o RULES OF ORIGIN
Fiber forward (Fiber forward requires NAFTA-origin fiber) for cotton and man-made fiber spun yarn and sewing thread. Filament yarns must be composed of filaments that are formed (extruded) in a NAFTA country, but petrochemical or cellulosic feedstock may be sourced outside NAFTA. Single substantial transformation (Yarns or sewing thread must be spun within a NAFTA country) for yarns or sewing thread of other fibers.
o TARIFFS
Mexico's duties on 93 percent of U.S. yarn and thread exports will be eliminated after five years on NAFTA-qualifying goods. Duties will be eliminated immediately in Mexico for key products of export interest such as cotton and man-made fiber sewing thread, and certain nylon and polyester filament yarns. U.S. duties on 96 percent of Mexico's yarn and thread exports will be eliminated after five years on NAFTA-qualifying goods. All duties between the U.S. and Canada on trade in qualifying yarn and thread will be at zero as of 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 upon implementation of NAFTA on Mexico's exports of yarn (either qualifying or non-qualifying). Quotas on trade between the United States and Mexico can be imposed under a "safeguard" mechanism during the transition period of the agreement 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 spun yarn (but not sewing thread) 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 I)
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