o RULES OF ORIGIN
The rule of origin for made-up products is yarn-forward, (Yarn used in made-up articles must originate within a NAFTA country) with the following exceptions:
o TARIFFS
Mexico's duties on 60 percent of U.S. exports of made-up products will be eliminated after five years for NAFTA-qualifying products. U.S. duties on 83 percent of Mexico's exports of made-up products will be eliminated after five years for NAFTA-qualifying products. Duties will be eliminated immediately between the United States and Mexico on key items of export interest for U.S. producers such as cotton terry towels, curtains and drapes. All duties between the United States and Canada on made-up products will be eliminated on January 1, 1998 (as set out in the U.S. - Canada Free Trade Agreement).
During the transition period, tariffs can temporarily be increased to MFN rates under a "safeguard" mechanism if imports of qualifying products cause or threaten serious damage to domestic producers.
o QUOTAS
Quotas will be eliminated immediately upon implementation of NAFTA on Mexico's exports of made-up products (qualifying and non-qualifying). Quotas on trade between the United States and Mexico can be imposed under a "safeguard" mechanism during the transition period if imports of non-qualifying goods cause or threaten serious damage to domestic producers.
o TARIFF PREFERENCE LEVELS (TPLs)
Non-qualifying cotton and man-made fiber made-up products (in Chapter 63 of the Harmonized System) will be allowed access to each NAFTA market at the preferential rate of duty, up to specific quantities. TPLs were developed primarily to alleviate short supply problems, especially as they relate to manufacturers inputs. (See Annex II)
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