14 in addition the united states maintains several

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14 In addition, the United States maintains several sets of preferential rules under free-trade agreements (FTAs) and unilateral tariff concessions (Table AIII.1); these rules are based on the principle of substantial transformation, implying a combination of local-content criteria, a tariff-shift system, or specific requirements applicable to a given product or group of products. 3. Under NAFTA rules of origin, detailed regulations for goods that are not wholly obtained from the NAFTA region are based on a combination of a tariff-shift method or regional value-content method. In general, a good incorporating non-originating materials originates in the NAFTA territory if each of these components undergoes an applicable change in tariff classification, specified for each good in an annex of 168 pages (Annex 401). For textiles and clothing the "yarn forward" determines in most cases that the only textiles and clothing items to fully benefit from the free trade between the signatories are items produced from inputs originating in the respective FTA partner, starting with yarn/fibre and including all transformations (Table AIII.1). 4. The NAFTA also introduced stricter rules of origin in the automotive sector. While under the Auto Pact and the former U.S.-Canada FTA, duty-free trade between participants was contingent on a 50% U.S. or Canadian content, the threshold under the NAFTA increased to 56% on 1 January 1998 and to 62.5% on 1 January 2002 for passenger cars, light trucks, small buses (transport of 15 or fewer persons), their engines and transmissions. The corresponding level for heavy-duty vehicles, large buses and all other parts is 60% since 1 January 2002. Thus, companies operating in Canada or Mexico are required to meet these increased regional content levels in order to export to the United States at preferential rates of duty. 5. On 1 January 2003, following requests from industry, the United States together with Canada and Mexico implemented measures to liberalize the NAFTA rules of origin applicable to alcoholic beverages, crude petroleum, esters of glycerol, pearl jewellery, headphones with microphones, chassis fitted with engines, and photocopiers. 15 13 These are described in detail in U.S. Customs and Border Protection (1998). 14 See U.S. Customs and Border Protection (2000).
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WT/TPR/S/126 Trade Policy Review Page 39 6. The Generalized System of Preferences (GSP) rules of origin generally require substantial transformation with a 35% regional-value content requirement. The rules of origin adopted under the CBERA and ATPA programmes are based on the GSP rules. Special rules of origin have been adopted under the AGOA and CBTPA programmes for clothing products, reflecting the fact that these products are granted duty-free access subject to requirements on the origin of the yarn and the fabric (see Chapter IV(3)(iii)). On 11 January 2002, India requested consultations with the United States in respect of its rules of origin applicable to imports of textiles and apparel products. A panel was established and it found in favour of the United States; the panel report was adopted in July 2003.
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