:Title:NAFTA Notes
Author: White House
Document-Date: 29 Sept 1993
Content-Type: text/plain; CHARSET=US-ASCII
Content-Length:22829

  
 
 
 
 
 
                                         NOTES 
 
 
            1.    Article 301 (Market Access - National Treatment):  "goods 
            of the Party" as used in paragraph 2 includes goods produced in 
            the state or province of that Party.  
 
            2.   Article 302(1) (Tariff Elimination):  this paragraph is 
            not intended to prevent any Party from modifying its non-NAFTA 
            tariffs on originating goods for which no NAFTA tariff 
            preference is claimed.  
 
            3.   Article 302(1) (Tariff Elimination):   this paragraph does 
            not prohibit a Party from raising a tariff back to an agreed 
            level in accordance with the NAFTA's phase-out schedule 
            following a unilateral reduction. 
 
            4.   Article 302(1) and (2) (Tariff Elimination):  paragraphs 1 
            and 2 are not intended to prevent a Party from maintaining or 
            increasing a customs duty as may be authorized by any dispute 
            settlement provision of the GATT or any agreement negotiated 
            under the GATT. 
 
            5.   Article 303 (Restriction on Drawback and Duty Deferral):  
            in applying the definition of "used" in Article 415 to this 
            Article, the definition of "consumed" in Article 318 shall not 
            apply. 
 
            6.   Article 305(2)(d) (Temporary Admission of Goods):  where 
            another form of monetary security is used, it shall not be more 
            burdensome than the bonding requirement referred to in this 
            subparagraph.  Where a Party uses a non-monetary form of 
            security, it shall not be more burdensome than existing forms 
            of security used by that Party. 
 
            7.   Article 307(1) (Market Access - Goods Re-Entered after 
            Repair or Alteration):  this paragraph does not cover goods 
            imported in bond, into foreign-trade zones or in similar 
            status, that are exported for repairs and are not re-imported 
            in bond, into foreign-trade zones or in similar status. 
 
            8.   Article 307(1) (Market Access - Goods Re-Entered after 
            Repair or Alteration):  for purposes of this paragraph, 
            alteration includes laundering used textile and apparel goods 
            and sterilizing previously sterilized textile and apparel 
            goods. 
 
            9.   Article 318 (Market Access - Definitions):  10-digit items 
            set out in the Tariff Schedule of Canada are included for 
            statistical purposes only. 
 
 
 
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            10.  Article 318 (Market Access - Definitions):  with respect 
            to the definition of "repair and alteration", an operation or 
            process that is part of the production or assembly of an 
            unfinished good into a finished good is not a repair or 
            alteration of the unfinished good; a component of a good is a 
            good that may be subject to repair or alteration.  
 
            11.  Annex 300-A (Trade and Investment in the Automotive 
            Sector), Appendix 300-A.1 - Canada:  paragraphs 1 and 2 shall 
            not be construed to modify the rights and obligations set out 
            in Chapter Ten of the Canada - United States Free Trade 
            Agreement, except that the NAFTA rules of origin shall replace 
            the Canada - United States Free Trade Agreement rules of origin 
            for purposes of Article 1005(1). 
 
            12.  Annex 300-A (Trade and Investment in the Automotive 
            Sector), Appendix 300-A.2 - Mexico:  citations to the Auto 
            Decree and the Auto Decree Implementing Regulations included in 
            parentheses are provided for purposes of reference only. 
 
            13.  Annex 300-B (Textile and Apparel Goods) Section 1 (Scope 
            and Coverage):  the general provisions of Chapter Two 
            (Definitions), Chapter Three (Market Access), Chapter Four 
            (Rules of Origin) and Chapter Eight (Emergency Action) are 
            subject to the specific rules for textiles and apparel goods 
            set out in the Annex. 
 
            14.  Annex 300-B (Textile and Apparel Goods) Section 2 (Tariff 
            Elimination):  with respect to paragraph 1, "as otherwise 
            provided in this Agreement" refers to such provisions as 
            Section 4, Article 802 (Global Emergency Action) and Chapter 22 
            (General Exceptions). 
 
