NAFTA - Annex 300-A Part 2

North American Free Trade Agreement

Annex 300-A: Trade and Investment in the Automotive Sector

Appendix 300-A.2: Mexico

Definitions

27. For purposes of this Appendix:

abnormal production disruption means a disruption in a manufacturer's production capability resulting from a natural disaster, fire, explosion or other unforeseen event beyond the manufacturer's control;

automotive products (referred to as "productos automotrices" in rule 1, paragraph III of the Auto Decree Implementing Regulations) means motor vehicles and autoparts;

autoparts (referred to as "partes y componentes automotrices" in article 2, paragraph X of the Auto Decree) means parts and components intended for use in a motor vehicle;

autotransportation parts means parts and components intended for use in an autotransportation vehicle;

autotransportation vehicle means a vehicle of one of the following types:

    (a) a vehicle without a chassis and with an integrated body, intended for the transport of more than 10 persons, with a gross vehicle weight of more than 8,864 kilograms, provided for in items 8702.10.02, 8702.10.03, 8702.90.03, 8702.90.04, 8705.20.01 or 8705.40.01 of the Tariff Schedule of the General Import Duty Act;

    (b) a vehicle with a chassis, intended for the transport of goods or more than 10 persons, with a gross vehicle weight of more than 8,864 kilograms, provided for in items 8702.10.01, 8702.10.03, 8702.90.02, 8702.90.04, 8704.22.99, 8704.23.99, 8704.32.99, 8705.20.01, 8705.40.01 or 8706.00.99 of the Tariff Schedule of the General Import Duty Act; or

    (c) a vehicle with two or three axles, either with integrated equipment or intended for the transport of goods by hauling a trailer, or semi-trailer, provided for in items 8701.20.01, 8705.20.01, 8705.40.01 or 8706.00.99 of the Tariff Schedule of the General Import Duty Act;

base value means the average for model years 1991 and 1992 of a manufacturer's production in Mexico for sale in Mexico (VTVd), adjusted annually for cumulative inflation, based on the Mexican National Producer Price Index of Vehicles, Autoparts, and other Transportation Goods ("Indice Nacional de Precios al Productor de vehículos, refacciones y otros materiales de transporte"), or any successor index, published by the Bank of Mexico ("Banco de Mexico") in its "Economic Indicators" ("Indicadores Económicos") (hereinafter "Mexican NPPI"). To adjust the base value for cumulative inflation up to 1994 or a subsequent year, the average for model years 1991 and 1992 of the manufacturer's VTVd shall be multiplied by the ratio of:

    (a) the Mexican NPPI for that year, to

    (b) the Mexican NPPI for 1992,

provided that the price indices set out in subparagraphs (a) and (b) have the same base year;

enterprise of the autoparts industry (referred to as "empresa de la industria de autopartes" in article 2, paragraph V, and articles 6 and 7 of the Auto Decree) means an enterprise constituted or organized under the law of, and operating in, Mexico that produces autoparts and:

    (a) whose annual invoice value of sales of autoparts to manufacturers, for use as original equipment by the manufacturer in its production of automotive products for sale in Mexico, constitutes more than 60 percent of the enterprise's annual total invoice value of sales, calculating its annual invoice value of sales of autoparts to manufacturers in accordance with rule 20 of the Auto Decree Implementing Regulations as of August 12, 1992, or any other measure adopted by Mexico that is no more restrictive than such rule;

    (b) complies with the national value added requirements pursuant to paragraphs 2 and 3 of this Appendix;

    (c) complies with the capital structure required under the Law to Promote Mexican Investment and Regulate Foreign Investment ("Ley para Promover la Inversión Mexicana y Regular la Inversión Extranjera"), March 9, 1973, and the Regulations of the Law to Promote Mexican Investment and to Regulate Foreign Investment ("Reglamento de la Ley para Promover la Inversión Mexicana y Regular la Inversión Extranjera"), May 16, 1989, as applied consistently with Mexico's commitments set out in its Schedule to Annex I of Part Five (Investment, Services and Related Matters); and

    (d) that, on the fulfillment of the requirements under (a), (b) and (c), is registered with the Ministry of Trade and Industrial Development ("Secretaría de Comercio y Fomento Industrial") ("SECOFI") as an enterprise of the autoparts industry, except that SECOFI may grant registration to an enterprise that complies with subparagraphs (b) and (c) but does not comply with subparagraph (a);

extended trade balance for a manufacturer is equal to S + T + W+0.3I + SFt - Y, where:

