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The NAFTA grants benefits to a variety of goods from the region. Maximum benefits are reserved for those goods that "originate" in the region. "Originating" is a term of art used to describe those goods that meet the requirements of Article 401 of the Agreement. Article 401 of the Agreement establishes which goods originate and precludes goods from other countries from obtaining those benefits by merely passing through Canada, Mexico or the United States. Thus, not all goods made in Canada, Mexico and the United States qualify for NAFTA benefits.

Traders must carefully research the terms of the Agreement to determine whether their goods are entitled to NAFTA benefits--they should not assume that they are entitled to NAFTA benefits merely because they were made in a NAFTA country. It is possible, for instance, for goods not to originate in Canada, Mexico or the United States as that term is defined in the NAFTA, but still be an article of Canada, Mexico or the United States for country of origin marking, statistical or other purposes.

Article 401 of the Agreement defines "originating" in four ways: goods wholly obtained or produced in the NAFTA region; goods meeting the Annex 401 origin rule; goods produced in the NAFTA region wholly from originating materials; and unassembled goods and goods classified with their parts which do not met the Annex 401 rule of origin but contain 60 percent regional value content using the transaction method (50 percent using the net cost method).

Last Modified: May 28, 2014