            15.  Annex 300-B (Textile and Apparel Goods) Sections 4 and 5 - 
            Bilateral Emergency Actions (Tariff Actions):  for purposes of 
            Sections 4 and 5: 
 
                 (a)  "increased quantities" is intended to be interpreted 
                      more broadly than the standard provided in Article 
                      801(1), which considers imports "in absolute terms" 
                      only.  For purposes of these Sections, "increased 
                      quantities" is intended to be interpreted in the same 
                      manner as this standard is interpreted in the draft 
                      Agreement on Textiles and Clothing, contained in the 
                      Draft Final Act Embodying the Results of the Uruguay 
                      Round of Multilateral Trade Negotiations (GATT 
                      document MTN.TNC/W/FA) issued by the Director-General 
                      of the GATT on December 20, 1991 ("Draft Uruguay 
                      Round Agreement on Textiles and Clothing"); and 
 
                 (b)  "serious damage" is intended as a less stringent 
 
 
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                      standard than "serious injury" under Article 801(1).  
                      The "serious damage" standard is drawn from the Draft 
                      Uruguay Round Agreement on Textiles and Clothing.  
                      The factors to be considered in determining whether 
                      the standard has been met are set out in Section 4.2 
                      and are also drawn from that Draft.  "Serious damage" 
                      is to be interpreted in the light of its meaning in 
                      Annex A of the Multifiber Arrangement or any 
                      successor agreement. 
 
            16.  Annex 300-B (Textile and Apparel Goods) Section 5 
            (Bilateral Emergency Actions - Quantitative Restrictions):  in 
            paragraph 5(c), the term "equitable treatment" is intended to 
            have the same meaning as it has in customary practice under the 
            Multifiber Arrangement. 
 
            17.  Annex 300-B (Textile and Apparel Goods) Section 7, 
            paragraph 1(c) (Review and Revision of Rules of Origin):  for 
            subheading 6212.10, the rule and paragraph 1 shall not be 
            applied if the Parties agree, prior to entry into force of this 
            Agreement, on measures to ease the administrative burden and 
            reduce costs associated with the application of the rule for 
            headings 62.06 through 62.11 to the apparel in subheading 
            6212.10. 
 
            18.  Annex 300-B (Textile and Apparel Goods) Section 7, 
            paragraph (2)(d)(ii) (Review and Revision of Rules of Origin):  
            with respect to provisions (a) through (i) of the rule for 
            subheadings 6205.20 through 6205.30, prior to the entry into 
            force of this Agreement the Parties will extend cooperation as 
            necessary in an effort to encourage production in the free 
            trade area of shirting fabrics specifically identified in the 
            rule. 
 
            19.  Annex 300-B (Textile and Apparel Goods), Appendix 3.1, 
            paragraph 17:  for purposes of applying paragraph 17, the 
            determination of the component that determines the tariff 
            classification of the good shall be based on GRI 3(b) of the 
            Harmonized System, and if the component cannot be determined on 
            the basis of GRI 3(b), then the determination will be based on 
            GRI 3(c) or, if GRI 3(c) is inapplicable, GRI 4.  When the 
            component that determines the tariff classification is a blend 
            of two or more yarns or fibers, all yarns and, where 
            applicable, fibers, in that component are to be considered. 
 
            20.  Annex 300-B (Textile and Apparel Goods) Schedule 3.1.3. 
            (Conversion Factors):  the conversion factors in this Schedule 
            are those used for imports into the United States.  Canada and 
            Mexico may by mutual agreement develop their own conversion 
            factors for trade between them. 
 
 
 
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            21.  Article 401 (Rules of Origin - Originating Goods):  the 
            phrase "specifically describes" is intended solely to prevent 
            Article 401(d) from being used to qualify a part of another 
            part, where the heading or subheading covers the final good, 
            the part made from the other part and the other part. 
 
            22.  Article 402 (Rules of Origin - Regional Value Content): 
 
                 (a)  Article 402(4) applies to intermediate materials, and 
                      that VNM in paragraphs 2 and 3 does not include 
 
                      (i)  the value of any non-originating materials used 
                           by another producer to produce an originating 
                           material that is subsequently acquired and used 
                           in the production of the good by the producer of 
                           the good, and 
 
                      (ii) the value of non-originating materials used by 
                           the producer to produce an originating self- 
                           produced material that is designated by the 
                           producer as an intermediate material pursuant to 
                           Article 402(10);  
                 (b)  with respect to paragraph 4, where an originating 
                      intermediate material is subsequently used by the 
                      producer with non-originating materials (whether or 
                      not produced by the producer) to produce the good, 
                      the value of such non-originating materials shall be 
                      included in the VNM of the good; 
 
