The NAFTA eliminates tariffs on most goods originating in Canada, Mexico and the United States over a maximum transition period of fifteen years. 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.
During the transition period, rates of duty will vary depending upon in which NAFTA country the goods were produced. 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.
In conclusion, 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.
Important issues considering exporting textile goods to Mexico:
The basic origin rule for textile and apparel articles is "yarn-forward".
This means that the yarn used to form the fabric (which may later be used
to produce wearing apparel or other textile articles) must originate in
a NAFTA country. Thus, a wool shirt made in Canada from fabric woven in
Canada of wool yarn produced in Argentina would not be considered originating
since the yarn does not originate within a NAFTA country. If, however,
Argentine wool fiber was imported into Canada and spun into wool yarn,
which was then used to produce the wool fabric, the shirt would be considered
originating.
Less demanding rules of origin govern certain knitted underwear, brassieres,
and shirts made from fabric in short supply in North America, and textile
and apparel articles made from fabric not commonly produced in North America.
For example, silk and linen apparel articles follow a single-transformation
instead of a "yarn-forward" rule. Thus, silk blouses are considered originating
even if made from non-originating fabric, provided the fabric is cut and
sewn in one or more NAFTA countries. These exceptions give producers flexibility
to import materials not widely produced in North America.
However, stricter rules of origin exist for certain textile and apparel
articles made of fibers that are produced in abundance in Canada, Mexico
and the United States. For example, cotton yarn and cotton knitted fabrics
follow a fiber-forward rule for goods traded between the
three countries while man-made fiber sweaters follow a "fiber-forward";
rule as to trade between the United States and Mexico.
Tariff Preference Levels
In order to allow flexibility, textile and apparel exports will have access to tariff preference levels (TPLs). Specifically set quantities of certain fibers, yarns and fabric that do not meet the Article 401 origin criteria, but are subject to significant processing in one or more NAFTA countries, can still be eligible for preferential NAFTA rates. Quantities of these goods exceeding the tariff preference level will be subject to the most-favored-nation (MFN) rates of duty. For example, apparel goods made from non-originating fabric that is cut and sewn in North America may be eligible for TPLs.
Tariff Elimination
With respect to trade between Mexico and Canada, tariffs for most textile articles will be eliminated over a period of eight years; for apparel, the adjustment period is ten years.
With respect to trade between Mexico and the United States, tariffs for many textile and apparel articles will be completely eliminated upon entry into force of the Agreement. Others will be eliminated over a six-year period, and all tariffs on textile and apparel articles will be eliminated within ten years.
Special Regime
The "Special Regime" provided bilateral access to the U.S. market for certain apparel articles assembled in Mexico of fabric formed and cut in the United States. This agreement was embodied in the U.S. tariff under HTS 9802.00.8010. Under the NAFTA, the United States eliminated all duties and quotas applied to both these categories of goods. These goods are now classifiable under a new tariff number, HTS 9802.00.90, that provides for:
Textile and apparel goods, assembled in Mexico in whole of fabrics wholly formed and cut in the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, provided that goods classifiable in chapters 61, 62 or 63 may have been subject to bleaching, garment dyeing, stone-washing, acid-washing or perma-pressing after assembly as provided herein.
Exporters' and Producers' Obligations
Exporters or producers that prepare Certificates of Origin shall provide copies to their own customs administration upon request.
Exporters or producers that provide a Certificate of Origin must maintain records pertaining to the exportation for five years or such longer period as may be specified by their countries.
Exporters or producers that complete a Certificate of Origin shall notify all parties to whom the Certificate was given of any change that could affect its accuracy or validity. Importers in Mexico, and exporters and producers in Canada and the United States may request an advance ruling from the General Direction of Revenue Policies and International Fiscal Affairs, Under secretariat of Revenue, Ministry of Finance and Public Credit (Dirección de Politica de Ingresos y Asuntos Fiscales Internacionales, Subsecretaría de Ingresos, Secretaría de Hacienda y Crédito Público)
Information sources on exporting from the United States to Mexico
1) U.S. Department of Commerce
Office of Mexico
Flash Facts System
Automated Facsimile Delivery System
(Available in the U.S. only)
Tel:(202)482-4464
An automated system available 24 hours a day, that will transmit a wide range of information directly to your facsimile machine. Topics include: NAFTA's expected impact on the U.S. economy; trade, economic, and marketing data; Mexican regulatory requirements; and Mexico's investment climate)
2) U.S. Department of Commerce
Office of Canada, Room 3033
14th Street and Constitution Avenue, N.W.
Washington, D.C. 20230
Tel: (202) 482-31 01
3) http://www.tradecompass.com
4) http://www.shcp.gob.mx: Contains official economic and financial information on Mexico. Includes public finances, economic and financial developments and variations in the most relevant monetary aggregates.
5) http://www.uschamber.org/chamber: Contains the latest news, information, resources and events from the world's largest federation of business, chambers of commerce, and American chambers overseas.
6) http://www.tpusa.com: One of the most important sources of information for international trade.
7) http://www.nafta.net/mexbiz: Mexico Business is the leading information source on doing business in and with Mexico.