Publication Number: 3802

Report Title: Probable Effect of Certain Modifications to the North American Free Trade Agreement Rules of Origin

Investigation Number: 103-012

Author's name(s): Gail Burns, Robert Carr, John Cutchin, Alfred Dennis, Vincent DeSapio, Queena Fan, Fred Forstall, Dennis Fravel, John Kitzmiller, Harry Lenchitz, Christopher Mapes, Douglas Newman, Rose Steller, Ralph Watkins, Judith-Anne Webster, Linda White, Falan Yinug

Date Published: September 2005

Report Description/Introductory Text: Advice from the U.S. International Trade Commission on whether proposed modifications of certain North American Free Trade Agreement (NAFTA) rules would likely increase or decrease preferential trade flows of U.S. trade in the NAFTA market thereby effecting total U.S. imports, exports, and production. The USITC determined that a majority of the rule of origin modifications resulted in a negligible effect (meaning a change of less than 6 percent) on U.S. trade and production or no change to the current application of the rule. The proposed NAFTA rules of origin modifications, as negotiated by government representatives of member countries, Canada, Mexico, and the United States, include: cocoa; cranberry juice; ores, slag, and ash; leather; cork; prepared feathers and down, artificial flowers, and articles of human hair; glass and glassware; copper; nickel; lead; zinc/ tin; other base metals; televisions; information technology agreement goods; and control instruments. See the full report titled Probable Effect of Certain Modifications to the North American Free Trade Agreement Rules of Origin for each of the proposed NAFTA rules of origin modifications and corresponding probable effect assessment as provided by the USITC.

This investigation provides the U.S. International Trade Commission ’ s (Commission) advice on the probable effect of certain proposed modifications to the rules of origin contained in the North American Free Trade Agreement (NAFTA) as requested by the office of the U.S. Trade Representative (USTR). The Commission ’ s advice is based on an impact assessment of whether a proposed rule modification would likely increase or decrease preferential trade flows of U.S. exports and imports in the NAFTA markets, and the resulting effect on total U.S. imports, exports, and production.

The Commission assessed each specific proposed modification to determine the probable effect on U.S. trade and on U.S. industries. The Commission first compared the rules incorporating the proposed modifications with the current rules using the available information to ascertain any changes in the application of the NAFTA rules of origin. If such changes were identified, the Commission then used qualitative and quantitative analyses to determine the probable effect of the modifications on the basis of the current USTR text. The Commission took into consideration production and sourcing patterns of the affected products in the NAFTA countries, product input sourcing patterns, overall levels of production and trade, as well as NAFTA and normal trade relations (NTR) duty rates. In cases where it was determined that the rule modification could result in a greater than negligible effect on U.S. industry, a partial equilibrium economic model was used to estimate the change in the NAFTA trade value for the affected products covered by the rule modification. Please refer to Chapter 2 for a detailed discussion of the Commission ’ s analysis for determining NAFTA rules of origin probable effects.

The Commission reviewed proposed rules for 37 product groups and determined that 14 have no substantive change in the application of the rules of origin, resulting in no probable effect on total U.S. trade and production. For 2 groups, the effect could not be determined because of the wording of the modifications and the existing rule. For the remaining 21, the Commission determined that, while there were substantive changes in the application of the rules of origin, these changes resulted in a negligible effect on total U.S. trade and production. A negligible determination means that the value of U.S. trade or U.S. production for the affected product will likely change by less than 6 percent.

Topics Covered: North American Free Trade Agreement, NAFTA, rules of origin, U.S. International Trade Commission, USITC

Countries: Canada, Mexico, United States

HTS Numbers: 1806.31, 1806.90, 2009.90, 2106, 2621, 4104, 4113, 4105.10, 4105.30, 4106.21, 4106.22, 4106.31, 4106.32, 4106.40, 4106.91, 4106.92, 4107, 4112, 4113, 4114, 4115.10, 4115.20, 4501, 4504, 6701, 6702, 6704, 7001, 7002, 7401, 7403, 7501, 7504, 7505, 7507.11, 7508.90, 7803, 7806, 7901, 7903, 7904, 7907, 8003, 8004, 8007, 8101.10, 8113.00, 8528.12, 8528.13, 8528.21, 8528.22, 8528.30, 8477.10, 8477.90, 8504.40, 8504.50, 8533.10, 8533.40, 8543.11, 8543.89, 8543.11, 8543.19, 8543.20, 8543.30, 8543.40, 8543.81, 8543.89, 9009.11, 9009.91, 9009.99, 9032.20, 9032.89

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