    (a) S denotes the manufacturer's trade balance;

    (b) T denotes the transfer of

      (i) trade balance surpluses between the manufacturer and other manufacturers, and

      (ii) foreign exchange to the manufacturer that an enterprise of the autoparts industry has earned from exports of autoparts, excluding the value of import content in such exports, and excluding foreign exchange that the enterprise has earned from exports of autoparts that were promoted by the manufacturer,

applied in accordance with rule 8 of the Auto Decree Implementing Regulations as of August 12, 1992, or any other measure adopted by Mexico that is no more restrictive than such rule;

    (c) W denotes the transfer to the manufacturer of foreign exchange that a maquiladora has earned from the export of automotive products, excluding the value of the import content in such exports, provided that the maquiladora is not a national supplier, and one or more of the following conditions is met

      (i) the manufacturer is, directly or indirectly, a majority shareholder of the maquiladora,

      (ii) the manufacturer and the maquiladora have a majority shareholder in common, or

      (iii) the manufacturer is a promoter of the automotive goods exported by such maquiladora,

calculated in accordance with article 9 of the Auto Decree and rule 8 of the Auto Decree Implementing Regulations as of August 12, 1992, or any other measure adopted by Mexico that is no more restrictive than that article or rule;

    (d) I denotes the value of the manufacturer's investments in fixed assets of Mexican origin destined for permanent use in Mexico, excluding machinery and equipment purchased in Mexico but not produced in Mexico, that the manufacturer may transfer to its extended trade balance, applied in accordance with article 11 of the Auto Decree and rule 8 of the Auto Decree Implementing Regulations as of August 12, 1992, or any other measure adopted by Mexico that is no more restrictive than the article or rule;

    (e) SFt denotes the manufacturer's trade balance surpluses unused in prior years and transferred to the current year, calculated in accordance with rules 17 and 19 of the Auto Decree Implementing Regulations as of August 12, 1992, as modified by paragraph 16 of this Appendix, or any other measure adopted by Mexico that is no more restrictive than such rules; and

    (f) Y denotes the adjustment factor calculated in accordance with paragraph 15;

independent maquiladora means an enterprise registered as an export maquiladora enterprise under the existing MaquiladoraDecree, that has no majority shareholder in common with any manufacturer, and in which no manufacturer is directly or indirectly a majority shareholder;

manufacturer (referred to as "empresa de la industria terminal"in article 2, paragraph IV, and articles 3, 4 and 5 of the Auto Decree) means an enterprise constituted or organized under the law of, and operating in, Mexico, that is:

    (a) registered with SECOFI; and

    (b) engaged in Mexico in the manufacture or final assembly of motor vehicles;

manufacturer of autotransportation vehicles means an enterprise constituted or organized under the law of, and operating in, Mexico:

    (a) that is registered with SECOFI;

    (b) that manufactures autotransportation vehicles in Mexico; and

    (c) where the enterprise's

      (i) total invoice value of sales of autotransportation vehicles and autotransportation parts that it produces in Mexico, minus

      (ii) total invoice value of autotransportation parts that the enterprise imports directly, plus the value of the import content of autotransportation parts that it purchases in Mexico,

is equal to at least 40 percent of its total invoice value of sales of autotransportation vehicles and autotransportation parts that the enterprise produces in Mexico;

manufacturer's production in Mexico for sale in Mexico (VTVd) means the total invoice value of a manufacturer's sales in Mexico of motor vehicles and autoparts it produced in Mexico, excluding the manufacturer's sales of imported motor vehicles;

manufacturer's total sales in Mexico means the manufacturer's total invoice value of sales of motor vehicles it produced in Mexico for sale in Mexico plus the total invoice value of its sales of imported motor vehicles;

model year (referred to as "año-modelo" in article 2, paragraph IX of the Auto Decree) means a 12-month period beginning November 1;

motor vehicle (referred to as "vehículos automotores" in article 2, paragraph IV of the Auto Decree) means an automobile, a compact automobile of popular use, a commercial truck, a light duty truck or a medium duty truck, where:

    (a) automobile means a vehicle intended for the transport of up to 10 persons, provided for in items 8703.21 through 8703.33, 8703.90.99, 8706.00.01, 8706.00.02 or 8706.00.99 of the Tariff Schedule of the General Import Duty Act;

