RESTRICTED
WORLD TRADE WT/REG4/1/Add.1
22July1996
ORGANIZATION(96-2857)
Original: English
NORTH AMERICAN FREE TRADE AGREEMENT
Questions andReplies -Goods
Addendum
Document WT/REG4/1 contains jointreplies oftheParties totheNorth American FreeTrade
Agreement(NAFTA)toquestionsreceivedfollowingtheinvitationinGATT/AIR/3607,of29June1994,
andGATT/AIR/3642, of24October 1994. Thisdocument reproduces additional questions addressed
totheParties, during orafterthemeeting oftheWorking Party onNAFTA, on20-21 July1995.
Questions aresetoutinboldtypeandreplies inlighttype. Thenumbers inthemargin refer
tothequestions andreplies contained indocument WT/REG4/1. When referring tomore thanone
question ahyphen isused, indicating "through" andaslash indicates "and". Forexample, 3.-5./9.
means questions 3through 5andquestion 9.
ResponsesprovidedbyCanadaandtheUnitedStatestoquestionsonintellectualproperty-related
matters arefound inAnnex 2.WT/REG4/1/Add.1
Page2
TABLE OFCONTENTS
Page
I. GENERAL PART 3-7
II. TRADE INGOODS 7-27
National Treatment andMarket Access (Chapter 3) 7-14
Rules ofOrigin (Chapter 4) 14-22
Customs Procedures (Chapter 5) 22-23
Energy andBasic Petrochemicals (Chapter 6) 23
Agriculture (Chapter 7) 24-26
Emergency Action (Chapter 8) 26-27
III. TECHNICAL BARRIERS TOTRADE 27-28
IV. GOVERNMENT PROCUREMENT 28
V. INVESTMENT, SERVICES AND RELATED MATTERS 29
VI. INTELLECTUAL PROPERTY 29
VII. ADMINISTRATIVE AND INSTITUTIONAL PROVISIONS 29-32
Review andDispute Settlement inAnti-Dumping andCountervailing Duty Matter
(Chapter 19) 29-32
VIII. OTHER PROVISIONS 32
Annex 1-Statistics onGovernment Procurement Prior totheNAFTA 33-48
Annex 2-Intellectual Property Questions andReplies 49-52WT/REG4/1/Add.1
Page3
I. GENERAL PART
1. Referring to"Noeconomic sectors areexcluded from theNAFTA":
(a) Isourunderstanding correct thattheNAFTA Parties were unable tosetout
common rules fortheagricultural sector duetotheextreme complexity ofthe
negotiations inthisarea?
(b) Ifsuchisthecase, willtheexisting rules oftheagricultural sectors already inforce,
e.g.those oftheU.S.-Canada FTA, stillcontinue toapply aspartoftheNAFTA
between theU.S.andCanada?
(c) Ifso,could theagricultural sector make adefacto exclusion from theNAFTA
asnonewagreements onagriculture arestipulated intheNAFTA? Inother words,
theNAFTA supposedly includes theagricultural sector through simply adding
those existing rules totheNAFTA.
(a) No,thisunderstanding isnotcorrect. Section AofChapter Seven setsoutanumber
ofcommon rulesfortheagricultural sector. Section B,onsanitary andphytosanitary
measures, consists exclusively ofcommon rules; these apply toagricultural trade as
donumerous other provisions oftheNAFTA. Chapter Seven alsocontains some
provisionsthatareapplicableonlytosomeoftheNAFTAparties.Forexample,Canada
andtheUnited States generally agreed inthecontext oftheNAFTA toretain their
existing market access agreement onagriculture, asprovided intheCanada-United
StatesFreeTradeAgreement.TheNAFTAalsoprovidesotherseparatebilateralmarket
access agreements onagriculture, within thecontext oftrilateral rules, forCanada and
Mexico, andfortheUnited States andMexico.
(b) SeveralprovisionsoftheCanada-UnitedStatesFreeTradeAgreementwereincorporated
intoandcontinue toapply aspartofNAFTA.
(c) Theagricultural sector iscovered bytheNAFTA asdescribed above andistherefore
notadefacto exclusion from theNAFTA.
2. Theanswer toquestion 2provides examples ofspecific areas ofNAFTA where theaParties
have agreed onparticular definitions ofwhat a“good ofaParty ”is.Thequestions,
however, seems tobethatthewording ofArticle 201could, infact,leave tothediscretion
oftheNAFTA Parties thepossible establishment ofother criteria fordifferent purposes
andalsotointroduce, attheir will,changes intheexisting criteria. If,attheendofthe
day,what article 201saysisthat“goods ofaParty means...such goods astheparties may
agree ”,operators from non-NAFTA countries (andpresumably those from NAFTA too)
mayhavetofaceaseriousproblemconcerningthestability,transparencyandpredictability
oftheNAFTA product coverage. Even iftheNAFTA Parties refrain from having recourse
tothisprovision, thefactisthatthetextoftheNAFTA Treaty seems toenable them to
doso.Wewould appreciate comments onthese points.
Asisthecase, toourknowledge, inallother similar agreements, theNAFTA partners may
jointly agree tochange anyprovision oftheNAFTA.WT/REG4/1/Add.1
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3.-5. Theanswer tothose questions doesnottackle thebasic issue raised inparticular by
/9. question 3,which isnotother thantheactual impact ofNAFTA asregards trade creation
andtrade diversion effects. Though theacademic literature onthose questions isfairly
abundant andtheir findings seem tobeonthelinesoftheIMFdocument quoted inthis
answer, wenotethatthisdocument dates back toMay1993. Theapproach could only
betheoretical, since noempirical verification could obviously beundertaken atthattime.
Theempirical approach is,however, theonewhich ispertinent forouranalysis. Would
itbepossible tohave thisaspect developed indetail bytheNAFTA parties. Could we
have their quantified analysis concerning thetrade flows which arelikely tohave been
created anddiverted bytheapplication oftheAgreement until now?
Seeanswer toquestion 5.
5. Please provide therelevant datatosupport theviews oftheNAFTA Parties referred to
inthefourth andfifthparagraphs.
Referring to"ourviewisthatanumber offactors suggest ..."inthefourth paragraph,
please explain inaconcrete manner themeaning oftheword "factors".
Referring tothefifthparagraph, mention isonlymade ofaCanadian assessment ofthe
U.S.-Canada FTA in1988. Wewould alsoliketohave asimilar assessment from the
United States?
Available dataontotalintra-NAFTA trade andNAFTA trade withtherestoftheworld seem
tobeconsistent withthetradecreation effects expected fromNAFTA. Forexample, totalintra-NAFTA
tradeincreased fromUS$288,117 million toUS$338,089 million between 1993and1994. This17.3%
increase inintra-NAFTA tradewasaccompanied bysimilarly highlevels ofimportation intoNAFTA
countries from non-member countries, asindicated bythechart below:
Imports intoNAFTA Countries from Non-NAFTA Sources,Percentage Change 1993-1994
Country ofdestination Source ofimports
World Industrial Countries Developing Countries
U.S.A. 14.9% 12.4% 18.4%
Canada 12.3% 12.6% 13.8%
Mexico 19.6% 19.6% 21.6%
Source: Direction ofTrade Statistics, IMF1995.
Third-country imports intoCanada andtheU.S.since theFTAin1988 alsoillustrate these
positive effects. ForCanada, onaverage (1988-1994) thesegrewby10.9% fromdeveloping countries,
11.8% fromAsia, and7.2% fromindustrial countries. FortheU.S., theaverage increases were9.2%,
10.1%, and6%respectively.WT/REG4/1/Add.1
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Theabove datathusshowthatsince1994NAFTA countries havebegun toincrease theirimports
fromthirdcountries athigher levels thantheaverage import increases fortheperiod 1988-1994. These
earlyresults areconsistent withtheviewthatNAFTA islikely toproduce apositive effect onimports
from thirdcountries.
7./8. Theanswer tothose questions seems toimply thattrade diversion effects havebeenavoided
because “increating afree-trade area, rather thanacustoms union, NAFTA Parties have
reduced barriers tomember countries without raising them oothers. ”However, trade
diverting effects willappear, independently from thestability oftheergoomnes tariffs,
ifatariff differential iscreated because oftheelimination orreduction oftariffs within
thefree-trade area. Itisthetariff differential thusgenerated thatreally matters. The
importance ofthetrade deviation effects willdepend onthedegree inwhich thetariff
differential aretranslated intoprice differential andonthevalue oftheprice-elasticities
ofdemand forthegoods concerned. Since intheviewofthese considerations theanswer
given doesnotseem satisfactory, have theNAFTA Parties analternative explanation to
provide?
Could theNAFTA Parties further elaborate intheir statement that“therules oforigin
have been constructed soastoavoid trade diversion? ”
Asenvisioned inArticle XXIV:4, theNAFTA wasintended tofacilitate tradebetween NAFTA
members, nottoraisebarriers against thirdcountries. Further, inaccordance withArticle XXIV:8(b),
duties onsubstantially allthetrade between NAFTA Parties havebeenorareintheprocess ofbeing
eliminated. Ifonefollows thelogic ofthequestion, thenbydefinition allagreements which provide
atariff differential aretrade diverting. Infact,asweknow from experience, thisissimply notthe
case.
Therulesoforigin weredesigned todetermine which goods wereofNorth American origin
forpurposes ofeligibility forNAFTA preferential tariffs.
12. Thereply states that"Itispremature toassess theimpact onproduction inside theNAFTA
area...". However, Japan doesnotconsider itpremature toassess, asthree years have
already elapsed since theAgreement wassubstantially reached inAugust 1992. Bearing
thisinmind, please provide detailed explanations oftheeffects, based ondataachieved
andnotjustonsimple speculation.
[Noreply received.]
13. Intheiranswer tothisquestion, theParties mistakenly imply thatfree-trade areas, contrary
tocustoms unions, could notbecome aninstrument ofmanaged trade. isourviewthat
thisaspects hastobeexamined onacase-by-case basis.
Dotheparties consider, forexample, thatthe“fibre first”ruleoforigin could leadto
restrictions onsome products inthetextiles sector itmight demonstrate thatfree-trade
areas canalsobesignificant factors ofmanaged trade?
Could theParties clarify their answer totheoriginal question withspecific reference to
NAFTA?
TheNAFTA rules oforigin areintended todefine which goods areeligible forpreferential
treatment under theNAFTA.WT/REG4/1/Add.1
Page6
14. Please explain specific cases orexamples which arepre-supposed under Article 103of
theNAFTA.
IftheU.S.-Canada FTAcontains asimilar article, please provide specific cases orexamples
thathave occurred ordisputes raised under sucharticle.
Referring tothecontents ofthereply, isourunderstanding correct thatinthecasewhere
theNAFTA Agreement willprevail inpursuit ofasolution among parties, thatsolution
ispursued onlytotheextent thatitdoesnotviolate theWTO Agreement.
AsArticle 101oftheAgreement makes clear, theNAFTA Parties haveestablished afree-trade
areaconsistent withArticle XXIV oftheGATT. Assuch, theNAFTA countries arefullymeeting
alloftheirobligations tothirdparties, andtoeachother, under theGATT andtheWTO.
Article 103(1) accordingly affirms theexisting rights andobligations oftheNAFTA Parties
withrespect toeachother under theGATT andother agreements towhich theyareParties. "Existing"
isdefined inArticle 201asineffect onthedateofentry intoforce oftheNAFTA (January 1,1994).
Article 103(2), byproviding thattheNAFTA prevails intheevent ofanyinconsistency between
itandsuchother international agreements (except asotherwise provided intheNAFTA), innoway
alters theWTO rights ofobligations oftheNAFTA Parties either withrespect tothirdparties, orwith
respect toeachother.
TheCanada-U.S. FTAhadasimilar provision. FTAArticle 104provided asfollows:
"(1) TheParties affirm theirexisting rights andobligations withrespect toeach
other, astheyexistatthetimeofentry intoforce ofthisAgreement, under
bilateral andmultilateral agreements towhich bothareparty.
(2) Intheevent ofanyinconsistency between theprovisions ofthisAgreement
andsuchother agreements, theprovisions ofthisAgreement shallprevail to
theextentoftheinconsistency,exceptasotherwiseprovidedinthisAgreement."
NoFTAdisputes arose under thisArticle.
Itisworth recalling theanswer provided bytheFTAParties toaquestion byoneoftheGATT
Contracting Parties about FTAArticle 104(2):
"The GATT continues toapply inallrespects between Canada andtheUSA except
totheextent thattheFTAaccords toeither Party treatment more favourable thanthat
previously accorded under theGATT, inlinewithGATT Article XXIV. Article 104.2
relates onlytoquestions atissuebetween thetwoParties totheAgreement. Itsimply
clarifies that,insofar asresolution ofsuchquestions ispursued under theprovisions
oftheAgreement, theprovisions oftheAgreement prevail overtheprovisions ofany
other agreement. TheFTAdoesnotaltertherights andobligations ofCanada orthe
United States under theGATT withrespect tothirdcountries. Nordoesitalterthe
rights andobligations ofCanada andtheUnited States withrespect toeachother under
theGATT. TheFTAprovides aseparate setofrights andobligations thatafree-trade
partner mayinvoke inparticular cases instead ofpursuing aclaim under theGATT."
[L/6739, 29October 1990]WT/REG4/1/Add.1
Page7
Thisisfullyconsistent withtherights andobligations oftheNAFTA Parties under NAFTA
Article 103.
Thereplies toquestions 208and211reinforce thepoint thatNAFTA doesnotaffect therights
andobligations thattheNAFTA Parties haveunder theWTO withrespect toother WTO Members.
18. According tothereply, theU.S.-Canada FTAhasbeensuspended, except where otherwise
provided forintheNAFTA, asofthedateofentry intoforce oftheNAFTA. Asthere
seems tobeasubstantial change intheU.S.-Canada FTA, hassuchchange beenofficially
notified totheWTO Secretariat?
Asnoted inourearlier reply, theFTAwassuspended onthedateoftheentry intoforce of
theNAFTA forCanada andtheUnited States, withthesuspension toremain ineffect forsuchtime
asthetwocountries areParties totheNAFTA, subject toanExchange ofLetters thatidentified
transitional arrangements withrespect todispute settlement proceedings under Chapters Eighteen and
Nineteen oftheFTA. Certain provisions oftheFTAwereincorporated byreference intotheNAFTA,
andcontinue toapply asbetween Canada andtheUnited States totheextent specified bytheterms
oftheincorporation. Inaddition, Canada andtheUnited States agreed tothecontinuing application,
asbetween thetwocountries, ofafewprovisions oftheFTA thatwere notincorporated intothe
NAFTA.
II. TRADE INGOODS
National Treatment andMarket Access (Chapter 3)
19. Itcanbereadintheanswer tothisquestion thattheonlysignificant exception listed in
Annex 301.11istheexclusion oftrade inmarine vessels. Why isthisthecaseandthe
other exceptions arenotsignificant? Could youplease describe thenature oftherestrictions
currently being applied inrespect ofthose specific cases, including trade inmarine vessels.
[Noreply received.]