                 (c)  with respect to paragraph 8, sales promotion, 
                      marketing and after-sales service costs, royalties, 
                      shipping and packing costs, and non-allowable 
                      interest costs included in the value of materials 
                      used in the production of the good are not subtracted 
                      out of the net cost in the calculation under Article 
                      402(3); 
 
                 (d)  with respect to paragraph 10, an intermediate 
                      material used by another producer in the production 
                      of a material that is subsequently acquired and used 
                      by the producer of the good shall not be taken into 
                      account in applying the proviso set out in that 
                      paragraph, except where two or more producers 
                      accumulate their production under Article 404; 
 
                 (e)  with respect to paragraph 10, if a producer 
                      designates a self-produced material as an originating 
                      intermediate material and the Customs Administration 
                      of the importing Party subsequently determines that 
                      the intermediate material is not originating, the 
                      producer may rescind the designation and recalculate 
 
 
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                      the value content of the good accordingly; in such a 
                      case, the producer shall retain its rights of appeal 
                      or review with regard to the determination of the 
                      origin of the intermediate material; and 
 
                 (f)  under paragraph 4, with respect to any self-produced 
                      material that is not designated as an intermediate 
                      material, only the value of non-originating materials 
                      used to produce the self-produced material shall be 
                      included in VNM of the good. 
 
            23.  Article 403 (Rules of Origin - Automotive Goods):   
 
                 (a)  for purposes of paragraph 1, "first person in the 
                      territory of a Party" means the first person who uses 
                      the imported good in production or resells the 
                      imported good; and 
 
                 (b)  for purposes of paragraph 2, 
 
                      (i)  a producer may not designate as an intermediate 
                           material any assembly, including a component 
                           identified in Annex 403.2, containing one or 
                           more of the materials listed in Annex 403.2, and 
 
                      (ii) a producer of a material listed in Annex 403.2 
                           may designate a self-produced material used in 
                           the production of that material as an 
                           intermediate material, in accordance with the 
                           provisions of Article 402(10). 
 
            24.  Article 405(6) (Rules of Origin - De Minimis):  for 
            purposes of applying paragraph 6, the determination of the 
            component that determines the tariff classification of the good 
            shall be based on GRI 3(b) of the Harmonized System.  If the 
            component cannot be determined on the basis of GRI 3(b), then 
            the determination will be based on GRI 3(c) or, if GRI 3(c) is 
            inapplicable, GRI 4.  When the component that determines the 
            tariff classification is a blend of two or more yarns or 
            fibers, all yarns and, where applicable, fibers, in that 
            component are to be taken into account.  
 
            25.  Article 413 (Rules of Origin - Interpretation and 
            Application):  the rules of origin under Chapter Four are based 
            on the 1992 Harmonized System, amended by the new tariff items 
            created for rules of origin purposes. 
 
            26.  Article 415 (Rules of Origin - Definitions):  the phrase 
            "except for the application of Article 403(1) or 403(2)(a)" in 
            the definition of "transaction value" is intended solely to 
            ensure that the determination of transaction value in the 
 
 
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            context of Article 403(1) or (2)(a) shall not be limited to the 
            transaction of the producer of the good. 
 
            27.  Article 514 (Customs Procedures - Definitions):  the 
            Uniform Regulations will clarify that "determination of origin" 
            includes a denial of preferential tariff treatment under 
            Article 506(4), and that such denial is subject to review and 
            appeal. 
 
            28.  Article 603, paragraphs 1 through 5 (Energy):  these 
            paragraphs shall be interpreted consistently with Article 309. 
 
            29.  Article 703 (Agriculture - Market Access):  the most- 
            favored-nation rate as of July 1, 1991 is the over-quota tariff 
            rate specified in Annex 302.2. 
 
            30.  Annex 703.2 (Agriculture - Market Access - Section A - 
            Mexico and the United States):  this quota replaces Mexico's 
            current access under the "first tier" of the U.S. tariff rate 
            quota as described in Additional Note 3(b)(i) of Chapter 17 of 
            the Harmonized Tariff Schedule of the United States prior to 
            the date of entry into force of this Agreement. 
 
            31.  Annex 703.2 (Agriculture - Market Access - Section A - 
            Mexico and the United States):  the United States operates a 
            re-export program under Additional U.S. Note 3 to Chapter 17 of 
            the U.S. Harmonized Tariff Schedule and under 7 C.F.R. Part 
            1530 (subparts A and B). 
 