    (b) compact automobile of popular use means a vehicle that complies with the characteristics set out in the existing Decree that Establishes Exemptions for Compact Automobiles of Popular Use ("Decreto que Otorga Exenciones a los Automóviles Compactos de Consumo Popular"), August 2, 1989, provided for in items 8703.21 through 8703.33, 8703.90.99, 8706.00.01, 8706.00.02 or 8706.00.99 of the Tariff Schedule of the General Import Duty Act;

    (c) commercial truck means a vehicle with or without a chassis, intended for the transport of goods or more than 10 persons, with a gross vehicle weight of up to 2,727 kilograms provided for in items 8702.10, 8702.90.02, 8702.90.03, 8702.90.04, 8703.21 through 8703.33, 8703.90.99, 8704.21.99, 8704.31.99, 8705.20.01, 8705.40.01, 8706.00.01, 8706.00.02 or 8706.00.99 of the Tariff Schedule of the General Import Duty Act;

    (d) light duty truck means a vehicle with or without a chassis, intended for the transport of goods or more than 10 persons, with a gross vehicle weight of more than 2,727 but no more than 7,272 kilograms provided for in items 8702.10, 8702.90.02, 8702.90.03, 8704.90.04, 8704.21.99, 8704.22.99, 8704.31.99, 8704.32.99, 8705.20.01, 8705.40.01, 8706.00.01, 8706.00.02 or 8706.00.99 of the Tariff Schedule of the General Import Duty Act; and

    (e) medium duty truck means a vehicle with or without a chassis, intended for the transport of goods or more than 10 persons, with a gross vehicle weight of more than 7,272 but no more than 8,864 kilograms provided for in items 8702.10, 8702.90.02, 8702.90.03, 8702.90.04, 8704.22.99, 8704.32.99, 8705.20.01, 8705.40.01, 8706.00.01, 8706.00.02 or 8706.00.99 of the Tariff Schedule of the General Import Duty Act;

national supplier (referred to as "proveedor nacional" in article 2, paragraph VII of the Auto Decree) means an enterprise constituted or organized under the law of, and operating in, Mexico:

    (a) that supplies to manufacturers autoparts classified in categories 26, 40, 41, 42, 43 and 57 of the input-output matrix of the National Institute of Statistics, Geography and Informatics ("Instituto Nacional de Estadística, Geografía e Informática"), published in 1980;

    (b) that is registered with SECOFI;

    (c) in which no manufacturer, directly or indirectly, is a majority shareholder;

    (d) that has no majority shareholders that are also majority shareholders of any manufacturer; and

    (e) that complies with the national value added requirements pursuant to paragraphs 2 and 3;

national value added from suppliers (VANp) (referred to as "VANp" in rule 18 of the Auto Decree Implementing Regulations) means, for a manufacturer, the sum of:

    (a) the national value added contained in the autoparts that the manufacturer purchases from national suppliers and from enterprises of the autoparts industry, excluding purchases of autoparts from such suppliers and enterprises destined for the aftermarket, and

    (b) the foreign exchange attributable to the value of exports of autoparts, excluding the value of import content in the exports, produced by national suppliers and enterprises of the autoparts industry, where the export of the autoparts was promoted by the manufacturer,

calculated in accordance with formula 7 of rule 18 in the Auto Decree Implementing Regulations as of August 12, 1992, or any other measure adopted by Mexico that is no more restrictive than such formula;

national value added means, for an enterprise of the autoparts industry or a national supplier, the total value of sales of such enterprise or supplier minus the value of its total imports, direct and indirect, excluding those imports incorporated in autoparts destined for the aftermarket, as modified by paragraphs 2 and 3;

total national value added (VANt) (referred to as "valor agregado nacional de la empresa de la industria terminal" in rule 18 of the Auto Decree Implementing Regulations) means, for a manufacturer, either:

    (a) the sum of the manufacturer's production in Mexico for sale in Mexico (VTVd) plus the manufacturer's trade balance (S), where the trade balance (S) is greater than zero; or

    (b) the manufacturer's production in Mexico for sale in Mexico (VTVd), where the manufacturer's trade balance (S) is negative;

total sales means, for a national supplier or an enterprise of the autoparts industry, the sum of:

    (a) the invoice value of sales of autoparts by that supplier or enterprise to a manufacturer that are intended for use as original equipment in the motor vehicles or autoparts that the manufacturer produces, excluding autoparts destined for the aftermarket; and