21. Theanswer tothisquestion apparently means that, forallthematters covered bythe
“Agreement between Canada andtheEuropean community covering Trade andCommerce
inAlcoholic Beverages, ”dated February 28,1989, Canada grants itsNAFTA partners
thesame treatment applied totheCommunity, withtheexception that“distilled spirits ”
aredefined inadifferent manner. Isthisinterpretation correct? Ifnot,please explain
why. Which isthereason forthedifferent definition of“distilled spirits. ”
Theinterpretation iscorrect thatforallmatters covered bythe“Agreement between Canada
andtheEuropeanCommunitycoveringTradeandCommerceinAlcoholicBeverages”,dated28February
1989, Canada grants itsNAFTA partners thesame treatment applied totheCommunity, withthe
exception that“distilled spirits ”aredefined inadifferent manner. TheCanada/EC agreement came
intoeffect in1989. Article II(distilled spirits) oftheagreement requires Canada toprovide national
treatmentfordistilledspiritsoftheCommunitywithrespecttolisting,de-listing,distributionandmarkup.
Notwithstanding national treatment, Article IIallowed Ontario amarkup differential forOntario brandy,
1Would itnotbeAnnex 301.3? Ourefforts toidentify Annex 301.1 have been fruitless andthere isno
reference toit,asonewould expect, inArticle 301. Thesame applies toAnnex 301.2.WT/REG4/1/Add.1
Page8
tobeeliminated instages byJanuary 1,1993. AstheNAFTA agreement wasbeing negotiated in
1993 andmirrored theCanada/EC agreement, Canada wished tomake itclear thatthere would be
nopreference forOntario brandy intheNAFTA agreement. Therefore, thedefinition of“distilled
spirits ”wastreated differently under NAFTA.
22. Theanswer tothisquestion seems toimply thattheexceptions applied todairy, poultry,
eggproducts, sugar andsugar-type syrup products intrade between Canada andMexico
stillleave unaffected “substantially alltrade “between those twocountries. Thisisan
important point which would require, inourview, some further justification taking into
account thefactthatasimple consideration ofcurrent trade flows maynotberelevant,
account taken oftherestrictions currently being applied totrade inthose products.
TheNAFTA isfullyconsistent withArticle XXIV:8 (b)because substantially alltradebetween
theParties willbefreeatorbefore theendofthetransition period. Noeconomic sector hasbeen
excluded fromNAFTA. Thefewproducts thatwereexcluded between certain NAFTA Parties represent
averyminor proportion oftotaltrade between NAFTA Parties.
23./ Although trade inproducts subject tothe15yearphase-out calendar represent avery
24. lowpercentage oftotaltrade between theNAFTA members, itisnotclear whether this
situation mayreflect theeffect ofrestrictions being currently applied. Could itbepossible
tohave adetailed description ofthecurrent situation inthisrespect?
TheUnderstanding ontheInterpretation ofArticle XXIV notonly states that“the
reasonable length oftime...should exceed 10years onlyinexceptional cases, ”italso
emphasizes that“incases where Members parties toaninterim agreement believe that
10years would beinsufficient theyshallprovide afullexplanation totheCouncil forTrade
inGoods ofneed foralonger period. ”Therefore could theparties provide afulland
detailed explanation ontheneedtoexceed the10yearperiod fortheproducts concerned?
Seeanswer toquestion 24.
24. According totheUnderstanding ontheInterpretation ofArticle XXIV oftheGATT 1994,
the"reasonable length oftime" should exceed 10years onlyinexceptional cases. The
reasoning thatthe15-year staging isanexceptional caseduetotheamount oftrade being
considerably small isnotsatisfactory, ifwetakeintoaccount thatitems towhich 15-year
staging isapplied arenormally extremely sensitive ones, therefore, insuchacasesome
protective measures maybetaken and, asaresult, theamount oftrade willnormally
become verysmall. Wewould appreciate further explanations astowhythe15-year staging
isnecessary.
Forthequestion related to“theeffect ofrestrictions being currently applied ”,seeanswer 22.
Forthequestion concerning the“reasonable length oftime”:
Asexplained intheoriginal answer toquestion 29indocument WT/REG4/1: “Within tenyears,
more than99%ofUSimports andvirtually allCanadian imports intoMexico willbeduty
free.”Therefore NAFTA assuch, thatistheAgreement asawhole, willcover “substantially
allthetrade”“within areasonable length oftime”.WT/REG4/1/Add.1
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Even assuming thattheterm“within areasonable length oftime”applies attheproduct level,
therelative importance oftheproducts subject tothe15yeartariff phase outcategory is
insignificant (lessthan1%oftotaltradebetween Mexico andtheUnited States, only0.0003%
between Mexico andCanada, andnotrade between Canada andtheUnited States).
Inanycase,fromthepointofviewoftheirvalue ortheirquantity, itisobvious thattheproducts
witha15yearperiod are“exceptional cases”within themeaning ofparagraph 3oftheUruguay
Round Understanding onArticle XXIV. These products (nottheNAFTA assuch) received
alonger phase outinorder tofacilitate itsincorporation within theNorth American FreeTrade
Area rather thantoexclude them altogether withnotimelimits fortheirinclusion.
25./ Please provide thestatistics of1993 aswell.
26. Inwhat wayarethese figures likely tochange?
Regarding question 25,the1993 figures are:
Mexican Imports from NAFTA partners:
1993 World Imports US$65,366.6 million
1993 Imports from U.S. US$45,294.7 million 69.29% oftotal
1993 Imports from Canada US$1,175.3 million 1.79% oftotal
1993 Imports from NAFTA US$46,470.0 million 71.09% oftotal
U.S.Imports from NAFTA partners:
1993 World Imports US$580.6 billion
1993 Imports from Canada US$111.2 billion 19.2% oftotal
1993 Imports from Mexico US$39.9 billion 6.9% oftotal
1993 Imports from NAFTA US$151.1 billion 26%oftotal
Canadian Imports from NAFTA partners:
1993 World Imports Cdn$172.3 billion
1993 Imports from U.S. Cdn$114.1 billion 66.2% oftotal
1993 Imports from Mexico Cdn$3.7 billion 2.15% oftotal
1993 Imports from NAFTA Cdn$117.8 billion 68.35% oftotal
Regarding question 26,the1993 figures are:
Mexican Imports from preferential partners (1993):
1993 World Imports US$65,366,534,000
1993 Imports from NAFTA US$46,470,004,000 71.00% oftotal
1993 Imports from Colombia
andVenezuela US$310,923,000 0.47% oftotal
1993 Imports from Bolivia US$16,236,000 0.024% oftotal
1993 Imports from Costa Rica US$21,801,000 0.033% oftotal
1993 Imports from Chile US$130,107,000 0.19% oftotal
1993 AllTrade Agreements US$46,949,071,000 71.82% oftotalWT/REG4/1/Add.1
Page10
U.S.Imports from preferential partners:
1993 World Imports US$580.6 billion
1993 Imports from NAFTA US$151.1 billion 26%oftotal
1993 Imports from Israel US$4.4 billion 0.8% oftotal
1993 Total preferential US$155.5 billion 26.8% oftotal
Canadian Imports from NAFTA partners:
1993 World Imports Cdn$172.3 billion
1993 Imports from NAFTA Cdn$117.8 billion 68.35% oftotal
These figures fortradewiththeU.S.arenotlikely tochange substantial overtime, astheU.S.
andtheMexican, andU.S.andCanadian economies arealready quiteintegrated. Since Mexican trade
withCanada, Colombia, Venezuela, Costa Rica, Bolivia andChile iscurrently relatively small, itis
expected thatthistrade willbecome relatively more significant overtime.
29. What proportion oftrade between theParties issubject totariff quotas under NAFTA
provisions other thanAnnex 302.2? Please enumerate those provisions andtheproducts
affected.
Neither Mexico northeUnited Stated havetariffquotas inNAFTA provisions other thanthose
specified inAnnex 302.2.
30. Could theParties bemore explicit onhowtheyintend tocomply withtherequirements
ofArticle XXVIII indetermining theprincipal andsubstantial supplier status inthecontext
ofthisarticle?
30. Indetermining principal andsubstantial supplier status inthecontext ofGATT Article 28,
willthetrade amount among NAFTA countries beexcluded from thefactors which
determine thestatus?
Ifnot,Japan requests thatthetrade among NAFTA countries beexcluded ascountries
outside theNAFTA Parties faceadisadvantage ofhigher tariffs overthose preferential
tariffs applied toproducts from theNAFTA countries.
Intheevent thatArticle XXVIII isinvoked byanyNAFTA Party, theprincipal substantial
interest ofamember shallbedetermined bytheMembers inaccordance withsuchArticle andwith
theUnderstanding ontheInterpretation ofArticle XXVIII oftheGeneral Agreement onTariffs and
Trade 1994.
32. TheParties failed togiveaconcrete answer tothequestion regarding themeasures they
willtaketoensure thatnon-preferential suppliers ’access would notbeeroded through
theverysubstantial margins ofpreference granted byMexico intheNAFTA framework.
Infact, Mexico seems tobefurther increasing themargins ofpreference, thusalso
increasing thelikelihood oftrade diversion. Inmay1995, Mexico raised tariffs ontextiles
andfootwear from thepreviously applied level tothemaximum level permitted under
itsWTO commitments. Thisaction wasannounced asatemporary measures topromote
smallandmedium-sizedenterprises.CouldthePartiesclarifythereasonsforhismeasures?WT/REG4/1/Add.1
Page11
WilltheParties beabletogiveafirmcommitment onthedatebywhich thetariffs will
rereturned toprevious levels?
Intheir answer, theParties referred tothefurther negotiation byMexico ofPreferential
arrangements. What kindofpreferential arrangements areenvisaged intheanswer to
thisquestion? How could these arrangements becompatible withtheWTO provisions?
Mexico ’stariffs increases onleather manufactures, clothing andfootwear arenotonlyfully
compatible withitsrights andobligations under theWTO buthavenothing todowiththeNAFTA
Agreement.
Thismeasurewastakentohelpmediumandsmall-sizedenterprisesthathadbeendirectlyaffected
bymassive imports inrecent years. Imports oftheseproducts increased by35%average annually from
1990 to1994. From 1992 to1994, Mexico ’snational production offootwear andapparel fell5.5%
and4.3%, respectively.
WTO doesnotrequire aParty togivea“firmcommitment onthedatebywhich thetariffs
willbereturned toprevious levels ”when suchlevels areatorunder thebound rate.Mexico ’sindication
ofthetemporal application ofthismeasure isofanautonomous nature.
32. Theapplication ofCIFinstead ofFOBforthetariff evaluation ofproducts from countries
outside theNAFTA would have asimilar effect asthatofatariff increase. Would this
increase thegapbetween MFN tariffs andpreferential tariffs applied among NAFTA
countries?
Thisquestion isnotrelated totheNational Treatment principle. Please seetheanswer to
questions 103.-105.
38. Theanswer tothisquestion underlines thattheprovisions ofArticle 303ofNAFTA “do
notaltertheMFN tariffs applicable toimports from non-NAFTA countries. Though this
iscertainly true,therestriction ondrawback anddutydeferral programmes, isnotwithout
effect ontheconditions under which goods areimported intheterritories oftheNAFTA
members. Article XXIV:5(b) doesnotrefer totheMFN rates inparticular, butmore
generally tothe“duties andother regulations ofcommerce.... ”which “...shall notbe
higher ormore restrictive.... ”thanthose existing prior totheformation ofthefree-trade
areaorinterimagreement.Inthelightofthoseconsiderations,wewouldappreciatefurther
comments from theParties.
39. Thesame remark applies, mutatis mutandis, tothestatement intheanswer tothisquestion,
that“since there isnoincrease inMFN tariffs thatapplies togoods imported intoany
NAFTA Party from anynon-NAFTA country, thenewsystem doesnotfallwithin the
provisions ofparagraph 5(b)ofArticle XXIV oftheGATT." Further comments would
alsobeappreciated.
41. Again, thequestion isin,inourview, whether MFN tariff areaffected ornotbuythe
NAFTA Treaty, byrather whether thenew“regulations fcommerce ”is“more restrictive ”
ornotthantheprevious legalframework. What istheopinion oftheParties onthissubject?WT/REG4/1/Add.1
Page12
Answer toquestions 38,39and41:
ItistruethatArticle XXIV, 5(b)doesnotrefer totheMFN rates inparticular but,more
generally, to“theduties andother regulations ofcommerce ”.Butitisalsotruethatwhathasbeen
saidattheendoftheoriginal answer toquestion 38indocument WT/REG4/1 withrespect toMFN
tariffs fornon-NAFTA countries isequally valid fordrawback anddutydeferral programmes.
Drawback anddutydeferral programmes ofaNAFTA Party vis-à-vis non-NAFTA parties
arenotaffected byArticle 303,since thatarticle applies onlytotrade between NAFTA Parties.
Therefore, thedrawback anddutydeferral programmes “tothetradeofcontracting parties notincluded
insuchareaornotparties tosuchagreement ”could notbeconsidered tobehigher ormore restrictive
thanthose existing prior totheformation oftheNorth American FreeTrade Area. Bydefinition, a
programme thatisnotaffected could notbehigher ormore restrictive thanitwasbefore.
The“conditions under which goods areimported intotheterritories oftheNAFTA members ”
willnotbeaffected. What isgoing tochange duetoArticle 303aretheconditions under which goods
areimported/exported between theterritories oftheNAFTA members. Inother words, notonlythe
duties, butalsothe"other regulations ofcommerce" applicable tothetrade ofcontracting parties not
included intheNAFTA Agreement willbeunaffected.
42. Wewould appreciate theopinion oftheParties onthepoint raised inthesecond paragraph
ofthisquestion.
Datapresented intheanswer toquestion 44(towhich reference ismade) refertothePITEX
programme only. Wewould appreciate further information onother wavier orduty
reductionschemes,including,inparticular,theMexicansystemof“operacionesespecíficas”
(Decreto of3February 1982, published intheDiario Oficial of11February 1982).
Although Mexico willnotbeabletogrant waivers ofcustoms duties subject tothefulfilment
ofaperformance requirement asofJanuary 1st,2001 assetoutinArticle 304,Mexico cancontinue
togrant waivers oncustoms duties without demanding thefulfilment ofaperformance requirement.
Imports oftheMaquiladora
Year Imports
(millions ofU.S.dollars)
1990 9,404
1991 12,101
1992 15,935
1993 16,442
1994 20,466WT/REG4/1/Add.1
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43. Though itiscertain that, astheanswer reads, anyNAFTA party may, inrespect ofa
given products, “apply itsMFN tariffs onimports from non-NAFTA countries uptothe
level oftherates bound under theGATT, thisisavalid argument inthecontext of
Article XXIV.6 which established theprocedures tobefollowed when theincrease ofa
boundrateisproposed.OurassessmentofNAFTAtakesplace,however,withinthecontext
ofArticle XXIV.5 where thepertinent reference istotheapplied duties andother
regulations ofcommerce. Inlightofthese considerations, wewould appreciate further
comments from theParties.
ThepertinentreferenceunderArticleXXIV.5isnottothe“applied”dutiesandotherregulations
ofcommerce, buttothe“applicable ”duties andother regulations ofcommerce. Theword “applied ”
doesnotappear onesingle timeinArticle XXIV.5. Theterm“applied ratesofduty”wasintroduced
intheUruguay Round Understanding, anditrefers toArticle XXIV.5(a) only,thatistocustoms unions,
nottofree-trade areas.
44. IsthePITEX programme stillinforce? Have amendments been made toitrecently?
Ifthisisthecase, inwhich sense?
ThePITEXprogramisstillinforce.OnMay11,1995,PITEXwasamendedinordertosimplify
international tradeprocedures sothatsuppliers, thatisindirect exporters, could haveaccess tobenefits
granted tofinalexporters. Theamendment isalsointended togrant administrative facilities tomedium
andsmall industries thatsupply materials toindustries benefiting from thePITEX program.
