Final Draft 7/22/99
[Canada comments of 3/24, 4/14, 4/20 and 715 and Mexico comment of 4/21 included]
Report Concerning Article 316.3 of the NAFTA
NAFTA Article 316.3:
The Parties shall convene at least once each year a meeting of their officials responsible for customs, immigration, inspection of food and agricultural products, border inspection facilities, and regulation of transportation for the purpose of addressing issues related to movement of goods through the Parties' ports of entry.
The first of NAFTA's stated objectives is to "eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between" the Parties. This goal is being accomplished as the various provisions of the NAFTA are phased in which eliminate duties, harmonize procedures, recognize standards as equivalent and encourage the exchange of information. In addition, the NAFTA created some two-dozen working groups, committees and subcommittees to advance the objectives of the Agreement. Article 316.3 emphasizes the importance of facilitating trade in goods and provides a means for ensuring that, as the NAFTA is implemented and as its various working groups meet, sufficient communication takes place to assure that the common goal of facilitating the cross-border movement of goods is undertaken in a comprehensive, coordinated and efficient manner.
This report was prepared by the NAFTA Committee on Trade in Goods (TIG), with input and review from other NAFTA working groups and committees. Its purpose is to describe the various issues that are related to the cross-border trade in goods, and to summarize how these issues are being managed through the NAFTA or other processes.
This section describes the range of laws, regulations, and physical constraints that goods crossing a border from one NAFTA country to another must meet.
Cross border trade is limited to ports of entry. Customs processing, inspection by one or more regulatory agencies, and the physical transit of goods occurs at these ports. The border between United States and Canada has 75 roadway and railway ports of entry, while Mexico and the United States have 22 such ports. Goods also enter though seaports in each country. A majority of NAFTA cross-border trade travels by truck. For Mexico and the United States, this accounts for about 80 percent of goods trade, for the U.S. and Canada it is approximately 68 percent.
The same types of entry processing occur at land and sea ports; however, there are important differences in the nature of trade in each. Goods transiting through land ports are overwhelmingly trade originating or destined for a NAFTA country, while at seaports the origin and destination of trade is much more diverse. Land ports also process very large numbers of people each day. While this activity is beyond the scope of this exercise, it has a major influence on the operation of land ports.
As the following table shows, border crossings by commercial vehicles (trucks and buses) which have been most directly affected by NAFTA provisions, have increased substantially since 1993, with a 37 percent increase between the United States and Canada and a 68 percent increase between the United States and Mexico. Crossing by pedestrians and private vehicles, which were by and large unaffected by NAFTA provisions, declined slightly overall.
Substantial enhancements to border infrastructure are underway. For the U.S.-Mexico border, three new bridges are under construction. This includes Los Tomates-Matamoros III, with a scheduled opening date of April 30, 1999; Eagle Pass- Las Piedras Negras II, scheduled to open in July 1999, and Laredo IV-Nuevo Laredo III, scheduled to open in early 2000. There are also plans to expand the San Ysidro-Tijuana border crossing and to install a dedicated Commuter Lane there. The Port of Brownsville obtained a Presidential Permits in 1997, and there is interest in another rail bridge at Laredo. The U.S. inspection agencies have come to an agreement in principle on an Anzalduas bridge, but no Presidential Permit has yet been issued.
Along the Canada- US border, several bilateral initiatives are underway. Joint construction of border facilities can also increase the efficiency of border processing, as has been demonstrated by the Canada- U.S. customs and immigration facility at Coutts, Alberta-Sweetgrass, Montana, which is expected to be completed in Spring 2002. There are five other joint/shared facilities slated for completion by Fall 2003. A commercial vehicle staging area on the Canadian side of the Fort Erie/Buffalo border crossing will reduce congestion by removing trucks from the Peace Bridge while their documents undergo initial review.
Border Crossing Statistics (This link opens a new window)
Source: U.S. Customs. Data for fiscal years (October-September)
Coordination and consultation on matters related to bridges and border crossings are the responsibility of the State Department in the United States. These agencies take the lead in coordinating the participation of other federal agencies, state and local government, and the private sector. Twice-yearly interagency Binational Group on Bridges and Border Crossings meetings are held with the Mexican government. Representatives for State, Commerce, the United States Department of Agriculture (USDA), the Environmental Protection Agency (EPA), Customs, the Government Services Administration (GSA), the Immigration and Naturalization Service (INS) and the U.S. Department of Transportation (DOT) attend for the United States. Canadian officials from the Departments of Revenue Canada, the Department of Foreign Affairs and International Trade (DFAIT), Citizenship & Immigration, Transport and Agriculture Canada also attend these meetings. Border infrastructure planning and resource allocation also has a domestic review process in each country that is largely beyond the scope of this exercise.(1)
International trade in goods begins not at the border but at factories, farms, forests, fisheries and mines. Facilitation of trade should begin here as well. As the NAFTA recognizes, each Party may adopt, maintain or apply measures related to safety, protection of human, animal or plant health, the environment and consumers. This includes the ability to ensure that goods entering its territory comply with such measures. Without reducing levels of safety or protection, the goal of the NAFTA is to make standards-related measures compatible, to the greatest extent possible, to facilitate trade in goods. A number of working groups, committees and subcommittees are addressing these issues and facilitate cross-border trade in goods. A summary of the activities of each follows:
Its mandate is to review the operation of agricultural grade and quality standards as they affect trade and resolve issues that may arise regarding the generation of these standards. It has conducted several workshops with industry on standards systems. All three countries now make information on agricultural product standards or regulations available through their agencies' Websites.
