150  /

International Trade and Customs—Continued

North American Free Trade Agreement (NAFTA)

The NAFTA has been in effect since January 1994 and is the world’s largest free trade area.  

One of the principal purposes of the NAFTA is to eliminate barriers to trade and facilitate the

cross-border movement of goods and services throughout the free trade area.

In order to be considered originating under the NAFTA, all goods must be either wholly

produced or manufactured in Canada, Mexico or the United States, or they must meet the 

Specific Rules of Origin of Annex 401 of the NAFTA. The Specific Rules of Origin require either

a tariff classification change (non-originating goods undergo sufficient processing to change

the classification), the application of a regional value content costing methodology, or both. A

NAFTA Certificate of Origin must be provided by the vendor, producer or exporter of the goods

verifying they meet the specific rule of origin requirements and qualify as originating under the

NAFTA before the goods can move into another NAFTA country under the preferential duty

rates.

Other Free Trade Agreements 

The Government of Canada has embarked on an aggressive trade negotiation agenda with 

many of Canada’s trading partners. As a result, goods shipped directly to Canada from certain

countries may be entitled to benefit from lower or “free” duty rates.

In addition to the NAFTA, Canada also has trade agreements in place with Chile, Columbia,

Costa Rica, Israel, Peru, Panama, Jordan and the European Free Trade Association which

includes the countries Iceland, Liechtenstein, Norway and Switzerland.  Trade agreements 

have also been signed with Honduras, but will not be implemented until legislation has been 

passed. The Canadian Government is also currently conducting trade negotiations with 13

additional countries and trading blocs.

Similar to the NAFTA, under these other free trade agreements, the exporter or producer of

the goods must provide the Canadian importer with a Certificate of Origin certifying that the

imported goods meet the specific rule of origin requirement for that product.

Current as of June 30, 2013

© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms

affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.