Chapter 14: North American Free Trade Law

Net Cost

removes sales and marketing costs, shipping costs and certain other expenses from calculation = ((NC - VNM) / NC)) x 100

Normas

standards and technical regulations in Mexico

binational panels

panels where NAFTA cases now go, apply the same standard of review as would a court of law convened in the country where the case originated

Trans-Pacific Partnership (TPP)

-US pulled out -hurts US...Mexico and Canada can get stuff from Asian countries -Dems and Reps agreed until the election, than disagreed

Mexico auto problem

-US told Mexico that they must pay their workers $16/hr -plan was not to help Mexican workers, but to prevent moving factories to Mexico Problem: How do you enforce it?

Regional Value Content

-a rule that states that a certain percentage of the value of a finished product is made by a certain country -can be calculated by either: * transaction value (60%) * net cost (50%)

NAFTA Pros

-easier to transport goods (tariff elimination) -lower prices fro everybody; more options -good for consumers -relationship building -help with immigration (failed) -improve Mexico's economy...so less illegal immigration & drugs (failed) -Specialization

USMCA

-more labor and environment laws pushed by democrats (enforceable?) -70% of steel and aluminum in cars must com from NAFTA -Mexico must allow unions -US agreed to take more Mexican cars and trucks

NAFTA Cons

-vulnerability -national security risk -increase drug flows -displacement of jobs from cheap labor (ag and manufacturing jobs) -harm domestic producers

Maquiladora

Factories built by US companies in Mexico near the US border to take advantage of much lower labor costs in Mexico -production sharing plants -subsidiary and cheap parts and labor

Case: Kirk v. New York State Department of Education

Kirk was a citizen of Canada, seeking to obtain his veterinary license in New York -he was not a US citizen or a permanent resident alien -but he obtained an entry visa from NAFTA that permitted him to live and work in the US temporarily mainly to obtain his medical license -NY restricted his his issuance stating that it protected the public as veterinarians deal with issues affecting public health and safety -Kirk sued alleging the restriction went against NAFTA Decision: Kirk wins and orders NY to grant him a vet license

Case: In the Matter of Cross Border-Trucking

Mexico argued that the US was not treating Mexican trucks as favorably as US and Canadian trucks -claimed that the US violated NAFTA open investment rules by prohibiting Mexican ownership of US trucking firms -US countered by saying that Mexico regulations were so unlike the US and Canada that they had to use more restrictive treatments for Mexican trucks -went to an arbitral panel Decision: The panel decided that the US restrictions on the Mexican trucking industry violated NAFTA

Export Taxes

NAFTA prohibited these on goods, unless taxes are also applied to similar goods sold for domestic consumption

Regional Value Requirements of Autos

NAFTA- 62% of vehicle cost...now 75% w/ USMCA

Tariff Shift Rule

The Annex 401 rules of origin may be based on a: -change in tariff classification -a regional value-content requirement -or both, depending on the requirements for that particular product

Trump NAFTA Video

Trump is against NAFTA / FTA -wanted to renegotiate -not a traditional conservative view

National Treatment

a NAFTA principle (similar to WTO) -states that once goods arrive from another NAFTA country, they must be treated without discrimination and no differently than domestic made goods

NAFTA

allows open trade with US, Mexico, and Canada; 1994

Common Market

also called an economic community -seeks to further facilitate free competition within a group of nations -protects the right of all enterprises and persons within the area to do business, invest capital, and sell their services anywhere within the area without discrimination on the basis of national origin

NAFTA Arbitral Panel

consists of five members who are experts in trade or law

Annex 311

exempts certain items from marketing requirements

Customs User Fees

fees imposed on importers to help fund the cost of customs enforcement and port services -eliminated by NAFTA in 1999

Article XXIV of GATT

has been used to lower the rates of external tariffs within a trade area for the benefit of non-FTA WTO members -achieves the goal of GATT for the benefit of WTO members

Case: Metaclad Corp v. US

involved a US firm that attempted to build a hazardous waste landfill in Mexico -it was told that all permits were obtained...but after making a lot of progress, it was found that one permit was missing Decision: Mexico had violated Metaclad's investor rights; as a US investor in Mexico, Metaclad was not granted fair and equitable trial

Customs Union

is more ambitious in scope than an FTA -there is free trade in all goods that come through any of the union members, even imports from outside the customs union -US cannot negotiate with one member of the EU, but only to the EU as a whole

certificate of origin (CO)

is required for all shipments moving among the US, Canada and Mexico -it certifies that the goods qualify as having originated in North America -required for all commercial shipments entering the US, where the total line item value for a good is more than $1000 -may cover one shipment or multiple (blanket certificate)

Samsonite Corp v. US

the operations of the plant were held to be a fabrication and not a mere assembly -Samsonite assembled luggage in Mexico for import in the US -lots of the parts used for assembly (steel strips) were made in the US and then altered in Mexico for the finished product -on import to the US, the customs service dutied the luggage at a 20% ad valorem -CIT upheld the gov contention's that the steel strips had not been "exported in a condition ready for assembly" ---> the process in Mexico amounted to a fabrication and more than a mere assembly - Samsonite appealed Decision: Court of Appeals went with the prior decision...the bending a processing of the steel strips in Mexico was fabrication and not mere assembly...did not qualify for duty-free treatment under section 9802

Transaction Value

the price actually paid for a good = ((TV - VNM) / TV) x 100 *value of non-originating material

production sharing

the process of spreading manufacturing and assembly operations across international borders -Peter Drucker

Generalized System of Preferences (GSP)

used before NAFTA, where goods from a developing country (Mexico) are shipped to a developed country (US) where the developing country receives special tariff preferences -to encourage trade with developing countries to aid their economic growth

Chapter 19 Dispute Settlements

used for dumping and CVD (NAFTA) -binational panel --> 5 members --> 2 from US and 2 from Canada...last is chosen by coin flip (USMCA wants this gone)

Substantial Transformation Test

used to determine the country of origin of goods imported into the US when the goods are produced or assembled in more than one country

Free Trade Area (FTA)

when two or more countries agree to eliminate or phase out customs duties and other barriers of trade among member countries -applies only to member countries (no outside)