TAC Program - Making Trade Agreements Work for You!

Chapter Twelve (Trade in Services) of the North American Free Trade Agreement (NAFTA) establishes principles that are designed to ensure that cross-border trade in services among the three Parties to the NAFTA - Canada, Mexico and the United States - is conducted in a non-discriminatory manner. The principles apply to the provision of services from one NAFTA country to another, within a NAFTA country by an individual provider from another NAFTA country, or the consumption of services in one NAFTA country by consumers from another NAFTA partner. Each Party was allowed to maintain measures that do not conform to the principles set forth in the Chapter, which are specified in Annexes to the NAFTA.

The NAFTA entered into force on January 1, 1994. It has no expiration date.

The three NAFTA countries are also Parties to the General Agreement on Trade in Services of the World Trade Organization (WTO), which entered into force on January 1, 1995, and which provides a process for the progressive removal of restrictions on international services trade.

Who benefits from Chapter Twelve of the NAFTA?

Any company or individual in the United States interested in providing a service to a consumer in (or from) another NAFTA country can benefit from the principles that have been established in Chapter Twelve of the NAFTA.

How can Chapter Twelve of the NAFTA help my company?

Coverage

Chapter Twelve of the NAFTA covers virtually all services except international air transportation and related services. It excludes financial services, which are covered in Chapter Fourteen. It also excludes the procurement of services by governments or state enterprises, which is covered in Chapter Ten. Key sectors covered in Chapter Twelve include: accounting, advertising, architecture, broadcasting, commercial education, construction, consulting, engineering, environmental services, health care management, legal services, land transportation, publishing, telecommunications (also covered in Chapter Thirteen) and tourism.

The Three Principles

Canada, Mexico and the United States, the three Parties to the NAFTA, agreed in Chapter Twelve to apply the following principles to their services trade:

National Treatment. Each NAFTA Party agreed to accord the service providers of the other Parties treatment that is no less favorable than the treatment that it provides, in like circumstances, to its own service providers.

Most Favored Nation (MFN) Treatment. Each NAFTA Party agreed to accord the service providers of the other Parties treatment that is no less favorable than the treatment that it accords, in like circumstances, to the service providers of any other country.

Local Presence. No Party may require a service provider of another Party to establish or maintain a representative office or other presence, or to be resident in its territory, as a condition for the provision of a service.

Reservations

In Chapter Twelve, the Parties negotiated to retain certain limited measures that did not conform to the three principles described above. These "non-conforming" measures were specified in Schedules in Annex I to the NAFTA. State and provincial "non-conforming" measures that were in effect when the NAFTA was concluded were also bound and specified in Annex I.

In addition, Annex II specified certain limited sectors, sub-sectors and activities for which Parties may retain or adopt new or more restrictive non-conforming measures.

Quantitative restrictions - defined for the purposes of Chapter Twelve as non-discriminatory measures such as quotas that limit the number of service providers or the operations of a service provider - may also be maintained by the central, state and provincial governments of the Parties. These are specified in Annex V.

Licensing Requirements

Chapter Twelve states that each Party shall endeavor to ensure that its requirements for licensing and certifying nationals of the other Parties do not constitute unnecessary barriers to trade. Requirements should be based on objective and transparent criteria, such as competence and ability to perform a service, and they should not be more burdensome than necessary to ensure the quality of the service. Chapter Twelve describes steps to be taken by the Parties to develop mutually acceptable professional standards, and contains specific provisions relating to legal, engineering and bus and truck transportation services.

Liberalization

In Annex VI to the NAFTA, each Party set forth its commitments to liberalize quantitative restrictions, licensing requirements, performance requirements and other non-discriminatory measures The NAFTA Parties also committed to consult periodically regarding further liberalization of the non-conforming measures on which they invoked reservations in Chapter Twelve.

Can the U.S. Government help me if I have a problem?

Yes. If you believe, in the course of conducting business with Canada or Mexico, that the Canadian or Mexican government has failed to comply with the provisions of Chapter Twelve of the NAFTA regarding trade in services, contact the Office of Trade Agreements Negotiations and Compliance's hotline at the U.S. Department of Commerce. The Center can help you understand your rights and the other NAFTA countries' obligations under Chapter Twelve, and it can alert the relevant U.S. Government officials to help you resolve your problem. The U.S. Government can, if appropriate, raise the particular facts of your situation with Canadian or Mexican authorities and ask them to review the matter.

How can I get more information?

The complete text of Chapter Twelve (Cross-Border Trade in Services) of the NAFTA is available on the Office of Trade Agreements Negotiations and Compliance's web site.

If you have questions about Chapter Twelve or how to use it, you can e-mail the Office of Trade Agreements Negotiations and Compliance (TANC), which will forward your message to the Commerce Department's Designated Monitoring Officer for this NAFTA Chapter. You can also contact the Designated Monitoring Officer at the following address:

Designated Monitoring Officer -

NAFTA Chapter 12 (Trade in Services)

Office of North and Central America and the Caribbean
U.S. Department of Commerce

14th Street & Constitution Avenue, N.W.

Washington, D.C. 20230

Phone: (202)-482-5405

Fax: (202) 482 - 5865

The Designated Monitoring Officer can also provide you with useful trade leads and contacts.

Other useful information is available on:

The NAFTA Facts web site of the Office of NAFTA and Inter-American Affairs at the U.S. Department of Commerce, which contains documents and background information on the NAFTA and on doing business in Canada and Mexico.

TANC offers these agreements electronically as a public service for general reference. Every effort has been made to ensure that the text presented is complete and accurate. However, copies needed for legal purposes should be obtained from official archives maintained by the appropriate agency.


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