When does a product qualify for NAFTA preferential treatment?

A product qualifies for NAFTA preferential treatment when it has met the requirements of Annex 401. This annex outlines the rules of origin that must be satisfied for a product to be eligible for preferential tariff treatment under NAFTA (now superseded by USMCA). Specifically, Annex 401 specifies the criteria regarding the origin of the materials used in the manufacturing process and the percentage of the product that must originate from NAFTA countries. These requirements ensure that a significant portion of the product's content comes from Canada, Mexico, or the United States, which promotes trade among these nations.

Meeting the requirements of Annex 401 is essential because it provides a standardized way to determine whether a product has been produced in a manner that warrants reduced tariffs or full duty-free treatment. This is important for businesses seeking to maximize the benefits of trading under NAFTA, as it enables them to compete effectively by reducing costs associated with tariffs.

While being manufactured in one of the NAFTA countries is relevant, it alone does not guarantee that the product qualifies for preferential treatment unless it also meets the specified origin criteria in Annex 401. Exporting directly to Canada or Mexico, or the total value exceeding a certain threshold, does not inherently determine eligibility for NAFTA preferential treatment without adhering to the