NAFTA Rules of Origin: Making the NAFTA Origin Determination
Source: Trade Information Center, U.S. Department of Commerce
This document is meant to be a guide on the Rules of Origin provisions of the
North American Free Trade Agreement. Exporters should keep in mind that only
the NAFTA text itself and the customs regulations of each country that may be
issued to implement NAFTA are definitive. For complex issues or where interpretation
is required, exporters should seek legal assistance or an advanced ruling from
the Customs Administration in the country to which they are exporting.
Only goods which qualify under the NAFTA rules of origin can obtain NAFTA tariff
preference, i.e., reduced or eliminated tariffs. (Refer to Annex 401 of the
Agreement.) The NAFTA rules of origin take into account where goods are produced
and what materials are used to produce them. The purpose is to ensure that North
American goods traded among the three NAFTA partner countries receive preferential
tariff treatment. Products of other countries merely being transhipped through
or undergoing only minor operations in North America are not eligible for NAFTA
When products meet the rules of origin and therefore qualify for NAFTA tariff
benefits, they are said to "originate." Chapter 4 of the NAFTA sets
out most of the principles governing origin determination. Exporters need to
fill out a NAFTA Certificate of Origin and provide this certificate to their
importer in order for the importer to claim NAFTA tariff preference.
The NAFTA sets out four "origin criteria," meaning that there are
four ways in which goods generally meet the NAFTA rule of origin, and therefore
qualify for NAFTA tariff preference.
A. Goods "wholly produced or obtained" in the NAFTA region, i.e.,
they contain no non-NAFTA material.
B. Goods containing non-originating inputs, but meeting the Annex 401 origin
C. Goods produced in the NAFTA region wholly from originating materials, i.e.
produced from materials which may contain non-NAFTA materials, but meet the
NAFTA rule of origin.
D. Unassembled goods and goods classified in same (HS) Harmonized System category
as their parts, which do not meet the Annex 401 rule of origin, but contain
sufficient North American regional value content. (Goods qualify in this category
only in very limited circumstances.)
Special provisions apply for agriculture, some automatic data processing equipment
and textile goods. These provisions are described in this document.
The Origin Criteria
The NAFTA "origin criteria" are described below.
A. Wholly Obtained or Produced
Goods that are "wholly obtained or produced" entirely in one or more
NAFTA countries originate. For a good to qualify under this criterion, it must
contain no non-North American parts or materials -- see NAFTA article 415, reprinted
below, for a definition. Coal mined in Pennsylvania, corn grown in Iowa, and
livestock born and raised in Texas, and silver jewelry made in Arizona exclusively
from silver mined in Mexico are all examples of goods wholly obtained or produced
in North America. "Obtained" has a unique meaning in the NAFTA context;
it does not mean "purchased," but is simply used to acknowledge that
production is not the only way goods are created. This relates to preference
criterion "A" on the NAFTA certificate of origin.
Article 415 of the NAFTA defines wholly produced or obtained in the following
Goods wholly obtained or produced entirely in the territory of one or more
of the Parties means:
(a) Mineral goods extracted in the territory of one or more of the Parties;
(b) Vegetable goods, as such goods are defined in the Harmonized System, harvested
in the territory of one or more of the Parties;
(c) Live animals born and raised in the territory of one or more of the Parties;
(d) Goods obtained from hunting, trapping or fishing in the territory of one
or more of the Parties;
(e) Goods (fish, shellfish and other marine life) taken from the sea by vessels
registered or recorded with a Party and flying its flag;
(f) Goods produced on board factory ships from the goods referred to in subparagraph
(e) Provided such factory ships are registered or recorded with that Party
and fly its flag;
(g) Goods taken by a Party or a person of a Party from the seabed or beneath
the seabed outside territorial waters, provided that a Party has rights to exploit
(h) Goods taken from outer space, provided they are obtained by a Party or
a person of a Party and not processed in a non-Party;
(i) Waste and scrap derived from:
(1) production in the territory of one or more of the Parties, or (2) used
goods collected in the territory of one or more of the Parties, provided such
goods are fit only for the recovery of raw materials; or
(j) goods produced in the territory of one or more of the Parties exclusively
from goods referred to in subparagraphs (a) through (i), or from their derivatives,
at any stage of production.
