(h) measures by Canada respecting preferential rates for

goods originating in certain Canadian provinces under

the existing provisions of Maritime Freight Rate Act,

R.S.C. 1985, c. M-1, as amended;

(i) Canadian excise taxes on absolute alcohol used in

manufacturing under the existing provisions of Excise

Tax Act, R.S.C. 1985, c. E-15, as amended;

(j) except as provided for in Chapter Seven (Agriculture),

import restrictions imposed under Section 5(1)(b) and

(d) of the Export and Import Permits Act, R.S.C. 1985,

c. E-19, as amended, as of January 1, 1994, that are in

accordance with the provisions of Article XI:2(c)(i) of

the GATT; and

(k) quantitative import restrictions on goods that

originate in the territory of the United States,

considering operations performed in, or materials

obtained from, Mexico as if they were performed in, or

obtained from, a non-Party, and that are indicated by

asterisks in Chapter 89 in Annex 401.2 (Tariff Schedule

of Canada) of the Canada - United States Free Trade

Agreement for as long as the measures taken under the

Merchant Marine Act of 1920, (46 U.S.C. App. 883) and

the Merchant Marine Act of 1936, (46 U.S.C. App. 1171,

1176, 1241 and 1241o) apply with quantitative effect to

comparable Canadian origin goods sold or offered for

sale into the United States market.

2. Notwithstanding any provision of this Agreement, any measure

related to the internal sale and distribution of wine and

distilled spirits, other than those covered by Article 313

(Blending Requirements) or Article 314 (Distinctive Products)

shall, as between Canada and the United States, be governed under

this Agreement exclusively in accordance with the relevant

provisions of the Canada - United States Free Trade Agreement

which for this purpose are hereby incorporated into this

Agreement.

3. In respect of any measure related to the internal sale and

distribution of wine and distilled spirits, the provisions of

Articles 301 and 309 shall not apply as between Canada and Mexico

to:

(a) a non-conforming provision of any existing measure;

(b) the continuation or prompt renewal of a non-conforming

provision of any existing measure;

(c) an amendment to a non-conforming provision of any

existing measure to the extent the amendment does not

decrease its conformity with the provisions of Article

301 or 309; or

(d) measures set out in paragraphs 4 and 5.

4. Further to paragraph 3(d):

(a) automatic listing measures in the province of British

Columbia may be maintained provided they apply only to

existing estate wineries producing less than 30,000

gallons of wine annually and meeting the existing

content rule;

(b) Canada may

(i) adopt or maintain a measure limiting on-premise

sales by a winery or distillery to those wines or

distilled spirits produced on its premises, and

(ii) maintain a measure requiring existing private wine

store outlets in the provinces of Ontario and

British Columbia to discriminate in favor of wine

of those provinces to a degree no greater than the

discrimination required by such existing measure;

and

(c) nothing in this Agreement shall prohibit the Province

of Quebec from requiring that any wine sold in grocery

stores in Quebec be bottled in Quebec, provided that

alternative outlets are provided in Quebec for the sale

of wine of the other Parties, whether or not such wine

is bottled in Quebec.

5. As between Canada and Mexico:

(a) any measure related to listing of wine and distilled

spirits of the other Party shall

(i) conform with Article 301,

(ii) be transparent, non-discriminatory and provide for

prompt decision on any listing application, prompt

written notification of such decision to the

applicant, and in the case of a negative decision,

provide for a statement of the reason for refusal,

(iii) establish administrative appeal procedures

for listing decisions that provide for

prompt, fair and objective rulings,

(iv) be based on normal commercial considerations,

(v) not create disguised barriers to trade, and

(vi) be published and made generally available to

persons of Mexico;

(b) where the distributor is a public entity, the entity

may charge the actual cost-of-service differential

between wine and distilled spirits of the other Party

and domestic wine and distilled spirits. Any such

differential shall not exceed the actual amount by

which the audited cost-of-service for the wine or

distilled spirits of the exporting party exceeds the

audited cost-of-service for the wine and distilled

spirits of the importing party;

(c) notwithstanding Articles 301 and 309, Article I

(Definitions), Article IV.3 (Wine), and Annexes A, B

and C of the Agreement between Canada and the European

Economic Community Concerning Trade and Commerce in

Alcoholic Beverages dated February 28, 1989 shall apply

with such modifications as may be necessary as between

Canada and Mexico;

(d) all discriminatory mark-ups on distilled spirits shall

be eliminated immediately upon the date of entry into

force of this Agreement. Cost-of-service differential

mark-ups as described in subparagraph (b) shall be

permitted;

(e) any other discriminatory pricing measure shall be

eliminated upon the date of entry into force of this Agreement;

(f) any measure related to distribution of wine or

distilled spirits of the other Party shall conform with

Article 301; and

(g) unless otherwise specifically provided in this Annex,

the Parties retain their rights and obligations under

the GATT and agreements negotiated under the GATT.

