North American Free Trade Agreement
The most significant aspect of the bilateral commercial relationship between the United States and Mexico is the North American Free Trade Agreement (NAFTA), which was passed in 1994 and established a free trade zone for Mexico, Canada, and the United States. Under the North American Free Trade Agreement, all tariffs and barriers on American exports to Mexico and Canada were erased as of January 1, 2008. (NAFTA).
Mexico is the second-largest export market for American goods and the third-largest commercial partner of the United States. Mexico was our second-largest export market and third-largest trading partner in 2018 (after China and Canada). 678 billion USD worth of goods and services were traded in both directions, supporting millions of jobs in the United States both directly and indirectly. In 2018, the United States sold 265 billion USD worth of goods and 34 billion USD worth of services to Mexico, totaling 299 billion USD in sales. 27 American states either rank Mexico as their top or second-largest export market.
NAFTA covers all services with the exception of those related to air, sea, and basic telecommunications. The agreement also offers protection for intellectual property rights in a number of fields, such as patent, trademark, and copyrighted content. Contracts for services and construction at the federal level are also covered by NAFTA's provisions on government procurement. Investors from the United States are also assured of receiving the same treatment as investors from Mexico and Canada.
Your business is able to deliver some products to clients in Canada and Mexico duty-free thanks to NAFTA. Under the origin standards of NAFTA, products may qualify in a number of ways. This may be because the items were entirely purchased or created by a NAFTA member or because, in accordance with the product's rule of origin, there was sufficient labor and input in a NAFTA member to transform the product into what it is at export.
Code of Conduct
You must adhere to the product's rule of origin for items that are partially obtained, typically through tariff shift or regional value content. Learn more about the FTA Rules of Origin and how to read and apply them.
The rules of origin (ROO) may be found in the final text of the FTA. Occasionally, a particular ROO may be revised. For the most updated version of the ROOs consult the Harmonized Tariff Schedule of the United States, General Notes — General Note 33.
There may be other criteria to qualify your goods in addition to the aforementioned regulations of origin:
- The value of the non-original components used in the manufacture of the good may be decreased by the producer through accumulation.
- A very small portion of non-originating items that don't comply with a tariff shift rule might be disregarded by the exporter thanks to the de minimis clause.
- Goods that must be sent directly from one FTA party to another FTA party are known as direct shipments.
- Fungible items and materials (components) are those that are interchangeable for commercial purposes and have almost equivalent qualities.
- Goods used in the manufacture, testing, or inspection of an item but not physically included into the good are referred to as indirect materials.
Documenting/Claiming Origin
Read the section below for instructions on how to declare that your product is eligible for preferential tariff treatment once you have established that it is NAFTA-eligible.
Key Advice for NAFTA Certificates of Origin:
- The NAFTA Certificate of Origin must be completed by the exporter, not the importer.
- The exporter must complete a NAFTA Certificate of Origin once they have decided the product is eligible for NAFTA. Unless the commodity is worth less than $1,000 USD and is headed for Canada or Mexico. In these circumstances, the exporter should only provide a written declaration that the goods comply with NAFTA requirements on the commercial invoice.
- The exporter must deliver the original or a duplicate of the Certificate of Origin to the importer once it has been completed. It is advised that the shipment additionally contain a copy of the Certificate of Origin. Five years after the date of importation, or for such a long period as a Party may set following the completion of the transaction, the exporter is obligated to maintain any paperwork related to NAFTA claims.
- Certificate of Origin under NAFTA (PDF from Customs and Border Protection).
- View Parts One and Two of the video series for further information on how to fill out a NAFTA Certificate of Origin.
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