    (b) the value of autoparts that the supplier or enterprise exports, either directly or through a manufacturer, less the value of the imported content of such autoparts; and

trade balance (S) (referred to as "saldo en balanza comercial" in rule 9 of the Auto Decree Implementing Regulations), for a manufacturer, is equal to X + TP - ID - IP, where:

    (a) X denotes the value of the manufacturer's direct exports of motor vehicles and autoparts that it produces,

    (b) TP denotes the foreign exchange attributable to the value of exports of autoparts, excluding the value of import content in the exports, produced by national suppliers and enterprises of the autoparts industry, where the exportation of such autoparts was promoted by the manufacturer,

    (c) ID denotes the value of the manufacturer's direct imports, excluding duties and domestic taxes, and whether the imports are for domestic consumption ("definitivas") or for re-export ("temporales"), incorporated in the motor vehicles and autoparts produced by the manufacturer, excluding autoparts destined for the aftermarket, and

    (d) IP denotes the value of import content in the autoparts purchased by the manufacturer from an enterprise of the autoparts industry or a national supplier that are incorporated in the motor vehicles and autoparts produced by the manufacturer, excluding the import content of autoparts destined for the aftermarket, calculated in accordance with rules 10, 12, 13, 14, and 15 of the Auto Decree Implementing Regulations as of August 12, 1992, or any other measure adopted by Mexico that is no more restrictive than such rules,

provided that, for purposes of subparagraphs (c) and (d), the value of imports for domestic consumption ("definitivas") shall be discounted in accordance with paragraph 12.

Appendix 300-A.3

United States - Corporate Average Fuel Economy

1. In accordance with the schedule set out in paragraph 2, for purposes of the Energy Policy and Conservation Act of 1975, 42 U.S.C. 6201 et seq. ("the CAFE Act"), the United States shall consider an automobile to be domestically manufactured in any model year if at least 75 percent of the cost to the manufacturer of such automobile is attributable to value added in Canada, Mexico or the United States, unless the assembly of the automobile is completed in Canada or Mexico and such automobile is not imported into the United States prior to the expiration of the 30 days following the end of the model year.

2. Paragraph 1 shall apply to all automobiles produced by a manufacturer and sold in the United States, wherever produced and irrespective of car line or truck line, in accordance with the following schedule:

    (a) with respect to a manufacturer that initiated the production of automobiles in Mexico before model year 1992, the enterprise subject to the fuel economy requirements for those automobiles under the CAFE Act may make a one-time election at any time between January 1, 1997 and January 1, 2004, to have paragraph 1 applied beginning with the next model year after its election;

    (b) with respect to a manufacturer initiating the production of automobiles in Mexico after model year 1991, paragraph 1 shall apply beginning with the next model year after either January 1, 1994 or the date that the manufacturer initiates the production of automobiles in Mexico, whichever is later;

    (c) with respect to any other manufacturer producing automobiles in the territory of a Party, the enterprise subject to the fuel economy requirements for those automobiles under the CAFE Act may make a one-time election at any time between January 1, 1997 and January 1, 2004, to have paragraph 1 applied beginning with the next model year after its election. If such a manufacturer initiates the production of automobiles in Mexico, it shall be subject to subparagraph (b) on the date it initiates such production;

    (d) with respect to all manufacturers of automobiles not producing automobiles in the territory of a Party, paragraph 1 shall apply beginning with the next model year after January 1, 1994; and

    (e) with respect to a manufacturer of automobiles covered by subparagraph (a) or (c), paragraph 1 shall apply beginning with the next model year after January 1, 2004, where the enterprise subject to the fuel economy requirements for those automobiles under the CAFE Act, has not made an election under subparagraph (a) or (c).

3. The United States shall ensure that any measure it adopts pertaining to the definition of domestic production in the CAFE Act or its implementing regulations shall apply equally to value added in Canada or Mexico.

4. Nothing in this Appendix shall be construed to require the United States to make any changes in its fuel economy requirements for automobiles, or to prevent the United States from making any changes in its fuel economy requirements for automobiles that are otherwise consistent with this Appendix.

5. For greater certainty, the differences in treatment pursuant to paragraphs 1 through 3 shall not be considered to be inconsistent with Article 1103 (Investment - Most-Favored- Nation Treatment).

6. For purposes of this Appendix:

automobile means "automobile" as defined in the CAFE Act and its implementing regulations;

manufacturer means "manufacturer" as defined in the CAFE Act and its implementing regulations; and

model year means "model year" as defined in the CAFE Act and its implementing regulations.

Continue on to Annex 300-B: Textile and Apparel Goods

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