45. There seems tobesome sortoflogical contradiction between theanswer tothisquestion
andtheexplicit exception ofthemeasures setoutinAnnex 301.2 from therequirement
tobeinaccordance withArticle XIoftheGATT (Article 309.5). Could theParties further
clarify thispoint?
Thereisnologicalorlegalcontradictionbetweentheoriginalanswertoquestion45andmeasures
setoutinAnnex 301.3. Article 309provisions arenotonlyGATT compatible, buttheirscope goes
beyond GATT Article XI.Since Annex 301.3 doesnotaffect therights andobligations oftheNAFTA
Parties orofthird countries under theWTO Agreement, theexceptions toArticle 309contained in
suchAnnex refertoNAFTA-provisions andNAFTA-beyond-GATT-provisions only. Therequirement
tobeinaccordance withArticle XIoftheGATT continues toapply intheGATT context (thatistaking
GATT asawhole) while therequirement tobeinaccordance withArticle 309continues toapply in
theNAFTA context (thatisincluding Annex 301.3). Bothrequirements runinparallel andtherefore
donotcontradict eachother.
53./ Though notification Under Article 5-1oftheTRIMs Agreement hasbeenmade, request
54. oftheCouncil forTrade inGoods toextend transition period hasnotyetbeen made.
TheNAFTA Annex 300-A stipulates thattheAutomotive Decree iseffective until year
2004. Ontheother hand, thetransition period forLDC isfiveyears. Canweunderstand
thatMexico maynotrequest theCouncil forTrade inGoods toextend theperiod, and
thattheAutomotive Decree maybeabolished before 2004?
Under theAutomotive Decree, anytrade surplus achieved byavehicle manufacturer in
Mexico canbeusedbythatmanufacturer toimport vehicles. What happens inthecase
ofnon-manufacture ornewcomer enterprises? Could youexplain thescope ofthe
application ofthedecree, theduration period ofthedecree, themethod ofdetermining
theamount ofimports allowed, andsoforth?WT/REG4/1/Add.1
Page14
ItistruethatMexico hasnotrequested theCouncil forTrade inGoods toextend thetransition
period fortheMexican Automotive Decree. Asitwasstated intheoriginal answer toquestion 53
contained indocument WT/REG4/1, when thetimecomes, Mexico 'sfinaldecision withrespect to
theAutomotive Decree willdepend onitsfinancial, trade anddevelopment needs aswellasonthe
rights andobligations accruing toitunder theWTO.
Alltheinformation regarding theAutomotive Decree, including itsscope ofapplication, its
duration, themethod fordetermining theamount ofauthorized imports andtheDecree itself, iscontained
indocuments G/TRIMS/N/1/Mex/1 andG/TRIMS/N/1/Mex/1. Rev1(English version) oftheTRIMS
Committee.
Rules ofOrigin (Chapter 4)
General questions:
(a) Theanswers bytheNAFTA Parties regarding rules oforigin reflect thebasic idea
thattheNAFTA preferential rules areusedtodetermine eligibility forpreferential
tariff treatment, anddonotaffect MFN tariffs orother policy instruments that
apply toimports ofgoods from non-NAFTA countries. Thisideadoesnotreflect
thereality. Rules oforigin should function inanimport restrictive manner and
thushave been themain issue ofthisWorking Party andtheUR. Weconsider
thatitisinthiscontext thatspecial rules oforigin withrespect toautomobiles
andtextiles, havebeenprovided. What istheNAFTA viewpoint onthismatter?
Itisclear thattheNAFTA 'srules oforigin regarding automobiles andtextiles
were made tougher sothattheycanfunction inanimport-restrictive manner.
What istheNAFTA viewpoint?
Asindicated intheanswers toquestions 61,63,64,66,68and92,theNAFTA viewpoint
onthematter ofpreferential rules oforigin isthattheydonotfunction inarestrictive manner with
regard toMFN tariffs orother policy instruments thatapply toimports ofgoods from non-NAFTA
countries. Werefer totheanswer toquestion 63withregard totherelationship oftheNAFTA
preferential rules oforigin totheprinciples setoutintheWTO Agreement onRules ofOrigin.
Asregards thecomment that“NAFTA rules origin regarding automobiles andtextiles were
made tougher ”,theNAFTA Parties would notethattheWorking Party isexamining theconsistency
ofNAFTA, including itrules ororigin, withArticle XXIV, andnotwiththeprovisions oforin
comparison withother FTAs.
(b) Theresponses toquestions intheareaofrules ororigin, ascontained inDocument
WT/REG4/1 seem tobebased, interalia,upon thepremise thattheNAFTA rules
oforigin create nonewrestrictions ontrade opportunities fornon-NAFTA
countries, since these rules areusedonlytodetermine theeligibility ofNAFTA
tariff preferences and,thus, arenotdirectly applied tooutside theregion.
However, apart from theindirect yetsubstantial adverse impact ontrade
opportunities ofthird countries, even "trade within NAFTA" canbeadversely
affected bytherules. Thisisespecially relevant inthecaseoftrade inautomobiles.WT/REG4/1/Add.1
Page15
Letustakeahypothetical example ofaforeign-invested automobile manufacturer
located inoneoftheNAFTA member countries. Thismanufacturer mayhave
been exporting automobiles toother countries intheregion. Presumably, the
decision tomake such investment inthefirstplace might have been motivated
bytheconclusion oftheCanada-U.S. Free Trade Agreement. Atthetime of
investment, thismanufacturer could have reasonably expected thatthe"50%
regional content rule" would bemaintained. Accordingly, thismanufacturer might
havebased itsproduction process andsourcing strategy onthatexpectation, thus
adopting aregional content ofslightly over50%. Now, withtheincrease ofregional
content requirements under NAFTA, thismanufacturer isfaced with the
alternativesofeitherchangingtheproductionprocess(models)andsourcingstrategy
orstopping production entirely. Ifthefirstopinion istechnically impossible, the
NAFTA rules are,infact,driving thismanufacturer outofintra-regional trade
forgood.
Thiscaseillustrates thattheNAFTA rules oforigin canwork torestrict, rather
thanliberalize, trade within theregion asfarassome sub-sectors oftheeconomy
areconcerned. Thisapparently runs counter tothearguments oftheNAFTA
members thatnoeconomic sectors areexcluded from NAFTA.
Moreimportantly,suchanadverseimpactonintra-regionaltradeseemsinconsistent
withGATTArticleXXIV:8(b)whichprescribesthat"...otherrestrictiveregulations
ofcommerce ...areeliminated onsubstantially allthetrade between theconstituent
territories".
Howcanthese inconsistencies beexplained? DotheParties totheNAFTA intend
toaddress thistypeofproblem inonewayoranother?
Asindicated intheresponse toGeneral Question (a),theNAFTA Parties would notethatthe
Working Group isexamining theconsistency ofNAFTA, including itsrules oforigin, with
Article XXIV, notwiththeprovisions oforincomparison withother FTAs.
Withregardtothehypotheticalautomotiveexample,theNAFTAPartieswouldnotethatNAFTA
rulesoforigin determine onlywhether theproducer oftheautomobiles isentitled totrade atNAFTA
preferential tariff rates. TheNAFTA doesnotdrive themanufacture outofintra-regional trade or
exclude thisoranyother economic sector since thisoranyproducer hasthechoice ofeither trading
attheNAFTA preferential tariff ratesbymeeting therules oforigin ortrading attheMFN ratesin
itstradebetween Canada, Mexico andtheUnited States. Asnoted intheresponse toGeneral Question
(a),theNAFTA rules oforigin donotaffect theMFN ratesorother regulations ortrade; theyonly
determine whether agood iseligible forNAFTA tariff preferences.
Article XXIV:8(b) prescribes thatinsuchcovered free-trade areas “...the duties andother
restrictive regulations ofcommerce...are eliminated onsubstantially allthetradebetween theconstituent
territories inproducts originating insuchterritories. ”Asnoted inanswer toquestion 29,theNAFTA
applies tovirtually allgoods thatmeettherulesoforigin. Consequently, theNAFTA rulesoforigin
areinnowayinconsistent withthisprovision, assuggested bythequestion.
57. According totheanswer tothisquestion, itwould seem that
(a) TheNAFTA preferential rules oforigin arenotalways equivalent totheNAFTA
market rules.WT/REG4/1/Add.1
Page16
(b) Agood which complies with theNAFTA preferential rules oforigin would
automatically comply withtheorigin market rules.
Itwould follow from (a)and(b)thatagoodwhich complies withtheNAFTA origin market
rules doesnotalways comply withtheNAFTA preferential rules oforigin.
Inthelightofthis,itisdifficult tounderstand thatlastparagraph ofthisanswer, unless
discrepancies between thetwosetsofrulesaffect onlytheCanadian imports ofgoods other
thanagricultural andtextile? Could itbethecase? Please explain.
Asnoted intheoriginal response toQuestion 57,theMarking Rules areused, pursuant to
Annex 311,todetermine thecountry oforigin forpurposes ofcountry oforigin marking under NAFTA.
Assuch, theMarking Rules stipulate anumber ofhierarchial testsdesigned toestablish thespecific
country oforigin. TheNAFTA preferential rules oforigin areusedtodetermine whether agood
originated within theNAFTA region andhence qualifies fortariff preferences. Thepreferential rules
arenotrequired todetermine inwhich NAFTA Party thegoods originate.
Forpurposes ofthetariff transition period, Mexico andtheUnited States havechosen touse
themarking rulesinorder todetermine which NAFTA tariff preference applies tooriginating goods
imported fromanother NAFTA Party --thatistodetermine thecountry oforigin forNAFTA originating
good. Canada isalsousing theMarking Rules foragricultural andtextile products. Forother goods,
Canada haschosen tousetheprovisions setoutinparagraphs 4through 6ofAnnex 302.2. Thedecision
byCanada tousetheseprovisions, rather thantheMarking Rules, wasnotrelated toanydiscrepancies
between theMarking Rules andthepreferential rules oforigin thataffected onlyCanadian imports.
Asageneral rule,theMarking Rules arethesame intheNAFTA Parties formost products.
58. TheNAFTA rules oforigin inthetextiles sector continue tobeagenuine source for
concern. Theintroduction oftheKNIFED rules oforigin hasresulted inserious trade
distortion tothedetriment ofexporters ofyarns andfabric from third countries. Itis
ourviewthe“fibre first”policy inparticular isexcessively restrictive. Could theParties
clarify thereasons whythisunduly restrictive “fibre first”approach hasbeenintroduced
forcertain products. DotheParties intend toabolish thisprocedure inthelightofthe
evidence oftrade distortion? Ifthisisnotthecase, which other measures willbetake
toeffectively prevent thetrade distortion effects ofthe“fibre first”policy?
Astheanswer toquestion 58indicates, there isaprocedure whereby limited derogation
canbegranted totherestrictive NAFTA rules oforigin inthetextiles sector. Could the
Parties explain whether theyintend toextend thisderogation procedure andforwhich
products.
Aswehaveindicated intheanswers toprevious similar questions, theNAFTA viewpoint on
thematter ofpreferential rulesoforigin isthattheydonotfunction inarestrictive manner withregard
toMFN tariffs orother policy instruments thatapply toimports ofgoods fromnon-NAFTA countries.
60. TheNAFTA Parties havestarted tosimplify theRules ofOrigin. Please explain thescope,
objectives, procedures, andtheschedule fortheir implication, aswellasthepossibilities
ofasking theopinions ofnon-NAFTA Parties.WT/REG4/1/Add.1
Page17
TheNAFTA Parties agreed toimplement changes totheNAFTA rulesoforigin forchemical
andallied products ofHSChapters 29to38onJanuary 1,1996. Thechanges affected overhalfthe
goods covered inthese chapters. With three exceptions, therules weresimplified byeliminating or
reducing theinstances when aregional value content testisrequired tobemetunder theNAFTA rules
oforigin. Bydoing so,therecord-keeping burden onproducers ofthese goods hasbeenreduced
significantly.
ThePartiesconsultedcloselywiththechemicalindustriesinthethreeNAFTAPartiesthroughout
theprocess, bothduring thedevelopment oftheproposals andlaterduring thefinalization ofthe
proposals. Theproposals werepublished forpublic comment during theSpring andSummer of1995.
Similarly, theNAFTA Parties haverecently amended (effective October 1,1995; copyattached)
theNAFTA Uniform Regulations forChapter Fourtoprovide moreconsistent treatment while allowing
more flexibility tothetrading community. Asinthecaseofthechemical rules, theParties closely
consulted withtheprivate sector indeveloping theamendments toimprove theUniform Regulations,
andinreleasing them forpublic comment inadvance oftheirimplementation. Forexample, Canada
published theamendments forpublic comment inAugust, 1995.
AsrequiredundertheWTOAgreementonRulesofOrigin,boththeamendmentstothechemical
rules oforigin andtheamendments totheUniform Regulations havebeennotified totheWTO.
62. Arethere anyspecific cases where anevasion ofAD/CVD duties hasbeen made?
What istherelationship between theMexican rules oforigin, withrespect totheevasion
ofAD/CVD duties andtheNAFTA rules ororigin? Isthere anydifference instandards
orcriteria? Ifso,why?
Pleaseexplainspecificallyhowrequirementshavebeenloosenedregardingthedetermination
andcertification oforigin forthose products originating intheU.S.andCanada?
TheNAFTA Rules ofOrigin regarding theapplication ofAD/CVD duties arebasically
thesame asthose oftheWTO. With respect totheapplication ofAD/CVD duties to
imports from NAFTA countries, whyarerules ororigin under theFreeTrade Agreement
applied?
TheNAFTA rulesoforigin arenotapplicable tothose ofNAFTA Parties inrespect oftheir
antidumpingandcountervailinglaws.Thatis,therulesoforiginregardingtheapplicationofantidumping
orcountervailing duties (AD/CVD) andNAFTA rulesoforigin arenotrelated toeachother. Theformer
areaimed atavoiding theelusion ofAD/CVD, while thelatter areapplied forpreferential purposes.
Moreover, asstated intheoriginal answer toquestion 62indocument WT/REG4/1, therulesoforigin
regarding theapplication ofAD/CVD donotresult fromNAFTA butfromMexico 'sinternal needs.
There aredifferences between bothsystems. Therulesoforigin toavoid theelusion ofAD/CVD
payment arelessstringent thantheNAFTA rules oforigin.
Since therules oforigin forAD/CVD areaimed atpreventing exporters from eluding such
duties byutilizing theterritory ofathirdparty todisguise therealorigin oftheirproducts, andsince
therulesoforigin ofthefreetradeagreements allow fortheidentification oftheorigin oftheproducts,
inthecaseofproducts covered bythose agreements itisnotnecessary todouble-check theirrealorigin
nortoapply tothem therules oforigin forAD/CVD.WT/REG4/1/Add.1
Page18
63. With regard toparagraph 1ofthereply, please provide uswithacopy of"theUniform
Regulations forChapter Four".
With regard toparagraph 2,please explain theactivities andthepresent situation ofthe
"Working Group onRules ofOrigin".
Thethree mainactivities oftheNAFTA Working Group onRules ofOrigin during 1994and
1995 involved thesubstantive amendments totheUniform Regulations andtotherules oforigin
applicable tothechemical sector (seeanswer toquestion 60),andnon-substantive technical rectifications
totheAnnex 401product-specific rules oforigin.
Thefourth major effort oftheWGduring thisperiod involved converting Annex 401product -
specific rulesoforigin fromthe1992HStariffclassification tothe1996HSclassification nomenclature.