(The intention of paragraphs 3, 4, and 5 is to

grant Mexico the same concessions granted to the

U.S. under the Canada - United States Free Trade

Agreement respecting wine and distilled spirits.)

=============================================================================

Section B - Mexican Measures

1. Articles 301 and 309 shall not apply to:

(a) controls by Mexico on the export of logs of all

species;

(b) measures under the existing provisions of Articles 192

through 194 of the General Ways of Communication Act

("Ley de Vias Generales de Comunicación") reserving

exclusively to Mexican vessels all services and

operations not authorized for foreign vessels and

empowering the Mexican Ministry of Communications and

Transportation to deny foreign vessels the right to

perform authorized services if their country of origin

does not grant reciprocal rights to Mexican vessels;

(c) measures taken in accordance with Annex 300-A (Trade in

Automotive Goods) and measures taken in accordance with

existing provisions of Articles 1, 4 and 5 of the

Mexican Foreign Trade Act ("Ley Reglamentaria del

Artículo 131 de la Constitución Política de los Estados

Unidos Mexicanos en Materia de Comercio Exterior") with

respect to automotive goods referred to in Annex 300-A

(Trade in Automotive Goods);

(d) measures taken in accordance with Sections 3 (Import

and Export Restrictions), 5 (Bilateral Emergency

Actions-Quantitative Restrictions), 6 (Rules of

Origin), and 8 (Trade in Worn Clothing) of Annex 300-B

(Textile and Apparel Goods) and measures taken in

accordance with existing provisions of Articles 1, 4

and 5 of the Mexican Foreign Trade Act ("Ley

Reglamentaria del Artículo 131 de la Constitución

Política de los Estados Unidos Mexicanos en Materia de

Comercio Exterior") with respect to textile and apparel

goods referred to in Annex 300-B;

(e) measures taken in accordance with Articles 703 (Market

Access) and Annex (permits for Dairy, Poultry and

Eggs) of Chapter Seven (Agriculture) and measures taken

in accordance with existing provisions of Articles 1, 4

and 5 of the Mexican Foreign Trade Act ("Ley

Reglamentaria del Artículo 131 de la Constitución

Política de los Estados Unidos Mexicanos en Materia de

Comercio Exterior") with respect to agricultural goods

referred to in Chapter Seven;

(f) measures covered by Chapter Six (Energy) and measures

taken in accordance with existing provisions of

Articles 1, 4 and 5 of the Mexican Foreign Trade Act

("Ley Reglamentaria del Artículo 131 de la Constitución

Política de los Estados Unidos Mexicanos en Materia de

Comercio Exterior") with respect to energy and basic

petrochemical goods referred to in Chapter 6;

(g) export permit measures taken in accordance with

existing provisions of Articles 1, 4 and 5 of the

Mexican Foreign Trade Act ("Ley Reglamentaria del

Artículo 131 de la Constitución Política de los Estados

Unidos Mexicanos en Materia de Comercio Exterior") with

respect to goods subject to quantitative restrictions,

tariff rate quotas or tariff preference levels adopted

or maintained by another Party; and

(h) with respect to existing provisions, the continuation

or prompt renewal of a non-conforming provision of any

of the above provisions or an amendment to a non-

conforming provision of any of the above provisions to

the extent that the amendment does not decrease its

conformity with the provisions of Articles 301 and 309.

2. Notwithstanding Article 309, and without prejudice to other

rights and obligations under this Agreement concerning import and

export restrictions, for the first 10 years after the date of

entry into force of this Agreement, Mexico may require permits

for the importation of used goods provided for in the following

existing items in the Tariff Schedule of the General Import Duty

Act ("Tarifa de la Ley del Impuesto General de Importación").

For purposes of reference, the goods covered by those items are

broadly identified next to the corresponding item.

Item Description

8407.3499 Gasoline engines of more than 1,000 cm3, except

for motorcycles.

8413.11.01 Pumps fitted with a measuring device even if

it includes a totalizing mechanism.

8413.40.01 Concrete pumps for liquids, not fitted with a

measuring device from 36 up to 60 m3/hr

capacity.

8426.12.01 Mobile lifting frames on tires and straddle carriers.

8426.19.01 Other (overhead travelling cranes,

transporter cranes, gantry cranes, bridge

cranes, mobile lifting frames and straddle

carriers.

