced duties on some goods of Canada, Mexico, and the United States that do not originate but that meet specified conditions. For example, limited quantities of goods that are non-originating may be eligible for preferential NAFTA treatment under special tariff-rate quotas.

The NAFTA creates a free trade area, not a common market. Customs administrations will still exist and goods entering Canada, Mexico or the United States must still comply with each country’s laws and regulations. The NAFTA does not allow for the unchecked movement of goods among Canada, Mexico and the United States.

Effect of the NAFTA

The four main criteria set out in the entry about Rules of Origin of this legal Encyclopedia are the basic conditions to confer origin. However, a good that does not meet such requirements may, in some cases, qualify as originating by using additional options described below:

• Drawback and Duty Deferral Programs: see related entries
• Commercial Samples and Printed Advertising Materials: see related entries
• Temporary Admissions: see related entry
• Repairs and Alterations: see related entry
• User Fees: see related entry
• Antidumping and Countervailing Duties: : see related entries
• Assembly Operations (U.S. HTS 9802.00.80)
• GSP/GPT/MFN

Description

Legal Materials

The original NAFTA treaty is posted with the NAFTA Secretariat (choose “English” and then “Legal Texts”) and at www.solon.org/Treaties/NAFTA/index.html. Another version is on Lexis (INTLAW;NAFTA).

The best single source for NAFTA materials is probably the multi-volume North American Free Trade Agreements by James R. Holbein and Donald J. Musch. In addition to the treaty itself, this set includes just about all the related treaties plus a lot of other related materials.

The NAFTA Secretariat posts the NAFTA treaty, Rules of Procedure and Decisions. More primary materials are available free from WorldTradeLaw.net

Lexis has lots of NAFTA materials, including NAFTA Panel Review Decisions (INTLAW;NAFDEC).

For more information and resources, see Basic Info and Online Sources for NAFTA and CAFTA Research by Francisco Avalos and Maureen Garmon. A bibliography of NAFTA-related materials was published in a 1993 issue of The Record (v.48 p.657). The Duke law library posts a research guide on NAFTA.

North American Free Trade Agreement

Find more information on North American Free Trade Agreement in relation to the Customs Trade Law in the legal Encyclopedias.

North American Free Trade Agreement and the International Trade Law

Introduction to North American Free Trade Agreement, 1994

In the context of the legal history: The North American Free Trade Agreement, known usually as NAFTA, is a free trade agreement among Canada, the United States, and Mexico. NAFTA went into effect on January 1, 1994. NAFTA is also used to refer to the tripartite trading bloc of North American countries.

Concept of North American Free Trade Agreement (NAFTA) in Foreign Trade

A definition of North American Free Trade Agreement (NAFTA) in relation with foreign trade is provided here: The formal agreement, or treaty, among Canada, Mexico, and the United States to promote trade amongst the three countries. It includes measures for the elimination of tariffs and nontariff barriers to trade, as well as numerous specific provisions concerning the conduct of trade and investment.

Resources

In the context of the legal history:

See Also

• International Treaties
• Multilateral Treaties

Resources

See Also

Further Reading

• North American Free Trade Agreement entry in the Dictionary of International Trade Law (Raj Bhala)
• North American Free Trade Agreement entry in the Gale Encyclopedia of U.S. Economic History (Thomas Carson; Mary Bonk)
• North American Free Trade Agreement entry in the Dictionary of International Trade
• North American Free Trade Agreement entry in the Dictionary of International Trade: Handbook of the Global Trade Community (Edward G. Hinkelman)

North American Free Trade Agreement (nafta) in the International Business Landscape

Definition of North American Free Trade Agreement (nafta) in the context of U.S. international business and public trade policy: Free trade area between Canada, Mexico, and the United States.

North American Free Trade Agreement (nafta) in the International Business Landscape

Definition of North American Free Trade Agreement (nafta) in the context of U.S. international business and public trade policy: A trade agreement removing trade barriers between the United States, Canada, and Mexico.