B. Goods Containing Non-originating Materials and Meeting the Annex 401 Origin
Goods made from non-originating materials may also qualify for NAFTA treatment
as long as each non-NAFTA input undergoes a tariff classification change as
specified in Originating Goods (Article 401) and meets other requirements that
may apply. This relates to preference criterion "B" on the NAFTA certificate
Harmonized System Terms Used in Origin Rules
HS numbers break down like this:
Tariff item--8 digits
Statistical break--10 digits
For example, a computer printer (HS # 8471.92.65) is classified in Chapter
84, Heading 8471, Sub-heading 8471.92 and Tariff Item 8471.92.65.
Classifications are "harmonized" internationally at the subheading
level; after the first 6 digits, each country assigns its own numbers.
The Annex 401 rules of origin may be based on:
- A change in tariff classification;
- A regional value-content requirement;
- Both a change in tariff classification and a regional value content requirement.
Exporters should refer to the rule associated with the product being exported.
Exporters may only use regional value content when it is allowed under a product-specific
Tariff Shift: HS classification change is the basis for most NAFTA rules of
origin and is used instead of value to measure the North American contribution
to a product. This method compares imported inputs and the finished good to
be exported; the extent of tariff classification change ("tariff-shift")
indicates whether sufficient North American processing has taken place. Exporters
must know the HS classification of both the exported good and their non-North
American parts to apply the rules.
Annex 401 is organized by the Harmonized Schedule (HS) numbers. Exporters must
know the HS number of the product they wish to export. The HS number (sometimes
knows as the Schedule B) can be found on the Internet at http://www.census.gov/foreign-trade/www/
. Then click on Schedule B.
Below is an example of a tariff shift rule of origin, and a product which qualifies
for NAFTA tariff preference based on tariff shifts.
Products: Breads, pastries, cakes, biscuits (HS 1905.90)
Non-North American input: Flour (classified in HS chapter 11), imported from
Rule of Origin: "A change to heading 1902 through 1905 from any other
Explanation: For all products classified in HS headings 1902 through 1905,
all non-North American inputs must be classified in an HS chapter other than
HS chapter 19 in order for the product to obtain NAFTA tariff preference. These
baked goods would qualify for NAFTA tariff preference because the non-originating
are classified outside of HS chapter 19. (The flour is in chapter 11). However,
if these products were produced with non-originating mixes, then these products
would not qualify because mixes are classified in HS chapter 19, the same chapter
as baked goods.
Regional Value Content: For goods subject to a regional value content rule
of origin, please refer to Regional Value content (Explanatory Material and
Article 402), for an explanation of regional value content rules of origin.
C. Goods Produced in the NAFTA Region Wholly from Originating Materials.
Another way for goods to originate is if they are produced entirely in one
or more NAFTA country using only originating materials. This provision encompasses
goods made of parts and materials that themselves meet NAFTA rules of origin,
even though containing some non-North American inputs. This relates to preference
criterion "C" on the NAFTA certificate of origin.
For example, an agricultural machine such as a wine press made in California
of all originating parts could qualify, even if the parts contained non-North
American metals. The difference in this case is that foreign materials have
been transformed in North America to such an extent that new, originating parts
have been created. These originating components are then used to produce the
originating wine press.
D. Unassembled Goods and Goods Classified with Their Parts which do not Meet
Annex 401 Rule of Origin, but Contain Sufficient Regional Value Content.
Under two limited circumstances, if a product fails to qualify under product-specific
tariff-shift rule of origin, it may qualify under a regional value content requirement,
even if the product-specific rule of origin in Annex 401 does not contain regional
value content provisions. These provisions NEVER apply to products classified
in HS chapters 61-63 (apparel and other made-up textiles items such as blankets,
linens and bags).
These two circumstances are applicable when the good is produced entirely in
the territory of one or more of the NAFTA countries, but one or more of the
non-originating materials provided for as parts under the Harmonized System
that are used in the production of the good does not undergo a change in tariff
1. The good was imported into North America in an unassembled or disassembled
form, but was classified as an assembled good under the HS system. This relates
to preference criterion "D1" on the NAFTA certificate of origin.
2. Parts and final products are classified in the same heading or subheading
(as long as the description of the HS heading for the good provides for and
specifically describes both the good itself and its parts and is not further
subdivided into subheadings, or the subheading for the good provides for and
specifically describes both the good itself and its parts). This relates to
preference criterion "D2" on the NAFTA certificate of origin.