8426.30.01 Portal or pedestal jib cranes.

8426.41.01 Derricks, cranes and other lifting machinery

on tires, self-propelled with mechanical

working and carrying capacity less than 55

tons.

8426.41.02 Derricks, cranes and other lifting machinery

on tires, self-propelled with hydraulic

working and carrying capacity more than 9.9

up to 30 tons.

8426.41.99 Other (Machinery, self propelled, on tires.)

8426.49.01 Derricks, cranes and other lifting machinery

(other than on tires), self-propelled with

mechanical working and carrying capacity less

than 55 tons.

8426.49.02 Derricks, cranes sand other lifting machinery

(other than on tires), self-propelled with

hydraulic working and carrying capacity more

than 9.9 up to 30 tons.

8426.91.01 Derricks, cranes and other lifting machinery

except items 8426.91.02, 03 and 04.

8426.91.02 Derricks, cranes and other lifting machinery

for mounting on road vehicles, with

hydraulical working and carrying capacity up

to 9.9 tons.

8426.91.03 Derricks, cranes and other lifting machinery

(basket type) for mounting on road vehicles,

with carrying capacity up to 1 ton and 15

meters lift.

8426.91.99 Other (machinery designed for mounting on

road vehicles).

8426.99.01 Derricks, cranes and other lifting machinery

except items 8426.91.02

8426.99.02 Swivel cranes.

8426.99.99 Other (derricks; cranes, including cable

cranes; mobile lifting frames, straddle

carriers and works trucks fitted with a

crane).

8427.10.01 Self-propelled work trucks powered by an

electric motor, carrying capacity 3.5 tons.

8427.20.01 Other self-propelled trucks with combustion

piston engines, carrying capacity up to 7

tons.

8428.40.99 Other (escalators and moving walkways).

8428.90.99 Other (continuous-action elevators and

conveyors, for goods or materials).

8429.11.01 Self-propelled bulldozers and angledozers,

for track laying.

8429.19.01 Other (bulldozers and angledozers).

8429.20.01 Self-propelled graders and levelers.

8429.30.01 Self-propelled scrapers.

8429.40.01 Self-propelled tamping machines and road

rollers.

8429.51.02 Self-propelled front-end shovel loaders,

wheel-type, less than 335 HP.

8429.51.03 Self-propelled front-end shovel loaders,

wheel-type, other than item 8429.51.01.

8429.51.99 Other (mechanical shovels, excavators and

shovel loaders).

8429.52.02 Self-propelled backhoes, shovels, clamshells

and draglines, other than 8429.52.01.

8429.52.99 Other (machinery with a 360 revolving

superstructure).

8429.59.01 Excavators.

8429.59.02 Track laying draglines, carrying capacity up

to 4 tons.

8429.59.03 Track laying draglines, other than item

8429.59.04.

8429.59.99 Other (self-propelled bulldozers,

angledozers, graders, levellers, scrapers,

mechanical shovels, excavators, shovel

loaders, tamping machines and road rollers).

8430.31.01 Self-propelled tunneling machinery.

8430.31.99 Other (self-propelled coal or rock cutters

and tunnelling machinery).

8430.39.01 Sinking or boring shields.

8430.39.99 Other (coal or rock cutters and tunnelling

machinery).

8430.41.01 Self-propelled boring or sinking machinery,

other than item 8430.41.02.

8430.41.99 Other (self-propelled boring or sinking

machinery).

8430.49.99 Other (boring or sinking machinery).

8430.50.01 Self-propelled peat excavators, with frontal

carriers and hydraulic mechanism less than

335 hp capacity.

8430.50.02 Scrapers.

8430.50.99 Other (machinery self-propelled).

8430.61.01 Tamping machinery, not self-propelled.

8430.61.02 Compacting machinery, not self-propelled.

8430.61.99 Other (machinery, not self-propelled).

8430.62.01 Scarificationer machine.

8430.69.01 Threshers or scrapers machine.

8430.69.02 Trencher machine, other than 8430.69.03.

8430.69.99 Other (moving, grading, levelling, scraping,

excavating, tamping, compacting, extracting

or boring machinery).

8452.10.01 Sewing machines of the household type.

8452.21.04 Industrial machines, other than 845221.02, 03

and 05.

8452.21.99 Other (automatic sewing machines).

8452.29.05 Pending

8452.29.06 Industrial machines, other than 84522901, 03

and 05.