Theamendments tothechemical rules oforigin, thetechnical rectifications toAnnex 401andthe
conversion oftheAnnex 401rules oforigin tothe1996 HSwere implemented onJanuary 1,1996
bythethree Parties. Asrequired under theWTO Rules ofOrigin Agreement, these substantive and
non-substantive amendments havebeennotified totheWTO.
TheWGanditsCustoms Subgroup havealsobeeninvolved inanumber ofother issues,
including addressing differences intariffclassification between thethreeParties andexamining proposals
from theprivate sector toamend substantively therules oforigin forother products.
61./ Comparing theNAFTA rules oforigin ingeneral withthatoftheU.S.-Canada FTA, we
65. donotdeny that, forexample, thescope ofusing thestandard oftariff classification has
beenwidened andthatthepredictability oftheNAFTA rules oforigin hasbeenenhanced.
Bearing thisinmind, whyarespecial complicated rules setoutforautomotive goods and
other areas? What isthereason forsuchpolicy?
With regard toparagraph 3ofquestion 64,please explain theaimandapplication of
"inventory control methods".
65. With regard toparagraph 2ofthereply, please givemore details concerning "Insome
cases".
Thereply mentioned that"thedegree ofspecificity intheNAFTA rules oforigin for
industry sectors isbased onthedegree ofspecificity intheHSforgoods inasector".
However, itisdifficult tounderstand from reports ontheNAFTA negotiations thatthe
degree ofspecificity intheNAFTA rules oforigin forindustry sectors wasdecided simply
fortechnical reasons. Rather, isthere notaproblem thatthedegree ofspecificity was
decided withtheintention toprotect sensitive areas byusing technical methods?
Answer toquestions 61and65:
TheNAFTA Parties developed theextensive useoftariff classification intherules oforigin
because itprovides predictability. TheNAFTA Parties alsosought tobasetherulesonlyonchanges
intariffclassification whenever possible inorder toreduce record-keeping andadministrative burdens
onproducers andtraders andtoreduce theverification burdens onthecustoms administrations. As
forreasons forthespecific rulesrelated toautomotive goods andother areas, please seetheexplanation
provided intheanswer toquestion 72.Itisunclear towhat other areas thequestion isaddressing
since therulesoforigin forother goods arebased onchanges intariff classification, with, inselectedWT/REG4/1/Add.1
Page19
cases, asupplementary regional value content testbased onthegeneral content calculation specified
inArticle 402oftheNAFTA.
Inventorycontrolmethodsareusedbyproducersinthetradingcommunitywhosenormalbusiness
practices entail theco-mingling ofinputs andgoods. TheNAFTA rulesallow agreed-upon methods
andfacilitate theiruse,therefore reducing andeveneliminating burdens thatwould berelated tothe
specific identification ofsuchinputs andgoods bythetrading community.
Withregardtothereferenceto“insomecases”inparagraph2oftheoriginalresponse,examples
ofgoods forwhich theNAFTA Parties created 8-digit tariff items toidentify specific inputs inorder
toavoid imposing aregional value content testincluding, among others, household refrigerators,
dishwashers, washing machines, most industrial machine tools, photocopiers, gasturbines, andfax
machines. These 8-digit tariff items specifically identify themajor parts orinputs ofthese goods.
Since these partsorinputs would berequired tobesourced within theNAFTA region inorder tomeet
theregional value content test,theNAFTA Parties wereabletodispense withthevalue content test
inthese cases. Asaresult, producers thatimport other parts ofthegood classified under thesame
parts heading orsubheading arespared theadministrative andrecord-keeping burdens ofcomplying
witharegional value content test. Aregional value content testwould require theproducer tokeep
track ofthesourcing andvalue ofallitsinputs, while thetariff shiftrules based onthese specially-
identified inputs require theproducer onlytokeeptrack ofsourcing ofthese specific inputs.
Incertain cases, theNAFTA Parties identified bydescription thespecific input inorder to
provide greater clarity aswellasavoiding theuseofaregional value content test. Anexample of
thisistherules oforigin fortelecommunications equipment.
Atthesame time, 8-digit tariff items werecreated tospecifically identify products asameans
ofavoiding theinclusion ofsuchproducts under aregional value content testthatapplied toother
products under thesame heading orsubheading. Anexample ofthisistheruleoforigin fortelevision
picture tubes.
Thespecificity oftherulesforeachproduct reflect theability oftheNAFTA Parties todevelop
rulesoforigin thatminimized therecourse tosupplementary testssuchasregional value content tests
when specifying thedesired degree oftransformation ofnon-originating inputs andpartsforeachgood.
Itwasnotpossible inallcases toeliminate theuseoftheregional value content test.
66./ Wedonotintend tochallenge theexistence oftherules oforigin themselves. However,
67. theessenceistodistinguishbetweenproductsoriginatingintheNAFTAregionandproducts
originating outside theNAFTA. Thus depending onthecriteria andapplication ofthose
rules, there could beaproblem ofapplying them inaprotective way.
Inthecaseoflocal content requirements onautomotive goods, theNAFTA content level
willeventually become 62.5percent, anincrease from 50percentintheU.S.-Canada
FTA. Thiscould beconsidered asacaseofviolation totherules inparagraph 5(b)of
Article XXIV oftheGATT, which stipulates thatregulations ofcommerce shall notbe
more restrictive thanthose prior totheformation ofthefree-trade area. Wewould like
torequest adetailed explanation onthispoint byusing thecaseofautomobiles asan
example.WT/REG4/1/Add.1
Page20
Reference ismade totheanswers inthegeneral questions tothissection, aswellastheanswer
toquestion 88.Asnoted previously, theNAFTA viewpoint onthematter ofpreferential rulesoforigin
isthattheydonotfunction inarestrictive manner withregard toMFN tariffs orotherpolicy instruments
thatapply toimports ofgoods from non-NAFTA countries.
72. Thisreply isextremely important andwewould liketoclarify inparticular onthefollowing
points:
(a) Paragraph 1and2ofthereply explain thatautomobiles andproducts formotor
vehicles arecomprised ofhundreds andthousands ofcomponents andparts, and
thusrequire amore accurate calculation oflocalcontent. Another example could
beaircraft, which alsohassimilar characteristics. Arespecial rules oforigin,
including local content, applied toaircraft? Ifnot,why?
(b) Ifadetailed calculation method oflocalcontent issetupforindustries withawide
range ofcomponents, itwould putagreat burden onsuchindustries. Would this
notbecontradictory with thework setouttosimplify therules oforigin, as
explained bytheNAFTA members?
(A)TheNAFTA Parties agreed todevelop, tothelargest extent possible, rulesoforigin devoid
ofavalue content percentage methodology, andweresuccessful inachieving thisobjective formany
product sectors, including aircraft. However, thisobjective wasnotmetintheautomotive sectors,
andavalue contents percentage methodology isutilized.
(B)Anoverall concern astoadministrative burdens ismanifested intheUniform Regulations,
which provide flexibility totheprivate sector inchoosing themostefficient andsimple manner tomeet
theagreement ’srequirements. Thisisparticularly truewithregard torecent amendments totheUniform
Regulations, asdiscussed intheresponses toquestions 60and63.
76. Thereply doesnotanswer thequestion about the"burdens oncompanies". What isthe
actual effect oncompanies?
Aninternational harmonization ofrules oforigin isnecessary. Take theexample ofthe
United States where there arethree different methods tocalculate thelocalcontent, namely,
theNAFTA, theLabelling ActandtheCAFF Act,which together putgreater burdens
oncompanies. Arethere anyplans fordomestic harmonization? Ifso,what isthespecific
schedule?
Throughongoingefforts,suchastherecentamendmentstotheUniformRegulations,theNAFTA
Parties areresponsive toactual effect oncompanies oftherequirements ofvarious origin regimes.
Itsisalsoforthisreason thattheNAFTA Parties areactive participants intheongoing work program
intheWTO, which willleadtotheharmonization ofrules oforigin usedintheapplication ofnon
preferential trade policy instruments.
79. Weunderstand thatfortheretention ofNAFTA records, afive-year period inthecase
ofMexico andtheUnited States, andasix-year period inthecaseofCanada, arespecified
ineachmember 'sinternal law. Please provide details astowhich lawsornotices these
areactually specified.WT/REG4/1/Add.1
Page21
TheNAFTA requires exporters orproducers "tomaintain allrecords related totheorigin
ofagood forfiveyears, orlonger than fiveyears astheNAFTA Party mayspecify".
What kindofsituation could arise where anextension tothefive-year period isrequired?
Such requirements existbecause ofNAFTA Parties ’individual domestic legislation relating
toaccounting records forcertain business transactions. With regard totherequirements relative to
imports, suchrequirements would apply toallimports, andnotjustimports entering under NAFTA
tariff preferences.
With specific reference toMexico, Article 30oftheMexican Federal Fiscal Code (Código
Fiscal delaFederación) provides foratenyearrequirement fortheretention ofaccounting records
forallfiscalpurposes,notonlythoserelatedtoNAFTA.Furthermore,accordingtotheNAFTAspecific
regulations, allexporters orproducers thatcomplete acertificate oforigin covering goods exported
totheterritory ofanother Party under preferential tariff treatment, shallkeepallrecords related to
theorigin ofthegood, intheterms oftheFederal Fiscal Code, while importers oforiginating goods
under preferential tariff treatment, shallkeepthecertificate oforigin andother documents related to
theimportation inaccordance withtheCustoms Act(LeyAduanera) andtheFederal Fiscal Code.
Thatis,according toMexican internal law,allMexican exporters, producers andimporters mustkeep
theirNAFTA records foratenyearperiod.
InCanada, subsection 40(1) oftheCustoms Actrequires every person whoimports goods to
keepforsixyears allrecords inrespect totheimported goods 'origin, marking, purchase, importation,
costandvalue ofcommercial goods, thepayment forcommercial goods inCanada andanyapplication
foradvance ruling made under subsection 43.1(1) oftheCustoms Actinrespect ofcommercial goods.
Thelegal requirement applies toallimports, andnotjustimports entering under NAFTA tariff
preferences
82. Ourquestion wasintended toaskabout thecaseofacompany exporting goods "from
theU.S.toMexico" andnot"from Mexico totheU.S.". Wewould appreciate anewreply
onthisbasis.
Only onecertificate isrequired byMexican Customs:
(a) Goods exported fromUSandCanada toMexico under NAFTA preferential treatment
arewaived fromthecertificate oforigin forAD/CVD purposes because theyalready
haveacertificate oforigin: theNAFTA certificate oforigin (seeanswer toquestion 62).
(b) Goods exported from USandCanada toMexico under MFN treatment require a
certificate oforigin forAD/CVD purposes because theydonothave aNAFTA
certificate oforigin (seeanswer toquestion 62).
88. TheParties statethey"expect theNAFTA tohaveapositive impact onimports ofallgoods
from allregions oftheworld because ofthetrade creation effects arising from higher
incomes intheNAFTA territories" (reply toquestion 88-WT/REG4/1).
Could theParties explain howtheyexpect imports ofsensitive sectors (autos, textiles) will
increase when NAFTA rules forthese sectors would tendtolimit freetrade evenwithin
theNAFTA?
MFN rates arenotincreased, butthestatus quoremains.
DotheParties believe thattrade inthesensitive sectors willincrease intheNAFTA given
thetighter rules forthese sectors?WT/REG4/1/Add.1
Page22
What percentage oftotalNAFTA trade isinthesensitive sectors?
Willthere beaphased incorporation/reduction ofthese different rulesforsensitive sectors;
i.e.willtherules forsensitive sectors bebrought intoline(coverage) withtherules for
other NAFTA sectors?
Howdoesthephased elimination ofCanada 'sprohibitions onusedvehicles from Mexico,
which expires by2019, comply withGATT 1947, Article XXIV:5(c)?
Every sector maybesensitive toaparticular element ofthetrading community, anditisnot
clearwhatsector would beuniversally understood tobe“sensitive. ”And, aspreviously noted, the
NAFTA didnotresult inanyincreased barriers toimports ofgoods from non-NAFTA regions. As
forthetextile sector --averybroad category-- therulesoforigin largely reflect thehighNorth American
content which many products have. Similarly, therulesapplicable toautomotive products alsolargely
reflect thecurrent andexpected (asreflected intheeight-year transition period) North American content
levels asreported bymost automotive producers.
Canada andMexico agreed, asanexception tothephase-out ofothertradebarriers, toeliminate
theprohibition onimports ofusedvehicles from eachother in2019 inrecognition ofthespecial
circumstances inMexico regarding importation ofusedvehicles.
Customs Procedures (Chapter 5)
103.- Ourunderstanding from Mexico 'sreply inthecaseoftheUnited States andCanada,
105. changes totheCIFsystem arenotrelevant because evenifthetaxable tariff basewere
tochange from theFOB system totheCIFsystem, substantially there isnogreat change.
Foranon-NAFTA member, however, thechange ofthesystem willhave aneffect equal
toadefacto increase oftariffs, anditisclear thatthechange totheCIFsystem willbe
discriminatory tonon-NAFTA members. What isyour viewonthispoint?
Asecond problem could arise inthesense thatitwould change thecontent ofMexico 's
schedules ofconcession arrived atthetariff negotiations when Mexico acceded totheGATT
(andatthesubsequent tariff negotiations).
103.- Though theuseofeither aCIForaFOB system iscompatible withtheCustoms Valuation
105. Agreement, thepoint raised inconnection with these questions istheuseofdifferent
valuation systems depending onwhether theimported goods haveNAFTA ornon-NAFTA
origin. Wecanseenologic intheargument that"when thegoods conform totherules
oforigin provisions contained inNAFTA, suchgoods areconsidered tocome notfrom
theUnited States orCanada butfrom theNorth American FreeTrade Area, andtherefore
treated under theFOB system".WT/REG4/1/Add.1
Page23
Theuseofdifferent customs valuation systems isnotareasonable implication ofthe
creation ofafree-trade area, though thesame practical results could havebeenobtained
byamarginal acceleration ofthetime-table forMexican tariff reductions. Thearguments
given intheanswer tothisquestion tounderline themarginal andtemporary nature of
thediscrimination introduced bythismeasure reinforce theideathatthisdifferentiation
is,apart from arbitrary, unnecessary. Could theParties, inviewofthose considerations,
givetheir views onthesubject?
Iftheargument according towhich theCIFsystem hasaneffect equivalent toadefactoincrease
oftariffs werecorrect, itwould alsobecorrect thatallWTO Members whousetheCIFsystem have
increased theirtariffs orhavetariffs relatively higher thanthose ofWTO Members whousetheFOB
system. Thisisnotthecase. Asstated intheoriginal answer toquestion 103ofthedocument
WT/REG4/1, theuseofboththeCIFsystem ortheFOBsystem iscompatible withArticle 8ofthe
Customs Valuation Agreement. Otherwise, Article 8ofthatAgreement would givepreference toone
system overtheother.
Theapplication oftheCIFsystem instead oftheFOBsystem isnotrelated totariffs. Ifitwere
so,theissue would bepartofthebinding obligations under Article IIofGATT 94,which isnotthe
case. Thus, itisnotcorrect tostatethattheuseofCIFwillresult ingreater differences between the
MFN tariffs andNAFTA preferential tariffs. Mexico 'sMFN tariffs (which inmostcases areinferior
tothebound level) havenotbeenaffected bytheapplication oftheCIFsystem. Theonlytariffchanges
introduced inMexico 'sschedule ofconcessions since itsaccession totheGATT werethereductions
inbound tariffs agreed during theUruguay Round.