In the two above situations, no tariff shift is possible because of how the
goods were classified. Goods in this situation may obtain NAFTA tariff preference
if they have 50 or 60 percent North American value content, depending on method
used. Refer to Regional Value content (Explanatory Material and Article 402).
E. Automatic Data Processing Equipment
Certain automatic data processing goods
and their parts that are not "originating" under the NAFTA rules of
origin are considered as "originating" when they are imported into
the territory of one of the NAFTA countries from another NAFTA country. The
reason for this is that the NAFTA countries have agreed to adopt a common external
tariff on certain products. Once these products enter into NAFTA territory,
they can be traded duty-free among the countries.
Per Annex 308.1 of the NAFTA, as of January 1, 1994, the NAFTA countries have
agreed to eliminate all tariffs, including those on Non-NAFTA parties, on a
number of products. These are listed below, with their Mexican and Canadian
Metal Oxide Varistors
Diodes, Transistors and Similar Semiconductor Devices; Photosensitive Semiconductor
Devices; Light Emitting Diodes; Mounted Piezo-electric Crystals
Canada and Mexico 8541.10
Electronic Integrated Circuits and Microassemblies
Canada and Mexico 8542
Because these goods are duty-free for imports from all countries, and not just
NAFTA countries, exporters will not have to fill out a certificate of origin
to obtain a zero tariff assessment.
However, this provision becomes important in the year 2004, at which time the
NAFTA countries have agreed to adopt a common external tariff on other products,
such as automatic data processing machines, digital processing units, input
or output units, storage units, parts of computers and computer power supplies.
Beginning in the year 2004, once one of these goods enters into a NAFTA country
and is subsequently exported to another NAFTA country, an exporter will not
have to fill out a NAFTA certificate of origin in order to waive the payment
of duties on those products. Until the year 2004, however, exporters of automatic
data processing machines, digital processing units, input or output units, storage
units, parts of computers and computer power supplies must complete a NAFTA
certificate of origin if their importers want to claim NAFTA duty preference.
The preceding provisions on automatic data processing goods relate to preference
criterion "E" on the NAFTA certificate of origin.
Agricultural Goods: If the good is an agricultural good, as defined by the
NAFTA, then exporters must ensure that their goods qualify under the special
criterion for agricultural goods. Exporters should review the NAFTA definition
of an "agricultural" good. Processed foods, often not considered an
agricultural product, fall within the NAFTA definition of agriculture, as does
raw natural fibers (silk, cotton, etc.) and furskins.
The agricultural provisions of the NAFTA were not negotiated on a trilateral
basis -- i.e., there are separate agreements between the U.S. and Mexico, and
Canada and Mexico. The agricultural provisions negotiated under the U.S.-Canada
Free Trade Agreement remain in place. NAFTA section Annex 703.2, Section A,
covers agricultural trade between the United States and Mexico. (Section B covers
agricultural trade between Mexico and Canada, and therefore is not applicable
to U.S. exporters to Mexico. The reference on the certificate of origin to appendix
703.2.B.7 does not apply to U.S. exporters to Mexico.)
U.S. Exports to Mexico: When determining whether or not U.S. agricultural goods
are eligible for NAFTA tariff preference when imported into Mexico, exporters
need to review two factors:
1) The definition of an "agricultural good" applicable to U.S. exports
2) The definition of "qualifying good" for U.S. agricultural exports
Once U.S. exporters to Mexico determine that their products fall into the NAFTA
definition of agriculture, they should examine the rules of origin for their
products, keeping in mind the definition of "qualifying good" for
Exporters should note that for certain products, which are identified below,
Mexico has established tariff rate quotas which will be in existence during
the NAFTA transition period (for 10-15 years). For the goods subject to the
tariff rate quotas, importers will only be granted the preferential rate up
to a certain specified volume of importations.
Definition of Agricultural Good for U.S. Exports to Mexico: agricultural good
means a good provided for in any of the following:
Note: For purposes of reference only, descriptions are provided next to the
corresponding tariff provision.
(a) Harmonized System (HS) Chapters 1 through 24 (other than a fish or fish
(b) HS subheading 2905.43 manitol
HS subheading 2905.44 sorbitol
HS heading 3301 essential oils
HS headings 3501 to 3505 albuminoidal substances, modified starches,
HS subheading 3809.10 finishing agents
HS subheading 3823.60 sorbitol n.e.p.
