An Overview of NAFTA
3/18/2002
by Sue Senger | Format for Print

The underlying principles of the North American Free Trade Agreement (NAFTA) were founded on the premise of promoting employment and economic growth through competitive trade and investment among the United States, Canada, and Mexico.

The NAFTA presently is not intended to be a common market as exists in Europe. There are still borders, customs formalities, immigration requirements, separate laws, currencies, and languages in all three countries. The NAFTA “free trade” agreement only provides free or reduced duties on merchandise crossing those borders that qualify as “originating” as defined by the agreement. These goods are entitled to preferential treatment.

The primary objective for creating a free trade area among the three countries is to eliminate barriers in trade on goods originating in Canada, Mexico, and the United States. The treaty also promotes conditions of fair competition, increased investment opportunities, and adequate protection for intellectual property rights.

NAFTA defines a strict standard for rules of origin and procedures needed to define which goods are eligible for this preferential tariff treatment. The agreement outlines streamlined procedures for importers, exporters, and manufacturers of the three member countries, consisting of uniform resolutions to ensure continuity.

The North American Free Trade Agreement consists of five volumes. Volume I consists of chapters 1 to 22, which is the basic text of the agreement dealing with trade in products and services, investment and other issues. Volume II contains the specific rules of origin and other annexes to the basic text. The remaining three volumes are the tariff schedules of the three countries, providing the schedules for staged duty rate reductions.

Getting Started

Step 1: The best place to begin your search for NAFTA compliance starts with the NAFTA Table of Contents. There may be special provisions that affect your goods being exported or imported. Various provisions will apply to all goods, but there are specific articles that apply to certain goods. You must review these articles apply them where necessary.

Step 2: Classify your product(s) that you are exporting according to the Harmonized Tariff Schedule of the United States.

Step 3: Determine current duty and tariff elimination for product(s) into Mexico, Canada, and the United States. Prioritize and qualify goods as “originating” according to the largest quantity (dollar value and/or number of units), higher duty, and tariff reduction staging category.

Step 4: Determine if goods qualify as “originating goods.”

Step 5: Determine country of origin marking.

Step 6: Complete NAFTA Exporter’s Certificate of Origin for “originating goods.”

Step 7: Maintain and update product records and NAFTA Exporter’s Certificate of Origin as required.

By following these steps correctly, you will be compliant with NAFTA.

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