(SPS Committee): This committee exchanged information and facilitated site visits by plant and animal health officials to address issues of pest free zones, proposed work to recognize broader disease-free areas in the US-Mexico border region and to apply the regionalization concept to pork, poultry and wheat, and established formal relationships with and coordinates the work of six Technical Working Groups (TWGs) (see below). It is also considering a range of bilateral issues (e.g., Mexican seed-potato imports from Canada, Florida inspection regulations, access for Mexican avocados to the U.S., and access to the U.S. and Canada for Mexican pork and poultry). The committee has also contributed to solving or improving access conditions in NAFTA countries, and serves as a forum for exploring NAFTA coordination in other fora (e.g., WTO, FTAA).
Current priorities for this committee include:
Under the aegis of the SPS Committee, eight working groups are currently active. They cover animal health; plant health; dairy, fruit, vegetables and processed food; meat, poultry and egg inspection; fish and fish products; food additives and contaminants and veterinary drugs and feeds and pesticides.
The TWGs have met regularly and served as useful fora for resolving a variety of issues. For example, collaboration on labeling policy has promoted a common NAFTA position in CODEX Committees; meat, poultry and egg sector issues have been resolved through discussions on certificates and inspection procedures, product sampling, testing and follow-up. The TWGs have resolved such bilateral market access issues as avocadoes and pork. The TWGs have also discussed more general issues such as HACCP implementation and harmonization/equivalency.
(CSRM): The CSRM monitors the implementation and administration of Chapter Nine (Technical Barriers to Trade), including the progress of the subcommittees and working groups. In general, the CSRM facilitates the process by which the Parties make compatible their standards-related measures; provides a forum for consultations; enhances cooperation on the development, application and enforcement of standards-related measures; and considers non-governmental, regional and international developments regarding standards-related measures.
The Committee meets at least once a year and reports annually to the NAFTA Free Trade Commission. Current priorities include discussion of conformity assessment measures and explore methods to streamline the procedures and reduce the costs associated with demonstrating product conformity.
There are four subcommittees which report to the CSRM. The Land Transportation Standards Sub-Committee has as its mandate to make more compatible the Parties' relevant standards-related measures on bus, truck and rail operations, and transportation of dangerous goods, as outlined in Annex 913.5.a-1. To accomplish this task, the LTSS has created working groups on Driver and Vehicles Standards, Vehicle Weights & Dimensions, Traffic Control Devices, Rail Safety and Dangerous Goods/Hazardous Materials Transportation. Achievements to date include:
Another arm of the CSRM is the Telecommunications Standards Sub-Committee (TSSC). It has, to date:
Current TSSC priorities include:
The Automotive Standards Council also reports to the CSRM. Its priorities for 1999 are to:
The final CSRM Sub-Committee covers Labelling of Textile and Apparel Goods. Its mandate is to develop and pursue a work program on the harmonization of labeling requirements to facilitate trade in textile and apparel goods between the Parties through the adoption of uniform labeling provisions. To date, significant progress in moving towards common, symbol-based North American care-labeling System.
In addition to standards for goods, regulatory regimes exist for the vehicles which transport those goods. Many of these issues are within the jurisdiction of the trilateral Transportation Consultative Group was created in 1994 to address operational issues that are outside the standards-related mandate of the NAFTA Land Transportation Standards Subcommittee. There are five working groups that meet at least yearly and hold an annual plenary session.
A separate consultative group on border operations and facilitation, not created by the NAFTA but established by the countries' transport ministries, includes various federal and sub-federal agencies which examine the regulations governing motor carriers, taxation, insurance, bills of lading, statistical information, infrastructure planning, border agency coordination, and manner other issues directly affecting the operation of trucks, rail and buses in the border regions.
A third set of cross-border issues revolve around the inspection of goods, documents and conveyances in order to allow goods to physically cross the border. Such activity occurs in the infrastructure described at the outset of this report, but while this "hardware" provides the setting for much of the inspection activity, a variety of federal, state and local agencies provide a complex set of "software" that does the actual processing.