Finally, itisimportant tobearinmind asstated intheoriginal answer toquestion 103of
document WT/REG4/1, thatMexico 'sCIFregime applies totheproducts ofallContracting Parties,
including theUnited States andCanada, inanon-discriminatory manner. Nevertheless, when thegoods
comply withNAFTA provisions onrulesoforigin, itisconsidered thatthose goods donotcome from
theUnited States orCanada, andthustheyaretreated under theFOBsystem.
Energy andBasic Petrochemicals (Chapter 6)
106. Asstated intheanswer tothisquestion, Article 603.3 ensures that,when import orexport
restrictions onenergy products from ortothird countries areapplied byaNAFTA Party,
thisParty mayrequire other NAFTA Contracting Parties toapply export restrictions as
itmaybenecessary inorder toprevent circumvention ofsuchmeasures. Inthecaseof
non-conformity withtheWTO rules ofthemeasures applied bytherequesting Party, a
conflict mayarisefortherequested Party between itsNAFTA andWTO obligations. Could
theParties explain howtheNAFTA Treaty would beapplied insuchhypothetical situation?
NAFTA Parties have nointention totakeWTO inconsistent measures. Inanycase,
Article 603(3) doesnotoblige theNAFTA Parties totakemeasures thatareinconsistent withtheir
WTO obligations.WT/REG4/1/Add.1
Page24
Agriculture (Chapter 7)
General question:
Why have themember countries adopted adifferent approach totherelationship (or
computation)ofintra-NAFTAtariffquotaswithrespecttotheirWTOquotacommitments?
Isthere nottheriskthat,insome cases, theaccess opportunities ofthird countries toWTO
quotas willbeimpaired? Please provide more extensive information onhowthismatter
isregulated ineachofthethree countries, aswellasdetails onthewayinwhich thequotas
areadministered.
(Canada) -With respect toCanada/Mexico trade, therelevant provision isAnnex 703.2,
Section B,Paragraph 5,which allows eachparty tocount thein-quota quantity under atariffratequota
applied toaqualifying good inaccordance withitsSchedule toAnnex 302.2 toward thesatisfaction
ofanin-quota quantity ofatariffratequota orlevelofaccess under theGATT. Canada didnotestablish
tariff ratequotas pursuant toitsSchedule toAnnex 302.2. Therefore, thisquestion isnotapplicable
withrespect toCanada.
(UnitedStatesandMexico)Thisquestionisnotclear.Inparticular,thereferencetoa“different”
approach isunclear withrespect towhattheapproach isbeing compared (thatis,different fromwhat?).
TheUnited States andMexico havenotimpaired theaccess opportunities ofthirdcountries toWTO
tariff-rate quotas. Ifthereference istoparagraph 6ofSection AofAnnex 703.2, thenitmaybeuseful
tounderstand thatthatprovision isintended toensure thatthere isno“double counting ”ofaccess.
Thatis,itmakes clear that,between theUnited States andMexico, aNAFTA party isnotentitled
tothequantity ofaccess provided under theNAFTA plusthequantity provided under theUruguay
Round. (Forexample, iftheNAFTA access commitment isfor100tons,andtheWTO commitment
isfor50tons, theaccess duetheNAFTA party is100tons, not150tons.)
109. With reference toquestion andreply 109,which talks about theprovisions ofNAFTA
which allow eachparty tocount thein-quota quantity under thetariff ratequota inthe
agricultural sector towards thesatisfaction ofcommitments made under theUruguay
Round. Thisisaveryimportant question forNewZealand, because itinvolves whether
countries areabletomaintain their rights ofaccess -tariff-quota access -tothemarkets
ofafree-trade area.
What were thecriteria usedtodetermine thetariff ratequota quantities under NAFTA
andtothatextent theamount thatcould becounted against Uruguay Round commitments?
109. Thereply toquestion 109doesnotanswer thequestion. Could theparties elaborate further
onthereply?
Seeanswer to“general question ”above.WT/REG4/1/Add.1
Page25
113. Inview oftheabsence ofanyreference inthetextoftheNAFTA Treaty itself tothe
necessary conformity withtheWTO (andinparticular withPartVIIoftheAgreement
onAgriculture), ofanymeasure taken following theprovisions ofArticle 705, the
Community wishes tounderline theimportance itattaches tothestatement contained in
theanswer tothisquestion that"any measures adopted byaNAFTA Party pursuant to
Article 705ofNAFTA would alsoneed tobefully inconformity withprovisions inthe
WTO Agreement".
[Noreply received.]
118./ More detail isrequired inrelation toquestions 118-120. Itisnotclear from theresponses
120. thatNAFTA willbeadministered inamanner thatwillensure that, inthelonger term,
there isnodetrimental effect onAustralia 'sshare oftheU.S.quota and,more broadly,
onthepossibility ofasugar trade developing between Australia andMexico.
Asnoted inthefirstresponse tothese questions, theconcerns ofother suppliers willbetaken
intoaccount inmaking anyallocations under thetariff-rate quota. TheUnited States hascontinued
toaccommodate imports fromitsNAFTA partners within thesugar tariff-rate quotas thattheUnited
States hasnowbound under theUruguay Round, including withrespect totheallocations forthecurrent
quota period.
Therefore, there hasbeennoeffect onother suppliers. Infact,thisyear’sin-quota quantity
issubstantially inexcess ofthebound Uruguay Round amount, andconsequently Australia ’sshare
ishigher aswell.
Trade insugar between Mexico andAustralia hasbeennonexistent during thelastfiveyears.
Mexico iscomplying andwillcontinue tocomply withtheterms agreed initsUruguay Round LXXVII
schedule.
121. Whilst theresponse toquestion 121indicates thattheU.S.willcontinue toallocate quota
shares onanhistorical basis, italsoreserves theright tochange thispractice andmakes
nomention ofitscommitment intheletter of22March 1994thatitwould consult Australia
prior totaking suchaction. Confirmation ofthiscommitment should besought.
TheUnited States confirms itscommitment, asstated intheMarch 22,1994, letter, thatif
itmodifies orsuspends theallocation ofmarket shares inaccordance withGATT Article XIII,itwould
promptly enter intoconsultations withAustralia.
122. Withregardtoquestion122,couldtheU.S.explainwhyitisappropriatetoincludeNAFTA
sugar imports intheUruguay Round global quota.
Seeresponse toquestions 119-120 above. Prior totheconclusion oftheNAFTA, the
United States hadbeenallocating ashare of7,258 metric tons, rawvalue, ofsugar toMexico under
itstariff-rate quota, andthatshare hascontinued under theNAFTA.WT/REG4/1/Add.1
Page26
123. HowisMexico going toapply preferences totheU.S.given thatunder theUruguay Round
outcome, Mexico 'sin-quota tariff rateforskimmilkpowder iszerofortheU.S.andothers?
Inskim milkpowder, Mexico grants azerotariff rateunder thequota bothinNAFTA and
WTO. Butasstated inthe"general question", thein-quota quantities oftheNAFTA quotas count under
thetariff ratequota intheagricultural sector towards thesatisfaction ofcommitments made inthe
Uruguay Round.
Emergency Action (Chapter 8)
128. (a) Theresponse toquestion 128,contained inDocument WT/REG4/1, states that
theprovisions ofNAFTA Article 802,under which imports from aNAFTA Party
maybeexcluded from another Party 'sapplication ofaglobal safeguard action
under certain circumstances, donotconflict withGATT Article XIXortheWTO
Agreement onSafeguards inthecontext ofafreetrade agreement under GATT
1994Article XXIV. However, GATT Article XXIV doesnotnecessarily provide
acarte blanche from allobligations under theWTO Agreements.
Acaseinpoint isthepossibility thatnon-member countries maybeburdened with
adisproportionate amount oftrade restriction because ofthenon-application of
aglobal safeguard action among NAFTA members.
Under Article 5.2(a), amember mayallocate quotas based upon theproportion
supplied during aprevious representative period. Since NAFTA members can
beexempted from thequota, itmayentail thattheshare ofsupply originating
from non-members willbesetatasmaller amount than itwould have been in
thecaseofproportional reduction oftheshares ofbothmember andnon-member
countries.
Thisresult seems toruncounter totheletter andspirit ofGATT Article XXIV,
paragraph 5(a), which provides that"duties andother regulations '...shall not
onthewhole behigher ormore restrictive thanthegeneral incidence oftheduties
andregulations ofcommerce applicable intheconstituent territories prior tothe
formation ofafree-trade area]".
Inthelightoftheabove, howisthesafeguard mechanism ofNAFTA considered
tobecompatible withtheWTO Agreement?
(b) IfaNAFTA member takes asafeguard measure, would itnotviolate theMFN
rules should itexclude imports from other NAFTA members?
Thequestion refers totheapplication ofaglobal safeguard measure byNAFTA members and
theexemption provisions ofNAFTA Article 802vis-à-vis GATT Articles XIXandXXIV:5 (a).It
isassumed thatthequestion ismeant todealwithArticle XXIV:5 (b),which deals withfree-trade
areas; XXIV:5 (a)applies tocustoms unions.WT/REG4/1/Add.1
Page27
Therelationship between Articles XIXandXXIV hasbeen raised inpastworking party
examinations offreetrade arrangements, including theexamination oftheCanada-United States Free
Trade Agreement.2Ithasalsobeendiscussed intheUruguay Round negotiating groups onGATT
Articles andSafeguards.
Theposition oftheNAFTA parties remains thattheexclusion fromanother NAFTA Party’s
applicationofaglobalsafeguardaction,undercertaincircumstances,doesnotconflictGATTArticleXIX
ortheWTO Agreement onSafeguards inthecontext ofafreetrade agreement under GATT
Article XXIV. Theprovisions ofNAFTA Article 802areconsistent withtherequirement ofGATT
ArticleXXIVtoeliminatedutiesandotherregulationsofcommerceonsubstantiallyallthetradebetween
theconstituent territories inproducts originating insuchterritories, apractice maintained byother
WTO members thatprovide fortheexemption ofParties toafreetradeagreement fromglobal safeguard
actions.
III. TECHNICAL BARRIERS TOTRADE
129. Though itistruethatArticle 907.2 ofNAFTA contains provisions tobalance theotherwise
unlimited right foraNAFTA Party toestablish thelevel ofprotection thatitconsiders
appropriate inrespect ofthelegitimate objectives listed inArticle 904.2 those balancing
provisions refer onlytotrade between NAFTA Parties ortothepossible discrimination
ofgoods orservice providers ofanother NAFTA Party. Wehave found noreference in
theNAFTA Treaty totheinternational obligations ofNAFTA Parties under theWTO
inthisrespect, andthestatement intheanswer tothisquestion that"Chapter 9doesnot
require theParties todiscriminate against third countries" ishardly aconsolation inthis
sense. Thequestion ontheguarantee thatthird countries willnotbediscriminated against
remains inourviewcompletely open andpertinent.
Chapter 9isnotintended toaddress thequestion ofnondiscrimination withregard tothird
countries. TheNAFTA isanagreement among theNAFTA Parties: itcannot affect theWTO rights
andobligations ofnon-Parties. Theprovision setforthinArticle 904(2)ofNAFTA applies asbetween
theParties; asforourobligations withrespect toother WTO Members, theNAFTA Parties willabide
bytheWTO 'srelevant provisions.
130. Please clarify what isspecifically meant bytheword "measures" in"standards-related
measures".
Thereply mentions: "Allconsultations about standards-related measures arechannelled
through theNAFTA Committee onStandards-Related Measures andtheSubcommittees
operating under Chapter 9."
What istheprocedure foraNAFTA member toholdsuch "consultations"? Aresuch
consultations restricted toNAFTA members? Iftheyarenotrestricted, isthere any
difference between theprocedures ofaNAFTA member andanon-NAFTA member?
Theterm“standards-related measure ”isadefined termunder theNAFTA (Article 915)and
means astandard, technical regulation orconformity assessment procedure.
2Seeparagraph 43,GATT Working Party ontheFree Trade Agreement between Canada andtheUnited
States, Spec(91) 18,May 28,1991.WT/REG4/1/Add.1
Page28
Thereference to“allconsultations about standards-related measures arechannelled through
theNAFTA Committee onStandards-Related Measures andtheSubcommittees operating under Chapter
9"wasinresponse toaquestion about consultations under paragraph 7ofArticle 906. There isno
setprocedure forholding these consultations.
NAFTA consultations areapplicable totheNAFTA members, asWTO consultations are
applicable toWTO Members.
IV. GOVERNMENT PROCUREMENT
137./ Thereply given byMexico onlymentions about itsgeneral disciplines, anddoesnotexplain
140. theextentofwhyMexico,whilecommittingitselftothegovernmentprocurementprovisions
intheNAFTA,doesnotcommititselftotheWTOAgreementonGovernmentProcurement.
Wewould liketoaskforfurther explanation.
WilleachParty provide thefollowing statistics?
(After entry intoforce oftheNAFTA)
(a) Thetotalamount ofgovernment procurement above theNAFTA threshold byeach
Member after itsentry intoforce.
(b) Thesectoral break-down (Goods, Services, Construction) offigures.
(c) Theratio offoreign products orservices inthetotalprocurement.
(d) Theratio ofproducts orservices originating from theNAFTA-member countries
inthetotalprocurement.
(Before entry intoforce oftheNAFTA)
(a) Thetotalamount ofgovernment procurement above thecurrent NAFTA threshold
byeachMember going back seven years before itsentry intoforce.
(b) Thesectoral break-down (Goods, Services, Construction) offigures.
(c) Theration offoreign products orservices inthetotalprocurement.
(d) Theratio ofproducts orservices originating from theNAFTA-member countries
inthetotalprocurement.
Statistics ongovernment procurement prior totheNAFTA areattached.3Statistics for
government procurement afterentry intoforce oftheNAFTA arecurrently being processed.
ThatMexicosubscribesornottheWTOAgreementonGovernmentProcurementhasnorelation
whatsoever withtheconsistency ofMexico 'scommitments under NAFTA andtheGATT 94.Asit
iswellknown, theAgreement onGovernment Procurement ispartofthePlurilateral Trade Agreements
inAnnex 4oftheWTO Agreement, andnotofGATT 94.
V. INVESTMENT, SERVICES AND RELATED MATTERS
3SeeAnnex 1.WT/REG4/1/Add.1
Page29
Investment (Chapter 11)
145.- Thereservations andexceptions provision contained inArticle 1108 ofNAFTA appear
160. tobesignificantly wider andgenerous thattheexceptions provided forinArticle 3TRIMs
andthephase-out periods contained inArticle TRIMs. Could theNAFTA Parties clarify
these apparent discrepancies?
[Noreply received.]
VI. INTELLECTUAL PROPERTY
191.- Noreplies havebeenreceived bytheNAFTA members. Wewould liketoaskforconcrete
205. replies tothese questions.
Canada andtheUnited States submitted responses toallofthese questions totheSecretariat
atthelastmeeting oftheNAFTA Working Party. However, these responses havenotbeencirculated
bytheSecretariat.4
Noreplies havebeensubmitted byMexico onTRIPs because theyareoutside themandate
oftheWorking Groups onTrade inGoods andTrade inServices. Mexico submitted itsNAFTA-TRIPs
notification under Article 4(d)oftheTRIPs Agreement totheTRIPs Council onDecember 29,1995.
194./ With regard tocases inwhich provisions intheNAFTA haveahigher levelofstandards
204.- enforcements thanthose intheTRIPs Agreement, wewould liketoasktheNAFTA parties
205. toapply measures inquestion onanMFN basis toJapan aswellasother WTO members,
pursuant toArticle 4oftheTRIPs Agreement.
