North American Free Trade Agreement (NAFTA) (Customs Glossary)
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🔖 This article is part of the Customs Glossary Guide |
North American Free Trade Agreement (NAFTA)
The landmark trade pact that integrated the economies of the U.S., Canada, and Mexico (1994–2020).
Overview
The North American Free Trade Agreement (NAFTA) was a trilateral trade bloc in North America created by the governments of the United States, Canada, and Mexico. Entering into force on January 1, 1994, it created one of the world's largest free trade zones, aiming to eliminate barriers to trade and investment between the three nations.
Current Status: On July 1, 2020, NAFTA was officially superseded by the United States-Mexico-Canada Agreement, known as:
- USMCA in the United States.
- CUSMA in Canada.
- T-MEC in Mexico.
Historical Impact: NAFTA eliminated virtually all tariffs on goods produced and traded within North America, causing trade between the three countries to triple from 1993 to 2019.
Key Provisions & Legacy
While no longer active, NAFTA established the framework for modern North American supply chains. Its core pillars included:
| Provision | Impact |
|---|---|
| Tariff Elimination | Gradually removed customs duties on qualifying goods. By 2008, virtually all tariffs between the three countries were eliminated, fostering deep integration in the automotive and agricultural sectors. |
| Rules of Origin | Established the criteria for determining if a good was "North American." For example, autos required 62.5% regional value content to be duty-free (a threshold raised under USMCA). |
| Intellectual Property | Was the first FTA to include robust IP protections, requiring each country to provide adequate and effective protection and enforcement of intellectual property rights. |
| TN Visa (Labor) | Created the "TN" (Trade NAFTA) non-immigrant classification, allowing qualified Canadian and Mexican citizens to seek temporary entry into the U.S. to engage in business activities at a professional level. |
Transition to USMCA/CUSMA
The new agreement modernized NAFTA to address digital trade and stricter labor standards. Key differences include:
1. Certificate of Origin Changes
- NAFTA: Required a specific, rigid form (CBP Form 434) to claim preferential treatment.
- USMCA: Eliminated the official form. Now, a "Certification of Origin" can be provided on any document (like a commercial invoice) as long as it contains 9 minimum data elements.
2. Automotive Rules of Origin
- NAFTA: Required 62.5% Regional Value Content (RVC).
- USMCA: Raised the RVC requirement to 75% and added a Labor Value Content (LVC) rule requiring a portion of the vehicle to be made by workers earning at least $16 USD/hour.
3. De Minimis Thresholds
The value at which goods can be imported duty/tax-free was updated, particularly for Canada (raising the duty-free limit from $20 CAD to $150 CAD for courier shipments, though taxes still apply above $40).
Usage in BorderConnect
While NAFTA is gone, the "NAFTA" label persists in some legacy systems, but users must update their workflows.
- Tariff Treatments: In BorderConnect ACI or ACE, do not use "NAFTA" codes for new shipments. Use the updated codes for USMCA/CUSMA (e.g., Tariff Treatment 10 in Canada is now replaced by the CUSMA code).
- Documents: If a shipper provides an old CBP Form 434 (NAFTA Certificate), it is invalid for shipments after July 1, 2020. Carriers should request a valid USMCA/CUSMA Certification of Origin to prevent clearance delays.
Official Resources
- Global Affairs Canada: CUSMA vs NAFTA Overview
- USTR (USA): USMCA Official Text & Fact Sheets
- CBP (USA): USMCA Implementing Instructions
- USCIS (Visas): TN NAFTA Professionals