A substantial difference between the entry procedures of Mexico on the one hand, and the United States and Canada on the other is the ability to release goods at the border separately from the completion of the necessary paperwork and fee matters. The United States and Canada use a system of bonds and securities which allow goods to be released at the border and settlement of any additional information, duties and taxes required to occur later. Mexico does not use a bonding system, by and large, so all formalities must be completed before goods are released.
The processing of goods at ports of entry is performed by the three Customs services. For the United States, U.S. Customs reviews documentation and examines goods on behalf of all Federal regulatory agencies (current for 45-55 agencies and covering over 400 regulations) to ensure merchandise meets all requirements for admission and does not contain hidden narcotics, other contraband or prohibited merchandise. For Canada, a similar structure is in place where Revenue Canada, who is responsible for the Customs and Trade Administration function, ensures compliance with some 60 Acts ranging from health and safety concerns to statistical gathering. Other government agencies for which the border is a major concern includes Canadian Immigration, Agriculture, Health and policing agencies with respect to contraband concerns.
At most ports on the U.S.-Mexico border and at a few U.S.-Canada ports, Animal and Plant Health Inspection Service (APHIS) personnel are present to inspect agricultural products. Entry of cattle, horse, birds and certain other animals is limited only to ports with APHIS staff. Representative of some U.S. state agriculture agencies maintain a presence adjacent to Customs facilities. Agricultural products entering Canada may be inspected by officials from the Canadian Food Inspection Agency to determine that these products meet Canadian phyto-sanitary and sanitary requirements.
In the U.S., the Federal Highway Administration inspectors perform targeted truck safety inspections at or near U.S.-Mexico ports of entry; sometimes this occurs within U.S. Customs Service import lots. State transportation agencies also maintain a presence at ports to enforce state regulations. In Canada, inspections are done at the provincial and municipal level.
Most ports of entry have on-site immigration officials. For the United States, Immigration and Naturalization (INS) officials are cross-trained with Customs staff on the initial regulatory requirements for entry into the U.S.
A great deal is involved in processing the entry of goods in addition to that done at ports of entry. Through the NAFTA and other initiatives a number of bilateral and trilateral efforts are underway to address these matters. A short status report on each follows.
The NAFTA put into place comprehensive, and often complex, rules of origin to determine which goods are eligible for NAFTA tariff preferences and other benefits of the agreement. The work group's mandate is to ensure consistent application of the rules governing trade in goods and to revise the rules when all three parties agree. There is substantial opportunity to simplify administration of the rules, clarify regulations, resolve problems, and in some cases liberalize rules, especially where subsequent trade liberalization has occurred on a multilateral basis. To date, the NAFTA process has implemented significantly simplified and liberalized rules for chemical products and two sets of technical rectifications to conform the rules to changes in the tariff schedules and is close to agreeing to a third set of rectifications which would include changing references to tariff items in the rules of origin from a country specific to a generic format.
Created to harmonize customs procedures, the group resolves tariff classification issues, sets out principles and increases transparency for audits, and is exploring simplification for the NAFTA certificate of origin.
Outside the NAFTA, a trilateral Heads of Customs Conference meets regularly. Some of its initiatives have been to create working groups on: enforcement, automation, and laboratory methods. Other achievements include a trilateral web-site and coordinated compliance seminars for the public. Work in progress includes a prototype for a new express air courier system and a common electronic entry "document."
On a bilateral basis, the United States and Canada have plans to reduce the number of customs stops for in-transit cargo from four to two. This will eliminate some 300,000 processing stops annually on the New York State-Ontario-Michigan alone saving truckers millions of dollars without compromising border security. Dialogue continues of the use of transponders in the import process to arriving goods from Canada entering the U.S.
While the focus of Article 316.3 is on the trade in goods at the border, the NAFTA does contain provision on the temporary entry of business persons. The NAFTA Temporary Entry Working Group was established under Chapter 16 to consider implementation of temporary entry provisions, to develop measures to further facilitate temporary entry of business persons on a reciprocal basis, and other proposed modifications or additions to Chapter 16.
Achievements of this working group to date include:
Several Bilateral efforts are also underway:
There are other activities underway that do not fall into the headings discussed above, but which have a beneficial impact on trade in goods at the border.
Trilateral government and industry advisory committee reached agreement on a recommendation for establishing a private commercial dispute resolution mechanism. The initial focus will be on perishable fruits and vegetables. Industry groups from the three NAFTA countries are currently developing specific procedures and a business plan for a privately run dispute settlement mechanism.
1. For the United States, the process begins each year when inspection agencies (Customs, Immigration, USDA) determine a "top ten" list of border station projects to assist the General Services Administration (GSA) in planning its annual capital investment program. The lists include new construction, expansion and major alterations on GSA-controlled border stations. Once a project is on the list, it will remain there until the project is submitted to the U.S. Congress for authorization and funding. It is difficult to give a single estimate for the time line for such projects, but they are measured in years.