NAFTA doesnotprovide ahigher levelofintellectual property rights enforcement thanthe
TRIPS Agreement.
VII. ADMINISTRATIVE AND INSTITUTIONAL PROVISIONS
Review andDispute Settlement inAnti-Dumping andCountervailing Duty Matters (Chapter 19)
207. Could theParties update, ifandasappropriate, theanswer tothisquestion totakeinto
account anyrecent developments?
TheUnited States hasrequested aNAFTA panel toconsider theapplication byCanada oftariffs
tocertain U.S.-origin agricultural products. Thisisadispute involving NAFTA rights, andsoitcould
nothavebeenhandled under theWTO dispute settlement mechanism. Mexico isparticipating asa
thirdparty inthisdispute.
209.- Thesame remarks made inrespect toquestion 154seem toapply totheanswers tothese
211. questions.
4These responses arefound inAnnex 2tothisdocument.WT/REG4/1/Add.1
Page30
Weagree thattheanswer toquestion 154applies totheanswers given toquestions 209,210
and211.
212. According totheprovisions ofArticle 1903.3(b)(i), aParty hastheright toenact
comparable legislation ifaParty failstoenact corrective legislation after aninemonth
period from thepanel decision. TheParties stated intheir answer that"any decisions
onwhether totakecomparable legislative orexecutive action willbemade following an
analysis ofthepotential impact ofthataction ontheParty 'sWTO obligations. Inthis
respect wewould likeclarification onthefollowing issues:
- Who willconduct thisanalysis?
- What specific criteria willbeapplied inassessing thisanalysis?
- WilltheWTO beinformed ofthedecision toenact corrective legislation?
Article 1903.3(b)(i) provides thatacomplaining Party maytakecomparable legislative or
equivalent executive action 12months afteranaffirmative finding byabinational panel pursuant to
Article 1903(1), ifnoother mutually satisfactory solution tothematter hasbeenfound. Thedecision
totakesuchaction, andwhatitwillconsist of,willbemade bythecomplaining government onthe
advice ofitsresponsible officials.
Indeterminingwhatcomparablelegislativeorequivalentexecutiveactiontotake,thegovernment
would look, inter-alia, atthenature ofthenon-conformity, andtheextent towhich theamending statute
affects national interests under theNAFTA, including theimpact oftheamending statute onitslegitimate
exports.
Should theParty complained against enact corrective legislation following theissuance ofan
affirmative finding byapanel, Article 18.5oftheAgreement onImplementation ofArticle VIofthe
General Agreement onTariffs andTrade 1994 andArticle 32.6oftheAgreement onSubsidies and
Countervailing Measures obligates member countries toinform theCommittees ofanychanges totheir
lawsandregulations relevant totheapplicable Agreement. Canada, theUnited States andMexico,
asparties totheWTO would respect theirWTO obligations andreport anysuchenactment.
Additional Questions:
Q.1: According totheprovisions ofArticle 1904(2) aParty mayrequest apanel review to
determine whether afinal anti-dumping orcountervailing duty determination wasin
accordance withtheanti-dumping lawoftheimporting Party. Article 1904(3) provides
thatthepanel review shallbeconducted according tothestandard ofreview andthegeneral
legalprinciples thatacourt oftheimporting Party would apply. Isthestandard ofreview
inArticle 1904(3) thesame asthe"appropriate" standard ofreview inArticle 1904(13(iii).
Would itbepossible toelaborate onthese concepts?WT/REG4/1/Add.1
Page31
Yes,thestandard ofreview inArticle 1904(3) isthesame asthe"appropriate" standard of
review inArticle 1904(13)(a)(iii). Theterm"appropriate" means thatthestandard ofreview applied
byapanel inagiven caseisthestandard ofreview oftheimporting Party asdefined inAnnex 1911.
Pursuant toArticle 1904(3), thepanel shallapply thestandard ofreview setoutinAnnex 1911 and
thegeneral legalprinciples thatacourt oftheimporting Party otherwise would apply toareview of
adetermination ofthecompetent investigating authority.
Q.2: Article 1904(9) states thatthedecision ofaPanel shallbebinding ontheinvolved Parties.
How willthisbeenforced ifaParty doesnotabide bytherules ofaPanel decision?
Each Party hasprovided forthebinding effect ofapanel decision within itsdomestic law.
InCanada s.77.016(1) oftheSIMA provides thataninvestigating authority shall takeaction not
inconsistent withapanel decision. Subsection 77.02(1) oftheSIMA provides thatpanel decisions
arebinding. IntheUnited States, section 516A(g)(7) ofTariff Actof1930, asamended, contains
similar provisions. Byvirtue ofArticle 97oftheMexican Foreign Trade Law(LeydeComercio
Exterior) andtheself-executing nature ofinternational agreements inMexico, anypanel decision shall
bebinding under Mexican Law.
Article 1905(1)(c) provides thatwhere aParty alleges thattheapplication ofanother Party's
domestic lawhasprevented theimplementation ofthedecision ofapanel ordenied itbinding force
andeffect, suchParty mayinitiate theSpecial Committee process. Where theSpecial Committee makes
anaffirmative finding inrespect ofthecomplaining Party'sallegations, andnosatisfactory resolution
isreached, Article 1905(8) provides thatthecomplaining Party maysuspend:
(a) theoperation ofArticle 1904 withrespect totheParty complained against; or
(b) theapplication totheParty complained against ofsuchbenefits under thisAgreement
asmaybeappropriate under thecircumstances.
Q.3: TheParties arerequired toamend their existing anti-dumping andcountervailing duty
legislation inorder toachieve thegoals ofArticle 1904. Article 1904(15) enumerates the
precise purpose ofthese modifications. However, therules ofArticle 1904(15) donotrefer
expressly totheprovisions ofArticle 1902(d)(i), i.e.theconsistency withtheGATT. Will
these amendments reflect theprinciple ofArticle 1902(d)(i)?
Allamendments enacted toachieve thegoals ofArticle 1904(15) areinconformity withthe
WTO Anti-dumping Agreement andtheWTO Subsidies andCountervailing Duties Agreement. In
addition, Canada andtheUnited States havetaken steps toamend theirexisting anti-dumping and
countervailing dutylegislation inorder toimplement theWTO Anti-dumping Agreement andtheWTO
SubsidiesandCountervailingDutiesAgreement.TheAgreementsareincorporatedintoMexico'sdomestic
lawbyvirtue ofitsownlegalsystem.
Q.4: According totheprovisions ofArticle 1904, aParty mayrequest aPanel inorder to
determine whether thefinaldetermination oftheinvestigating authority oftheimporting
Party isinaccordance withtheapplicable legislation oftheimporting Party. Pursuant
toArticle 1904(8) aParty mayuphold afinaldetermination orremand itforaction not
inconsistent withthePanel 'sdecision. Please explain howthesecond option willbeapplied
inpractice.WT/REG4/1/Add.1
Page32
Under eachParty'sapplicable law,theinvestigating authority shalltakeaction notinconsistent
withapanel decision. Inpractice, thepanel setsatimeperiod forremand action. Theinvestigating
authority thenfilesadetermination onremand setting outitsfindings made inaccordance withthe
panel decision. Theparticipants tothepanel review mayfilesubmissions insupport orinopposition
totheaction taken bytheinvestigating authority onremand. Thepanel normally issues afinaldecision
within 90daysofthedatesuchremand action issubmitted toit.
Q.5: According totheprovisions ofArticle 1905, acomplaining Party may request the
establishment ofaSpecial Committee ifanother Party 'sdomestic lawfailstomeet the
criteria ofArticle 1905(1)(a) through to(d). IftheParty complained against hasnot
demonstrated thatitcorrected theproblem, thecomplaining Party may pursuant to
Article 1905(8)(b) suspend theapplication ofsuchbenefits under theNAFTA Agreement
"asmaybeappropriate under thecircumstances". Could theParties elaborate onthis
concept andalsoexplain whether such suspension iscompatible withtherequirements
under theWTO Agreement? Inthisrespect, could theParties clarify what isunderstood
under thephrase that"suspension ofbenefits ismanifestly excessive" inArticle 1905(10)?
Article 1905(8) provides thatwhere aSpecial Committee hasmade adetermination thatthe
application ofaNAFTA country 'sdomestic lawhasinterfered withthebinational panel process and
thematter remains unresolved sixty daysfollowing theissuance oftheSpecial Committee 'sreport,
thecomplaining Party mayeither suspend theapplication ofArticle 1904oftheNAFTA orsuchbenefits
under theAgreement asmaybeappropriate under thecircumstances.
Whatis"appropriateunderthecircumstances"willbedeterminedbythecomplaininggovernment
ontheadvice ofitsresponsible officials.
Indetermining whataction totakeunder Article 1905(8), thecomplaining Party maytakeinto
account suchfactors astheseverity ofthebreach, itsimpact onthebinational panel process andthe
effect, bothofthebreach andoftheremedial action contemplated, onthecountry 'sinterests andits
exporters.
IftheParty complained against regards thelevel ofbenefits suspended bythecomplaining
Party as"manifestly excessive", itmayreconvene theSpecial Committee tomake adetermination in
thisregard, oradetermination thatthepartycomplained against hascorrected theproblem orproblems.
ThebenefitstobesuspendedarelimitedtobenefitsundertheNAFTA,therefore,theseprovisions
donotaffect therights andobligations thatNAFTA Parties haveunder theWTO inrespect ofother
WTO Members.
VIII. OTHER PROVISIONS
215.- Could theParties update asappropriate theanswers given tothese questions? Could the
218. Parties further elaborate, inparticular, ontherelationship between theNAFTA andFTAA
initiative?
TheFTAA isaseparate initiative fromtheNAFTA. TheFTAA isnotasubstitute forNAFTA
accession. Inmore general terms, allthethree partners seeNAFTA asanimportant contribution to
theobjective ofbuilding anFTAA bytheyear2005.WT/REG4/1/Add.1
Page33
ANNEX 1
Statistics onGovernment Procurement Prior totheNAFTA
MEXICO
Summary
(Million USdollars)
1990
Goods Services Construction
servicesTotal
TOTAL 8,715 4,879 4,846 18,440
FEDERAL GOVERNMENT
ENTITIES 1,038 1,058 722 2,818
GOVERNMENT
ENTERPRISES 7,677 3,821 4,124 15,622
Entities Goods Services Construction
servicesTotal
Total procurement 8,715 4,879 4,846 18,440
Total
Federal Government Entities 1,038 1,058 722 2,818
Secretaría deAgricultura y
Recursos Hidraúlicos 153 177 300 630
-Instituto Mexicano de
Tecnología delAgua
-Instituto Nacional de
Investigaciones Forestales y
Agropecuarias
Secretaría deComunicaciones
yTransportes 88 80 285 453
Secretaría delaDefensa
Nacional 304 76 1 381
Secretaría deSalud 103 63 24 190
-Administración del
Patrimonio dela
Beneficencia Pública
-Centro Nacional dela
Transfusión Sanguínea
-Gerencia General de
Biológicos yReactivosWT/REG4/1/Add.1
Page34
Entities Goods Services Construction
servicesTotal
-Instituto dela
Comunicación Humana
Dr.Andrés Bustamante
-Instituto Nacional de
Medicina dela
Rehabilitación
-Instituto Nacional de
Ortopedia
-Consejo Nacional parala
prevención ycontrol del
SIDA
Secretaría deEducación
Pública 64 115 4 183
-Instituto Nacional de
Antropología eHistoria
-Instituto Nacional deBellas
Artes yLiteratura
-Radio Educación
-Centro deIngeniería y
Desarrollo Industrial
-Consejo Nacional parala
Cultura ylasArtes
-Comisión Nacional del
Deporte
Secretaría deMarina 96 46 8 150
Secretaría deHacienda y
Crédito Público 39 103 6 148
-Comisión Nacional Bancaria
-Comisión Nacional de
Valores
-Comisión Nacional de
Seguros yFianzas
-Instituto Nacional de
Estadística, Geografía e
Informática (INEGI)
Secretaría deGobernación 37 68 20 125WT/REG4/1/Add.1
Page35
Entities Goods Services Construction
servicesTotal
-Centro Nacional deEstudios
Municipales
-Comisión Calificadora de
Publicaciones yRevistas
Ilustradas
-Consejo Nacional de
Población (CONAPO)
-Archivo General dela
Nación
-Instituto Nacional de
Estudios Históricos dela
Revolución Mexicana
-Patronato deAsistencia para
laReincorporación Social
-Centro Nacional de
Prevención deDesastres
-Consejo Nacional deRadio
yTelevisión
-Comisión Mexicana de
Ayuda aRefugiados
Secretaría deDesarrollo Social 15 42 36 93
Procuraduría General dela
República 47 35 4 86
Secretaría deRelaciones
Exteriores 5 76 5 86
-Sec.Mex. Com. Int.
Límites yAguas
Mex-EE.UU.
-Sec.Mex. Com. Int.
Límites yAguas
Mex-Guatemala
Comisión Nacional deLibros
deTexto Gratuito 39 9 - 48
Secretaría deTurismo 3 44 - 47
Secretaría delaReforma
Agraria 11 21 12 44
-Instituto deCapacitación
AgrariaWT/REG4/1/Add.1
Page36
Entities Goods Services Construction
servicesTotal
Secretaría dePesca 8 19 11 38
-Instituto Nacional dePesca
Secretaría deComercio y
Fomento Industrial 10 22 2 34
Secretaría delTrabajo y
Previsión Social 9 23 - 32
-Procuraduría Federal dela
Defensa delTrabajo
Consejo Nacional deFomento
Educativo 3 21 - 24
Secretaría deEnergía Minas e
Industria Paraestatal 2 9 - 11
-Comisión Nacional de
Seguridad Nuclear y
Salvaguardias
Secretaría delaContraloría
General delaFederación 1 8 - 9
Comisión Nacional deZonas
Áridas 1 1 4 6
Comisión Nacional de
Derechos Humanos - - - -
Total
Government enterprises 7,677 3,821 4,124 15,622
Industry
-Petróleos Mexicanos
(PMEX) 1,652 1,282 1,818 4,752
-Comisión Federal de
Electricidad (CFE) 1,786 164 1,531 3,481
-Consejo deRecursos
Mineros 10 5 1 16
-Consejo deRecursos
Minerales 3 1 7 11WT/REG4/1/Add.1
Page37
Entities Goods Services Construction
servicesTotal
Social security
-Instituto Mexicano del
Seguro Social (IMSS) 994 1,122 97 2,213
-Instituto deSeguridad y
Servicios Sociales delos
Trabajadores delEstado
(ISSSTE) 225 369 198 792
-Sistema Nacional parael
Desarrollo Integral dela
Familia (DIF) 87 12 6 105
-Instituto deSeguridad
Social paralasFuerzas
Armadas Mexicanas 12 10 41 63
-Instituto Nacional parala
Educación delosAdultos 9 11 - 20
-Servicios Asistenciales dela
Secretaría deMarina 11 1 - 12
-Instituto Nacional
Indigenista (INI) 4 4 - 8
-Centros deIntegración
Juvenil 1 1 - 2
-Instituto Nacional dela
Senectud 1 1 - 2
Commerce
-Compañía Nacional de
Subsistencias Populares
(CONASUPO) 1,882 505 4 2,391
-Leche Industrializada
Conasupo S.A.deC.V.