            32.  Annex 703.2 (Agriculture - Market Access - Section B - 
            Canada and Mexico):  the incorporation in paragraph 6 is not 
            intended to override the exceptions to Articles 301 and 309 set 
            out in Canada's and Mexico's respective Schedules to Annex 
            301.3. 
 
            33.  Article 906(4) and (6) (Compatibility and Equivalence):  
            these paragraphs are not intended to restrict the right of the 
            importing Party to revise its measures. 
 
            34.  Article 908(2) (Conformity Assessment):  this paragraph 
            does not treat the issue of membership in the Parties' 
            respective conformity assessment bodies. 
 
            35.  Article 915 (Standards-Related Measures - Definitions):  
            the definition of "standard" shall be interpreted to mean --  
 
                 (a)  characteristics for a good or a service, 
 
                 (b)  characteristics, rules or guidelines for 
 
                      (i)  processes or production methods relating to such 
 
 
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                           good, or 
 
                      (ii) operating methods relating to such service, and 
 
                 (c)  provisions specifying terminology, symbols, 
                      packaging, marking or labelling for  
 
                      (i)  a good or its related process or production 
                           method, or  
 
                      (ii) a service or its related operating method, for 
                           common and repeated use, including explanatory 
                           and other related provisions,  
 
            set out in a document approved by a standardizing body, with 
            which compliance is not mandatory. 
 
            36.  Article 915 (Standards-Related Measures - Definitions):  
            the definition of "technical regulation" shall be interpreted 
            to mean -- 
 
                 (a)  characteristics or their related processes and 
                      production methods for a good, 
 
                 (b)  characteristics for a service or its related 
                      operating methods, or  
 
                 (c)  provisions specifying terminology, symbols, 
                      packaging, marking, or labelling for 
 
                      (i)  a good or its related process or production 
                           method, or  
 
                      (ii) a service or its related operating method,  
 
            set out in a document, including applicable administrative, 
            explanatory and other related provisions, with which compliance 
            is mandatory. 
 
            37.  Annex 1001.2c (Government Procurement - Country Specific 
            Thresholds):  Canada and the United States will consult 
            regarding this Annex before the entry into force of this 
            Agreement. 
 
            38.  Article 1101 (Investment - Scope and Coverage):  this 
            Chapter covers investments existing on the date of entry into 
            force of this Agreement as well as investments made or acquired 
            thereafter. 
 
            39.  Article 1101(2) (Investment - Scope and Coverage) and 
            Annex 602.3:  to the extent that a Party allows an investment 
 
 
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            to be made in an activity set out in Annex III or Annex 602.3, 
            the investment shall be entitled to the protection of Chapter 
            Eleven (Investment). 
 
            40.  Article 1106 (Investment-Performance Requirements):  
            Article 1106 does not preclude enforcement of any commitment, 
            undertaking or requirement between private parties. 
 
            41.  Article 1305 (Monopolies):  for purposes of this Article, 
            "monopoly" means an entity, including a consortium or 
            government agency, that in any relevant market in the territory 
            of a Party is maintained or designated as the sole provider of 
            public telecommunications transport networks or services. 
 
            42.  Article 1501 (Competition Law):  no investor may have 
            recourse to investor-state arbitration under the Investment 
            Chapter for any matter arising under this Article. 
 
            43.  Article 1502 (Monopolies and State Enterprises):  nothing 
            in this Article shall be construed to prevent a monopoly from 
            charging different prices in different geographic markets, 
            where such differences are based on normal commercial 
            considerations, such as taking account of supply and demand 
            conditions in those markets. 
 
            44.  Article 1502(3) (Monopolies and State Enterprises):  a 
            "delegation" includes a legislative grant, and a government 
            order, directive or other act transferring to the monopoly, or 
            authorizing the exercise by the monopoly of, governmental 
            authority. 
 
            45.  Article 1502(3)(b) (Monopolies and State Enterprises):  
            differences in pricing between classes of customers, between 
            affiliated and non-affiliated firms, and cross-subsidization 
            are not in themselves inconsistent with this provision; rather, 
            they are subject to this subparagraph when they are used as 
            instruments of anticompetitive behavior by the monopoly firm. 
 
            46.  Article 2005(2) (GATT Dispute Settlement):  this 
            obligation is not intended to be subject to dispute settlement 
            under this Chapter. 
 
 
 
 
 
 
 
 
 
 
 
 
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