HS headings 4101 to 4103 hides and skins
HS heading 4301 raw furskins
HS headings 5001 to 5003 raw silk and silk waste
HS headings 5101 to 5103 wool and animal hair
HS headings 5201 to 5203 raw cotton, cotton waste and cotton carded or
HS heading 5301 raw flax
HS heading 5302 raw hemp
Definition of Qualifying Good for U.S. Agricultural Exports to Mexico: If an
exporter's product falls into one of the categories identified above, then that
product must meet the definition of "qualifying good," as defined
by the NAFTA in order for the good to be eligible for NAFTA tariff preference.
NAFTA Annex 703.2, Section A defines "qualifying good" in the following
Qualifying good means an originating good that is an agricultural good, except
that in determining whether such good is an originating good, operations performed
in, or materials obtained from Canada shall be considered as if they were performed
in or obtained from a non-party."
This means that U.S. exporters to Mexico must treat Canadian production and
Canadian inputs as non-originating for the purposes of obtaining NAFTA tariff
preference. Canadian production and inputs would be treated the same manner
as input from or production in Europe. Tariff preference eligibility can only
be obtained on the basis of production and inputs in the United States and Mexico.
These agricultural provisions relate to preference criterion "F"
on the NAFTA certificate of origin.
Textiles: Exporters to Mexico of certain carpets and sweaters should review
the following text for applicability to their product.
NAFTA Article 300-B, Appendix 6.A: Rules Applicable to Certain Carpets and
For purposes of trade between Mexico and the United States, a good of either
Party of HS Chapter 57, subheading 6110.30, 6103.23 or 6104.23 shall be treated
as if it were an originating good only if any of the following changes in tariff
classification is satisfied within the territory of one or more of the Parties:
(a) A change to subheading 5703.20 or 5703.30 or heading 57.04 from any heading
outside Chapter 57 other than headings 51.06 through 51.13, 52.04 through 52.12,
53.08, 53.11 or any headings of Chapter 54 or 55; or a change to any other heading
or subheading of Chapter 57 from any heading outside that chapter other than
headings 51.06 through 51.13, 52.04 through 52.12, 53.08, 53.11, any heading
of Chapter 54 or 55.08 through 55.16;
(b) A change to U.S. tariff item 6220.127.116.11, 618.104.22.168, 622.214.171.124,
6126.96.36.199, 6188.8.131.52, 6184.108.40.206, 6220.127.116.11, 618.104.22.168, 622.214.171.124,
or 6126.96.36.199 or Mexican tariff item 6110.30.01, or a good of those tariff
items that is classified as part of an ensemble in subheading 6103.23 or 6104.23,
from any heading outside Chapter 61 other than headings 51.06 through 51.13,
52.04 through 52.12, 53.07 through 53.08, 53.10 through 53.11, any heading of
Chapter 54 or 55, 60.01 or 60.02, provided that the good is both cut (or knit
to shape) and sewn or otherwise assembled in the territory of one or more of
the Parties; or a change to any other tariff item of subheading 6110.30 from
any heading outside Chapter 61 other than headings 51.06 through 51.13, 52.04
through 52.12, 53.07 through 53.08, 53.10 through 53.11, any heading of Chapter
54, 55.08 through 55.16, 60.01 or 60.02, provided that the good is both cut
(or knit to shape) and sewn or otherwise assembled in the territory of one or
more of the Parties.
1. NAFTA De Minimis Provision
The North American Free Trade Agreement contains a de minimis provision. This
is beneficial to exporters because it keeps small amounts of non-originating
material (seven percent of the value of the good in most cases) from preventing
a good from obtaining NAFTA tariff preference. Refer to De Minimis (Explanatory
Material and Article 405) for additional information.
2. Advance Rulings
Exporters may seek advance rulings as to whether or not their products qualify
for NAFTA tariff preference. Refer to How to Obtain an Advanced Customs Ruling
for further information. Some of the information contained in this document
has been drawn from a U.S. Customs Service document entitled The North American
Free Trade Agreement: A Guide to Customs Procedures that outlines rules of origin
and customs procedures under the NAFTA. This 44 page document is available from
the Government Printing Office, (202) 512-1800, or by fax: (202)512-2250, at
a cost of $6.00.
Information Source: Trade Information Center