(LICONSA) 279 41 1 321
-Bodegas Rurales Conasupo
S.A.deC.V. 5 7 2 14
-Procuraduría Federal del
Consumidor 4 6 - 10
-Instituto Nacional del
Consumidor 2 4 - 6
-Distribuidora eImpulsora
Comercial S.A.deC.V.
(DICONSA) 1 3 - 4WT/REG4/1/Add.1
Page38
Entities Goods Services Construction
servicesTotal
-Servicio Nacional de
Información deMercados 2 1 - 3
-Laboratorios Nacionales de
Fomento Industrial 1 1 - 2
Communications and
Transportation
-Ferrocarriles Nacionales de
México (FERRONALES) 323 57 99 479
-Caminos yPuentes
Federales deIngreso y
Servicios Conexos
(CAPUFE) 18 10 43 71
-Servicio Postal Mexicano 19 37 11 67
-Aeropuertos yServicios
Auxiliares (ASA) 15 36 15 66
-Telecomunicaciones de
México (TELECOM) 39 21 2 62
Printing andEditorial
-Productora eImportadora
dePapel S.A.deC.V.
(PIPSA) 244 5 1 250
-Talleres Gráficos dela
Nación 6 1 - 7
Others
-Comisión Nacional del
Agua (CNA) - - - -
-Comité Administrador del
Programa Federal de
Construcción deEscuelas 4 4 246 254
-Lotería Nacional parala
Asistencia Pública 20 35 1 56
-Pronósticos Deportivos 3 51 - 54
-Consejo Nacional de
Ciencia yTecnología
(CONACYT) 8 4 - 12WT/REG4/1/Add.1
Page39
Entities Goods Services Construction
servicesTotal
-Comisión parala
Regularización dela
Tenencia delaTierra 2 4 - 6
-Notimex S.A.deC.V. 1 4 - 5
-Instituto Mexicano de
Cinematografía 4 1 - 5WT/REG4/1/Add.1
Page40
CANADA
Federal Entities Subject toNAFTA whose Contracts
arePartoftheirReporting Departments
1. Immigration andRefugee Board
2. Canada Employment andImmigration Commission
3. Atomic Energy Control Board
4. National Energy Board
5. Canadian International Development Agency (onitsownaccount)
6. Department ofFinance
7. Office oftheSuperintendent ofFinancial Institutions
8. Canadian International Trade Tribunal
9. Municipal Development andLoan Board
10. Department ofFisheries andOceans
11. Science Council ofCanada
12. National Research Council ofCanada
13. Natural Sciences andEngineering Research Council ofCanada
14. Canadian Human Rights Commission
15. Statute Revision Commission
16. Supreme Court ofCanada
17. Canada Labour Relations Board
18. Medical Research Council
19. Social Sciences andHumanities Research Council
20. Office oftheCo-ordinator, Status ofWomen
21. Public Service Commission
22. Correctional Service ofCanada
23. National Parole Board
24. Canadian General Standards Board
25. Veterans Land Administration
26. Auditor General ofCanada
27. Federal Office ofRegional Development (Quebec)
28. Canadian Centre forManagement Development
29. Canadian Radio-Television andTelecommunications Commission
30. Canadian Sentencing Commission
31. Civil Aviation Tribunal
32. Commission ofInquiry intotheAirOntario Crash atDryden, Ontario
33. Commission Inquiry intotheUseofDrugs andBanned Practices Intended toIncrease Athletic
Performance
34. Commissioner forFederal Judicial Affairs
35. Competition Tribunal RegistryWT/REG4/1/Add.1
Page41
36. Copyright Board
37. Emergency Preparedness Canada
38. Federal Court ofCanada
39. Grain Transportation Agency
40. Hazardous Materials Information Review Commission
41. Information andPrivacy Commissioners
42. Investment Canada
43. Department ofMulticulturalism andCitizenship
44. TheNational Archives ofCanada
45. National Transportation Agency
46. Northern Pipeline Agency
47. Patented Medicine Prices Review Board
48. Petroleum Monitoring Agency
49. Canadian Intergovernmental Conference Secretariat
50. Commissioner ofOfficial Languages
51. Economic Council ofCanada
52. Public Service StaffRelations Office
53. Office oftheSecretary totheGovernor General
54. Office oftheChief Electoral Officer
55. Federal Provincial Relations Office
56. Procurement Review Board
57. Royal Commission onElectoral Reform andParty Financing
58. Royal Commission onNational Passenger Transportation
59. Royal Commission onNewReproductive Technologies
60. Royal Commission ontheFuture oftheToronto Waterfront
61. Statistics Canada
62. TaxCourt ofCanada, Registry ofthe
63. Agricultural Stabilization Board
64. Canadian Aviation Safety Board
65. Canadian Centre forOccupational Health andSafety
66. Canadian Transportation Accident Investigation andSafety Board
67. Director ofSoldier Settlement
68. Director, theVeterans 'Land Act
69. Fisheries Prices Support Board
70. National Battlefields Commission
71. Royal Canadian Mounted Police
72. Royal Canadian Mounted Police External Review Committee
73. Royal Canadian Mounted Police Public Complaints CommissionCANADAWT/REG4/1/Add.1
Page42
Supply andServices Contracts byFederal Departments/Agencies
byGoods andServices 1989
Thousands ofCanadian Dollars
Department/
AgencyGoods Services TotalConstruction
estimated
expenditures
Number of
contractsValue
$000Number of
contractsValue
$000Number of
contractsValue
$000Value
$000
Agriculture 5,613 39,665 1,669 29,559 7,282 69,224 51,665
Atlantic Canada Opportunities Agency 141 1,354 119 5,385 264 6,739 -
Communications* 5,461 39,763 2,296 88,682 6,757 122,445 3,367
Consumer andCorporate Affairs 958 7,763 967 5,161 1,325 12,924 -
Employment andImmigration 3,009 56,605 2,481 74,908 6,490 191,513 -
Energy, Mines andResources 4,504 30,088 2,134 104,370 6,698 143,467 6,979
Environment 9,015 77,169 3,083 64,849 12,008 142,018 40,367
External Affairs 1,954 23,920 204 17,146 1,648 41,066 44,211
Finance 469 6,910 193 13,394 662 20,304 -
Fisheries andOceans* 6,169 54,675 3,021 83,733 9,164 138,408 87,511
Forestry 744 4,594 416 5,480 1,100 10,074 1,800
Indian andNorthern Affairs 1,636 13,827 495 10,899 2,030 24,726 29,832
Industry, Science andTechnology 8,002 170,087 1,052 194,876 9,954 304,963 6,248
Justice 897 8,072 224 4,949 1,121 19,021 -Department/
AgencyGoods Services TotalConstruction
estimated
expenditures
Number of
contractsValue
$000Number of
contractsValue
$000Number of
contractsValue
$000Value
$000
Labour 421 5,042 73 1,396 494 6,438 -WT/REG4/1/Add.1
Page43National Defence** 69,040 2,520,920 11,963 968,213 101,003 3,489,193 249,990
National Health andWelfare 3,068 64,925 1,100 47,007 4,758 111,932 31,822
National Revue 3,218 70,189 1,652 53,521 4,870 123,710 4,487
Privy Council 131 881 593 9,274 664 10,165 -
Public Works 3,750 62,492 643 22,491 4,393 84,983 636,110
Secretary ofState 694 4,803 1,727 25,656 2,421 30,459 -
Solicitor General** 13,658 167,408 2,456 69,400 10,112 220,815 154,235
Supply andServices (a) 6,392 243,882 3,651 605,732 9,043 840,614 -
Transport* 17,521 238,257 3,581 627,358 21,102 763,615 388,205
Treasury Board 202 2,202 100 4,117 371 6,919 -
Veterans Affairs 1,574 11,875 429 32,018 2,003 43,693 -
Western Diversification Office 210 1,659 104 1,270 314 2,929 -
TOTAL 165,452 9,920,028 46,759 3,070,659 232,211 6,090,867 1,715,079
*Excluded from GATT/FTA.
**Partially excluded from GATT/FTA.
(a)Includes Multi-customer Contracts which could notbeapportioned toindividual departments.CANADAWT/REG4/1/Add.1
Page44 TheEstimated Market SizeofCanadian Federal Crown Corporations Under NAFTA, FY1991-92 inMillions ofCanadian Dollars
Crown corporations Total
$MGoods Services Construction
1.Canadian National Railways 1,991.20 525.90 1,173.30 292.00
2.Canada Post 1,331.40 297.00 815.10 219.30
3.VIARailCanada Inc. 285.10 45.20 194.80 45.10
4.Royal Canadian Mint 265.70 234.10 27.10 4.50
5.St.Lawrence Seaway Authority 61.00 27.50 21.40 12.10
6.National Capital Commission 59.20 11.00 14.50 33.70
7.National Gallery ofCanada 20.80 6.80 14.00 -
8.Canadian Museum ofCivilization 20.70 7.30 13.40 -
9.National Museum ofScience andTechnology 8.40 2.20 4.70 1.50
10.Canadian Museum ofNature 8.10 2.60 6.60 -
11.Defence Construction (1951) Ltd. 3.30 0.50 2.80 -
Total 4,054.90 1,160.10 2,266.60 608.20
Source: Estimates arederived from thePublic Accounts ofCanada, andfrom corporation 'sannual report where available.WT/REG4/1/Add.1
Page45
UNITED STATES
1989 United States Procurements
Total Procurements, Totals byAgency
(NoExclusions)
Values inThousands ofSDRs
Agency Total
Action 632
Administrative Conference oftheUnited States 337
Agency forInternational Development 318,647
Agriculture, Department of 1,901,393
American Battle Monuments Commission 3,368
Arms Control andDisarmament Agency 1,076
Board forInternational Broadcasting 93
Commerce, Department of 409,616
Commission ofCivil Rights 347
Commodity Futures Trading Commission 5,973
Consumer Product Safety Commission 2,917
Defense, Department of 100,675,796
Department ofVeterans Affairs 2,189,915
Education, Department of 161,854
Energy, Department of 12,663,287
Environmental Protection Agency 122,640
Equal Employment Opportunity Commission 8,879
Executive Office ofthePresident 10,043
Federal Communications Commission 2,724
Federal Election Commission 418
Federal Emergency Management Agency 130,527
Federal Maritime Commission 444
Federal Mediation andConciliation Service 222
Federal Trade Commission 3,338
General Services Administration 2,742,977
Health andHuman Services, Department of 1,415,743WT/REG4/1/Add.1
Page46
Agency Total
Housing andUrban Development, Department 88,280
Interior, Department ofthe 1,200,598
International Trade Commission 1,578
Interstate Commerce Commission 1,574
Justice, Department of 1,023,695
Labor, Department of 440,361
National Aeronautics andSpace Administration 7,892,519
National Archives andRecords Administration 1,430
National Capital Planning Commission 25
National Foundation ontheArtsandthe 649
National Labor Relations Board 2,219
National Mediation Board 1,576
National Science Foundation 59,950
National Transportation Safety Board 33
Nuclear Regulatory Commission 31,439
Office ofPersonnel Management 16,947
Peace Corps 28,817
Pennsylvania Avenue Development Corporation 573
Railroad Retirement Board 4,210
Securities andExchange Commission 14,584
Selective Service System 542
Small Business Administration 2,252
Smithsonian Institution 33,769
State, Department of 297,602
Tennessee Valley Authority 2,158,809
Transportation, Department of 1,311,253
Treasury, Department ofthe 665,992
United States Army Corps ofEngineers -Civil Pro. 972,386
United States Information Agency 78,868
Total 139,105,736WT/REG4/1/Add.1
Page47
UNITED STATES
1989 United States Procurements
Below $25,000, Totals byAgency
(NoExclusions)
Values inThousands ofSDRs
Agency Total
Action 502
Administrative Conference oftheUnited States 312
Agency forInternational Development 19,023
Agriculture, Department of 656,245
American Battle Monuments Commission 3,368
Arms Control andDisarmament Agency 641
Commerce, Department of 105,740
Commission ofCivil Rights 347
Commodity Futures Trading Commission 1,655
Consumer Product Safety Commission 1,792
Defense, Department of 8,813,388
Department ofVeterans Affairs 1,153,348
Education, Department of 11,680
Equal Employment Opportunity Commission 4,250
Executive Office ofthePresident 5,036
Federal Communications Commission 2,402
Federal Maritime Commission 267
Federal Mediation andConciliation Service 222
Federal Trade Commission 2,158
Health andHuman Services, Department of 521,531
Housing andUrban Development, Department 12,896
Interior, Department ofthe 331,129
International Trade Commission 1,112
Interstate Commerce Commission 784
Justice, Department of 407,615
Labor, Department of 25,060WT/REG4/1/Add.1
Page48
Agency Total
National Aeronautics andSpace Administration 141,504
National Labor Relations Board 1,171
National Mediation Board 223
National Science Foundation 4,783
Nuclear Regulatory Commission 6,199
Office ofPersonnel Management 14,807
Peace Corps 19,859
Railroad Retirement Board 2,306
Securities andExchange Commission 3,477
Selective Service System 422
Smithsonian Institution 18,393
State, Department of 47,512
Treasury, Department ofthe 175,836
United States Information Agency 29,740
Total 12,548,735WT/REG4/1/Add.1
Page49
UNITED STATES
1989 United States Procurements
Above $25,000, Totals byAgency
(NoExclusions)
Values inThousands ofSDRs
Agency Total Products Services
Action 130 0 130
Administrative Conference oftheUnited States 6,265 264 6,000
Agriculture, Department of 1,245,148 905,493 339,655
Arms Control andDisarmament Agency 435 0 435
Commerce, Department of 303,876 124,860 179,015
Consumer Product Safety Commission 1,125 125 1,000
Defense, Department of 91,862,408 53,828,141 38,034,267
Department ofVeterans Affairs 1,036,567 354,561 682,007
Education, Department of 150,174 71 150,103
Energy, Department of 12,663,287 507,095 12,156,191
Environmental Protection Agency 122,640 1,620 121,020
Equal Employment Opportunity Commission 4,629 507 4,122
Executive Office ofthePresident 313,589 16,379 297,210
Federal Communications Commission 322 95 227
Federal Emergency Management Agency 130,527 42,267 88,259
Federal Maritime Commission 177 0 177
Federal Trade Commission 1,180 286 895
General Services Administration 2,742,977 1,346,326 1,396,651
Health andHuman Services, Department of 894,212 244,780 649,432
Housing andUrban Development, Department 75,384 6,572 68,812
Interior, Department ofthe 869,469 89,774 779,695
International Trade Commission 466 66 400
Interstate Commerce Commission 790 0 790
Justice, Department of 616,080 217,362 398,717
Labor, Department of 415,301 10,846 404,455
National Aeronautics andSpace Administration 7,751,015 1,627,837 6,123,178
National Archives andRecords Administration 1,430 367 1,063WT/REG4/1/Add.1
Page50
Agency Total Products Services
National Foundation ontheArtsandthe 649 0 649
National Labor Relations Board 1,048 0 1,048
National Science Foundation 55,167 2,108 53,059
Nuclear Regulatory Commission 25,240 713 24,527
Office ofPersonnel Management 2,140 0 2,140
Pennsylvania Avenue Development Corporation 573 0 573
Railroad Retirement Board 1,904 294 1,610
Securities andExchange Commission 11,107 233 10,874
Selective Service System 120 0 120
Small Business Administration 2,252 0 2,252
Smithsonian Institution 15,376 1,709 13,667
State, Department of 250,090 63,703 186,388
Tennessee Valley Authority 2,158,809 2,078,518 80,291
Treasury, Department ofthe 490,156 395,157 94,999
United States Army Corps ofEngineers -Civil Pro. 972,386 50,087 922,299
United States Coast Guard 1,311,253 514,115 797,138
United States Information Agency 49,128 19,679 29,448
Total 126,557,000 62,452,011 64,104,989WT/REG4/1/Add.1
Page51
UNITED STATES
1989 United States Procurements
Below Threshold, Totals byAgency
(NoExclusions)
Values inThousands ofSDRs
Agency Total
Action 632
Administrative Conference oftheUnited States 337
Agency forInternational Development 49,176
