NAFTA (North American Free Trade Agreement)

The North American Free Trade Agreement (NAFTA) is a trilateral trade agreement among the United States, Canada, and Mexico that took effect in 1994. It aims to eliminate tariffs and non-tariff barriers to trade in goods among the three countries, promote investment liberalization, protect intellectual property rights, and establish dispute settlement mechanisms. Foreign trade practitioners should note: NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) in 2020, but historical contracts, rules of origin, and certain industry provisions may still be referenced. Use cases include: claiming preferential origin, calculating tariff reductions, handling anti-dumping and countervailing cases, and cross-border services and investment arrangements. Compared with WTO most-favored-nation treatment, NAFTA provides deeper preferences but only within the region; the difference from USMCA is that USMCA raises the automotive rules of origin threshold and labor and digital trade standards. Note: Certificates of origin must strictly comply with regional value content requirements, otherwise preferences cannot be enjoyed; and NAFTA does not apply to transshipment trade with non-member countries.