NAFTA MFN Harmonization

Jan. 18, 2004

The Office of the U.S. Trade Representative (USTR) has invited the submission of proposals for harmonizing Most Favored Nation (MFN) tariffs among NAFTA countries, and liberalizing the NAFTA rules of origin.   Federal Register Notice.  The Notice explains the type of harmonization being considered as follows:  "Harmonization would occur as countries with the higher MFN duties reduce such duties to the level of the lowest current duty rate applied by a NAFTA country, or move to a rate lower than any currently applied.

In addition to being an opportunity to achieve MFN harmonization for a particular product or sector, this is also an opportunity to obtain for other products/sectors the same NAFTA treatment given to computers/computer parts, local area network equipment and semiconductors.  That is, products manufactured outside of the NAFTA territory with 0% MFN duties in all 3 NAFTA countries could be considered originating under NAFTA.  This means that not only could they be considered originating content when used in the production of other goods, and not only could they escape classification change requirements, but they also would not have to pay merchandise processing fees in the United States or customs fees in Mexico when entering from a NAFTA country.

The NAFTA negotiators will only be considering products/sectors with wide industry support.  If your firm would like to propose MFN harmonization and/or liberalization of the rules of origin under NAFTA for a particular product or sector, it is in your interest to obtain the positions of other players in your industry.  If you find that there is significant industry support, we would advise you to file a proposal indicating the manufacturing and transaction cost savings that would accrue to your firm and/or industry, as well as the expected volume increase in NAFTA trade.  Furthermore, if your firm opposes any reduction in MFN rates or liberalization of rules or origin, it would be a good idea to register your opposition with USTR without delay.  BRC has experience in this area and we are prepared to help you draft and submit an effective proposal.

Submissions are due to USTR at noon on Friday, February 6, 2004.  The Canadian Department of International Trade has issued a parallel Notice inviting proposals.  Canadian Notice.  The Canadian Notice provides detailed background information on this initiative.  Submissions to the Canadian Department of International Trade are due on Friday, 2/13/04.  We are equally prepared to assist you in submitting proposals to the Canadian Department of International Trade, and would encourage such a submission if your firm has Canadian operations.