Agriculture, Department of 838,433
American Battle Monuments Commission 3,368
Arms Control andDisarmament Agency 789
Board forInternational Broadcasting 93
Commerce, Department of 144,943
Commission ofCivil Rights 347
Commodity Futures Trading Commission 2,331
Consumer Product Safety Commission 2,794
Defense, Department of 11,668,542
Department ofVeterans Affairs 1,419,872
Education, Department of 19,204
Energy, Department of 40,271
Environmental Protection Agency 3,071
Equal Employment Opportunity Commission 6,807
Executive Office ofthePresident 6,591
Federal Communications Commission 2,724
Federal Election Commission 66
Federal Emergency Management Agency 7,414
Federal Maritime Commission 267
Federal Mediation andConciliation Service 222
Federal Trade Commission 2,381
General Services Administration 242,915
Health andHuman Services, Department of 593,183
Housing andUrban Development, Department 15,459WT/REG4/1/Add.1
Page52
Agency Total
Interior, Department ofthe 438,880
International Trade Commission 1,578
Interstate Commerce Commission 832
Justice, Department of 458,173
Labor, Department of 34,492
National Aeronautics andSpace Administration 236,661
National Archives andRecords Administration 708
National Capital Planning Commission 25
National Foundation ontheArtsandthe 201
National Labor Relations Board 2,219
National Mediation Board 1,576
National Science Foundation 7,925
National Transportation Safety Board 33
Nuclear Regulatory Commission 12,162
Office ofPersonnel Management 15,057
Peace Corps 21,651
Pennsylvania Avenue Development Corporation 137
Railroad Retirement Board 2,899
Securities andExchange Commission 3,808
Selective Service System 542
Small Business Administration 975
Smithsonian Institution 22,816
State, Department of 66,670
Tennessee Valley Authority 46,922
Transportation, Department of 70,726
Treasury, Department ofthe 188,560
United States Army Corps ofEngineers -Civil Pro. 65,108
United States Information Agency 34,832
Total 16,808,400WT/REG4/1/Add.1
Page53
UNITED STATES
1989 United States Procurements
Above Threshold, Totals byAgency
(NoExclusions)
Values inThousands ofSDRs
Agency Total Products Services
Administrative Conference oftheUnited States 3,994 0 3,994
Agriculture, Department of 1,062,960 840,575 222,385
Arms Control andDisarmament Agency 286 0 286
Commerce, Department of 264,672 111,791 152,881
Consumer Product Safety Commission 123 0 123
Defense, Department of 89,007,253 52,172,570 36,834,683
Department ofVeterans Affairs 770,043 308,472 461,570
Education, Department of 142,650 0 142,650
Energy, Department of 12,623,016 501,581 12,121,435
Environmental Protection Agency 119,569 1,468 118,101
Equal Employment Opportunity Commission 2,072 172 1,900
Executive Office ofthePresident 280,089 11,390 268,699
Federal Emergency Management Agency 123,113 40,444 82,669
Federal Maritime Commission 177 0 177
Federal Trade Commission 957 179 778
General Services Administration 2,500,062 1,260,650 1,239,412
Health andHuman Services, Department of 822,560 239,839 582,721
Housing andUrban Development, Department 72,821 6,454 66,367
Interior, Department ofthe 761,718 70,552 691,166
Interstate Commerce Commission 741 0 741
Justice, Department of 565,522 186,228 379,294
Labor, Department of 405,869 9,983 395,886
National Aeronautics andSpace Administration 7,655,858 1,600,327 6,055,531
National Archives andRecords Administration 722 367 355
National Foundation ontheArtsandthe 448 0 448
National Science Foundation 52,025 1,844 50,181
Nuclear Regulatory Commission 19,277 499 18,778WT/REG4/1/Add.1
Page54
Agency Total Products Services
Office ofPersonnel Management 1,890 0 1,890
Pennsylvania Avenue Development Corporation 436 0 436
Railroad Retirement Board 1,311 204 1,107
Securities andExchange Commission 10,776 170 10,606
Small Business Administration 1,277 0 1,277
Smithsonian Institution 10,953 485 10,468
State, Department of 230,932 60,243 170,690
Tennessee Valley Authority 2,111,888 2,038,100 73,788
Treasury, Department ofthe 477,433 390,612 86,820
United States Army Corps ofEngineers -Civil Pro. 907,278 39,537 867,741
United States Coast Guard 1,240,527 496,945 743,582
United States Information Agency 44,036 18,552 25,484
Total 122,297,336 60,410,234 61,887,102WT/REG4/1/Add.1
Page55
ANNEX 2
Intellectual Property Questions andReplies (Nos. 191-205)
CanadaandtheUnitedStatesareprovidingtheattachedresponsestothequestionsonintellectual
property-related matters without prejudice totheirrespective views ontheappropriate mandate ofthe
GATT working party ongoods, theGATS working party onservices andtheTRIPS Council inrespect
ofthissubject. Thissubmission ofthese responses should not,inanyway,beinterpreted toprejudge
positions thatmight betaken byanyNAFTA Party orbyWTO bodies inthisregard.
191. How dotheNAFTA Parties, inview ofArticle 19(1) oftheTRIPs Agreement,
intend toremedy thefactthatunder Article 1708.8 oftheNAFTA theregistration
ofatrademark maybecancelled forthereason ofnon-use after anuninterrupted
period oftwoyears?
There isnoinconsistency between therequirements ofTRIPS, Article 19(1), andNAFTA,
Article 1708(8). ANAFTA Party cancelling atrademark registration onlyaftertheminimum TRIPS
period ofthree years ofnon-use would notbeinconsistent withtheNAFTA minimum period oftwo
years'non-use.
192. Where atrademark ofaforeign supplier cannot beusedbythatsupplier inone
NAFTA member, isitsuseinother NAFTA members affected?
No.
193. Does thefactthatArticle 1709.5(a) doesnotmention theright oftheowner of
aproduct patent toprevent other persons from offering forsaleorimporting the
product mean thatthese actsarenotsubject tothepatent owner 'sauthorization,
asrequired under Article 28(1)(a) oftheTRIPs Agreement?
Because NAFTA merely setsoutminimum international standards, there isnoinconsistency
between NAFTA andTRIPS onthesepoints. Withrespect to"offering forsale"and"importing", there
aredifferences between NAFTA, Article 1709(5)(a), andTRIPS, Article 28(1)(a), butNAFTA does
notprohibit thehigher levelofprotection required byTRIPS Article 28(1)(a).
194. Does thefactthatArticle 1709.5(b) doesnotmention theright oftheowner of
aprocess patent toprevent other persons from offering forsaletheproduct
obtained directly bythatprocess mean thatthisactisnotsubject tothepatent
owner 'sauthorization, asrequired under Article 28(1)(b)?
Again, NAFTA setsoutminima ofprotections anddoesnotpreclude thehigher level of
protection required byTRIPS Article 28(1)(b). Withrespect to"offering forsale", there isthetextual
difference between NAFTA, Article 1709(5)(b), andTRIPS, Article 28(1)(b).
195. What aretheimplications ofthechoice ofpatent term between 20years from the
dateoffiling and17years from thedateofgrant, notably inviewofArticle 33
oftheTRIPs Agreement which provides thatthetermofprotection available shall
notendbefore theexpiration ofaperiod of20years counted from thefiling date?WT/REG4/1/Add.1
Page56
There isnoinconsistency between therequirements ofTRIPS, Article 33,andNAFTA,
Article 1709(12). Canada already provides apatent termof20years fromfiling aswilltheUSAwith
respect toprospective applications. Forexisting subject matter, theUSAwillbeproviding atermwhich
isthegreater of17years from grant and20years from filing.
196. DotheParties totheNAFTA consider thattheprotection granted under Articles
1712.1(a) and1712.2 fullymeets therequirements under Articles 23(1) and23(2)
oftheTRIPs Agreement?
TRIPS, Article 23(1) and23(2), contain specific obligations which areabsent fromNAFTA,
Article 1712(1)(a) and1712(2). Therelevant NAFTA obligation focuses onwhether ornotthepublic
would bemisled. Inthisregard, nochanges toCanada 'sdomestic lawwere necessary. However,
Canada'sWTOAgreementImplementationActcontainsspecificprovisionstoimplementtheobligations
under TRIPS, Articles 23(1) and23(2).
Toimplement Article 1712, changes weremade totheU.S.trademark law.Additional changes
were made totheU.S.trademark lawtoimplement TRIPs Articles 23(1) and23(2), which become
effective onJanuary 1,1996.
197. How dotheParties totheNAFTA interpret thereference inArticle 17.12.4 to
useofageographical indication inacontinuous manner "foratleast 10years"
or"ingoodfaith" notably inviewofthefactthattheTRIPs Agreement specifically
refers inArticle 24(4) touse"foratleast 10years preceding 15April 1994" or
"ingood faith preceding thatdate"? How isthecompatibility withtheTRIPs
Agreement going tobeassured?
NAFTA,Article1712(4),andTRIPS,Article24(4),aregrandfatheringexceptionswhichParties
maychoose tousewithregard tothespecific obligations intherespective instruments. Because of
thepurely optional character ofthetwoprovisions, there isnoquestion ofinconsistency between
NAFTA, Article 1712(4) andTRIPS, Article 24(4).
Inviewofthedifferent obligations inthetwoinstruments, while anexception based onTRIPS,
Article 24(4), iscontained inCanada 'sWTO Agreement Implementation Act,Canada hasnotfound
itnecessary torelyonthefacility provided byNAFTA, Article 1712(4). Consequently, there isno
possibility ofmaking acomparison between Canada 'streatment offoreign rightholders under NAFTA,
Article 1712(4), andTRIPS, Article 24(4).
TheUnited States implemented thegrandfather clause contained inNAFTA Article 1712(4)
inconnection withitsamendment toitstrademark lawtoimplement Article 1712 ofNAFTA.
Additionally, thegrandfather provisions ofTRIPs Article 24(4) areincorporated intheU.S.changes
toitstrademark lawtoimplement TRIPs Article 23(1) and23(2).
198. What isthemeaning ofArticle 1712.8 andwhat arethesituations theParties wish
tocover inthisparagraph?
NAFTA, Article 1712(8), originated withTRIPS, Article 24(8), asembodied inthe1991draft
Dunkel text.NAFTA, Article 1712(8), andTRIPS, Article 24(8), share thesamerationale, i.e.alimited
exception permitting theuseofatrade orbusiness name thathappens tobesimilar oridentical toa
geographical indication.WT/REG4/1/Add.1
Page57
199. Does thefactthatArticle 1713.3 doesnotmention theright oftheowner ofthe
industrial design toprevent other persons from importing articles bearing or
embodying thatdesign mean thatthisactisnotsubject tothedesign owner 's
authorization, asrequired under Article 26(1) oftheTRIPs Agreement?
With respect toimportation, there isadifference between thelevelofprotection required by
NAFTA, Article 1713(3), andTRIPS, Article 26(1). While NAFTA doesnotrequire thishigher level
ofprotection, itdoesnotpreclude it.
200. Could theNAFTA Parties explain theexact significance andimplications of
Article 1715.7?
NAFTA, Article 1715(7) isrelated toTRIPS, Article 44(2), on"injunctions" inthesense that
discussion ofNAFTA, Article 1715(7), originated withtherelevant TRIPS provision inthe1991draft
Dunkel text.NAFTA, Article 1715(7), permits NAFTA Parties tomaintain adomestic legalsystem
inwhich injunctive relief isnotavailable against theState withrespect toitsinfringement ofan
intellectual property right.
201. How dotheUnited States ofAmerica intend toextend, byvirtue ofArticles 4,
9,14(6) and70(2) oftheTRIPs Agreement, theprotection granted under Articles
1705.7, 1720.1 and1720.3 oftheNAFTA?
Article 1705.7
Article1705.7requirestheUnitedStatestorestorecopyrightincertainmotionpicturesproduced
inCanada orMexico thathadbeendeclared tobeinthepublic domain pursuant to17U.S.C. 405.
Section 514oftheUruguay Round Agreements Act(URAA) restores copyright inallworks (including
sound recordings) originating inWTO members thathavefallen intothepublic domain intheUnited
States forfailure tocomply withformalities orforthelackofcopyright relations between theUnited
States andthecountry oforigin. TheUnited States thusprovides tonationals ofWTO members far
more protection thanisrequired inArticle 1705.7 ofNAFTA.
Article 1720.1
Article 1720.1 provides thattheNAFTA doesnotgiverisetoobligations inrespect ofacts
thatoccurred before thedateofapplication oftherelevant provisions. Article 70.1ofTRIPs contains
asimilar provision. TheUnited States isincompliance withbothprovisions, neither ofwhich requires
anyaction bytheUnited States.
Article 1720.3
Article 1720.3 states that,except asrequired under Article 1705.7, aparty doesnothaveto
restore protection forsubject matter thathasfallen intothepublic domain initscountry oforigin.
Asnoted, section 514oftheURAA restores copyright protection totheentire range ofcopyrightable
works (including sound recordings) thathavefallen intothepublic domain intheUnited States for
failure tocomply withformalities orforthelackofcopyright relations between theUnited States and
thecountry oforigin.WT/REG4/1/Add.1
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202. Isthepossibility toaccept, from theentry intoforce oftheNAFTA, applications
from plant breeders forplant varieties andsubsequently protection, limited to
nationals ordomiciliaries ofaNAFTA Party?
Theability toapply forsuchprotection inCanada andtheUnited States isnotlimited tonationals
ordomiciliaries ofaNAFTA Party.
203. How dotheUnited States andMexico intend toextend, byvirtue ofArticle 4of
theTRIPs Agreement, theprotection granted under Article 1709.4 tonationals
ofandpatents granted inother WTO members? What istheexact procedure
thatthese nationals have tofollow inorder toobtain suchprotection?
BecausetheUnitedStatesprovidedproductpatentprotectionforpharmaceuticalsandagricultural
chemicalscommensuratewithArticle1709.1atthetimetheNAFTAwassigned,Article1709.4imposes
nosubstantive obligations ontheUnited States.
204. TheNAFTA requires protection andenforcement stricter thanthose provided by
theTRIPs Agreement. DotheNAFTA parties apply these measures onanm.f.n.
basis tonon-parties totheNAFTA? Ifnot,whynot?
Once theintellectual property provisions inCanada 'sWTO Agreement Implementation Act
andtheUnited States 'Uruguay Round Agreement Act,areinforce, theprotection andenforcement
measures inCanadian andU.S.intellectual property statutes, respectively, willapply equally toWTO
Members andNAFTA Parties
205. Have theintellectual property standards, including those which establish protection
greater thanordifferent from thatprovided inthefuture TRIPS Agreement, been
reflected inthethree national legislations?
InCanada 'sview, allourintellectual property obligations under NAFTA werefullysatisfied
on1January 1994, thedaytheNAFTA Implementation Actcame intoforce.
ChangesneededtoU.S.legislationinordertoimplementNAFTAchapter17wereaccomplished
throughtheprovisionsofsections331-335oftheNorthAmericanFreeTradeAgreementImplementation
Act.