Alert 33. 2018
On August 27th, it was announced that the United States of America and Mexico have reached a preliminary agreement as a result of renegotiations around the North America Free Trade Agreement (NAFTA), where Canada is pending to accept the terms that USA and Mexico agreed.
This agreement is not yet approved by the Congress of both Countries, moreover, it is also subject to finalization and implementation, therefore you cannot take this as a definitive.
Below, we summarize some key points to be considered:
Automotive Industry:
- New rules of origin and origin procedures requires that 75 percent of auto content must be made in the United States and Mexico.
- The deal uses trade rules to drive higher wages by requiring that 40-45 percent of auto content be made by workers earning at least $16 per hour (as in the USA).
- Auto parts would be subject to regional content quotas at different levels, depending on the type of part or system will require a regional content of different levels, some of up to 100%.
Textile:
- Changes are foreseen to limit the use of non-NAFTA inputs in textile and apparel trade.
- Will require that sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in apparel and other finished products, be made in the region for those finished products to qualify for trade benefits.
- Creation of a specific Textiles chapter for United States–Mexico trade, including textile-specific verification and customs cooperation provisions for strengthening customs enforcement and preventing fraud.
Agriculture:
- The deal Includes a biotechnology section aimed to encourage agricultural innovation.
- Tariffs of 0% duties will be maintained for products originated in the region.
- A commitment will be established to reduce the misuse of subsidies and safeguards considered in the World Trade Organization (WTO).
Market Access:
- New market access chapter will be updated by removing provisions that are no longer relevant, updating key references, and affirming commitments from the original agreement.
- The prohibition on export duties, taxes, and other charges and the waiver of specific customs processing fees is maintained.
- New provisions for transparency in import licensing and export licensing procedures are included.
- The deal prohibits Parties from applying requirements to use local distributors for importation, restrictions on the importation of commercial goods that contain cryptography as well as import restrictions on used goods to remanufactured goods.
Validity:
- The "sunset" clause which established a validity of 5 years, was discarded, now, a minimum validity of 16 years is foreseen, with the possibility of revising every 6 years, and be able to extend the term for another 16 years.
If you require more information, please contact us in the following emails:
Mexico and Monterrey Office
Mario Echagaray Mario.Echagaray@mx.gt.com T (52 55) 54246500
Santos Briz Santos.Briz@mx.gt.com T (52 55) 54246500
Pedro Zugarramurdi Pedro.Zugarramurdi@mx.gt.com T (52 55) 54246500
Guadalajara Office
Mario Rizo Mario.Rizo@mx.gt.com T (52 33) 38174480
Daniel Santiago Daniel.Santiago@mx.gt.com T (52 33) 38174480
Puerto Vallarta Office
Mario Rizo Mario.Rizo@mx.gt.com T (52 322) 2241297
Queretaro Office
Carlos Hernández Carlos.A.Hernandez@mx.gt.com T (52 442) 229 1543
Tijuana Office
Luis Fernando Acosta Luis.F.Acosta@mx.gt.com T (664) 207-0050
Rafael Rubí rafaeil.rubi@mx.gt.com T (664) 207-0050
Ciudad Juarez Office
Daniel Santiago Daniel.Santiago@mx.gt.com T (52 33) 38174480
Puebla Office
Santos Briz Santos.Briz@mx.gt.com T (52 55) 54246500
Aguascalientes Office
Daniel SantiagoDaniel.santiago@mx.gt.comT (52 33) 38174480
