What defines nonoriginating materials under NAFTA?

Nonoriginating materials under NAFTA are defined as parts or products that do not come from a NAFTA country. This means that if a component or raw material is sourced from a country that is not part of the NAFTA agreement—namely, Canada, the United States, or Mexico—it is considered a nonoriginating material.

This classification is significant because it impacts the eligibility of finished goods for preferential tariff treatment under NAFTA. To qualify for reduced tariffs, a product typically needs to contain a certain percentage of originating materials, which are those sourced from within the NAFTA regions. Hence, any components that are imported from outside NAFTA qualify as nonoriginating materials and do not contribute to this originating status.

In contrast, components sourced from a NAFTA country fall into the category of originating materials, which contribute positively when it comes to tariff benefits. Raw materials exclusively produced domestically would also qualify as originating materials. Finally, finished products manufactured in the NAFTA region would also be considered originating because they are produced in countries that are members of the agreement.