Rules of Origin
The rules of origin for a significant number of electronic products (e.g., computers, telecommunications equipment, televisions, machine tools, semiconductors) are based strictly on a tariff change. This tariff change is structured to require that key subassemblies of the product be produced in North America. Where necessary, the tariff schedules of Canada, Mexico and the United States were modified to accommodate these rules of origin.
Television receivers with a picture tube of more than 14 inches in diameter may be considered originating only if the picture tube is produced or assembled in North America.
Other electronic products may originate in one of two ways: by satisfying a tariff change or by meeting a less substantial tariff change and a regional value-content requirement. The first tariff change is generally stricter (requiring the non-originating materials to be classified in another chapter) and therefore has no regional value-content requirement. The alternative tariff change frequently involves a transformation of parts into a finished good. Since this alternate tariff change reflects a lesser degree of processing, the regional value-content requirement ensures significant North American content.
Harmonization of MFN Rates
In one of the most unique features of the NAFTA, the three countries will harmonize, in a series of staged reductions, their respective most-favored-nation tariff rates on computers, computer parts and certain computer peripherals. Once the duty rates for these articles are harmonized, duties on goods will be payable only once upon entering the NAFTA territory. Once within the NAFTA territory, these articles are considered originating and may move among Canada, Mexico and the United States without payment of duty.
In addition, on January 1, 1994, the three countries changed their most-favored-nation tariff rates to free on virtually all semi-conductors and all local area network apparatus.