8452.29.99 Other (sewing machines).

8452.90.99 Other (parts of sewing machines).

8471.10.01 Analog or hybrid automatic data processing

machines.

8471.20.01 Digital automatic data processing machines,

containing in the same housing at least a

central processing unit and an input and

output unit, whether or not combined.

8471.91.01 Numerical or digital units entered with the

rest of a system, which may contain in the

housing one or two of the following types of

units: storage units, input units, output

unit.

8471.92.99 Other (input or output units whether or not

entered with the rest of a system and whether

or not containing storage units in the same

housing).

8471.93.01 Storage units, including the rest of the

system.

8471.99.01 Other (automatic data processing machines and

units thereof).

8474.20.02 Crushing jawbone and grinding millstone.

8474.20.05 Drawer cone crushing, with diameter no more

than 1200 millimeters.

8474.20.06 Grinding hammer percussion.

8701.30.01 Track-laying tractors with a net engine power

more than 105 h.p. but less than 380 h.p.

including pushing blade.

8701.90.02 Rail road tractors, on tires with mechanical

mechanism for pavement.

8474.20.01 Crushing and grinding with two or more

cylinders.

8474.20.03 Blades crushing machines.

8474.20.04 Blades XXX

8474.20.99 Other (crushing or grinding machines).

8474.39.99 Other (mixing machines).

8474.80.99 Other (kneading machines).

8475.10.01 Machines for assembling electric or

electronic lamps, tubes.

8477.10.01 Injection-molding machines for working rubber

or plastics, up to 5 kg capacity for one

molding model.

8711.10.01 Motorcycles, mopeds and cycles fitted with an

auxiliary motor with reciprocating internal

combustion piston engine not exceeding 50

cm.3.

8711.20.01 Motorcycles, mopeds and cycles fitted with an

auxiliary motor with reciprocating internal

combustion piston engine over 50 cm.3 but not

over 250 cm.3.

8711.30.01 Motorcycles, mopeds and cycles fitted with an

auxiliary motor with reciprocating internal

combustion piston engine over 250 cm.3 but

not over 500 cm.3.

8711.40.01 Motorcycles, mopeds and cycles fitted with an

auxiliary motor with reciprocating internal

combustion piston engine over 500 cm.3 but

less than 550 cm.3.

8711.90.99 Other (motorcycles, mopeds and cycles fitted

with an auxiliary motor without an internal

combustion piston engine, and sidecars which

are not to be used with motocycles and

velocipedes of any kind).

8712.00.02 Bicycles, other than of the type for racing.

8712.00.99 Other (Cycles, not motorized, except

bicycles, and tricycles for the transport of

merchandise).

8716.10.01 Trailers and semi-trailers for housing and

camping, not mechanically propelled.

8716.31.02 Tanker trailers and tanker semi-trailers for

the transport of goods, not mechanically

propelled, of the steel-tank type.

8716.31.99 Other (Tanker trailers and tanker

semi-trailers for the transport of goods, not

mechanically propelled, except of the

steel-tank type, and of the thermal type for

the transportation of milk).

8716.39.01 Trailers and semi-trailers for the transport

of goods, not mechanically propelled, of the

platform type (more detailed description

pending).

8716.39.02 Trailers and semi-trailers for the transport

of vehicles, not mechanically propelled.

8716.39.04 Trailers and semi-trailers for the transport

of goods, not mechanically propelled, of the

modular-platform type (more detailed

description pending).

8716.39.05 Semi-trailers for the transport of goods, not

mechanically propelled, of the low-bed type

(more detailed description pending).

8716.39.06 Trailers and semi-trailers for the transport

of goods, not mechanically propelled, of the

closed-box type, including those for

refrigeration.

8716.39.07 Trailers and semi-trailers for the transport

of goods, not mechanically propelled, of the

steel-tank type.

8716.39.99 Other. (Trailers and semi-trailers for the

transport of goods, not mechanically

propelled, except those referred to in items

87163901, 02, 04, 05, 06 and 07, those with

two levels which are recognizable as intended

for use exclusively in the transportation of

cattle, and carriages with solid rubber

wheels).

8716.40.01 Other trailers and semi-trailers, not

mechanically propelled. (Other than for the

transport of goods).

8716.80.99 Other. (Vehicles not mechanically propelled,

except trailers and semi-trailers,

hand-wagons, and hand-wagons of hydraulic

operation.

3. Notwithstanding Article 309, and without prejudice to other

rights and obligations under this Agreement concerning import and

export restrictions:

(a) for the first five years after the date of entry into

force of this Agreement, Mexico may require permits for

the importation of new automotive goods provided for in

the following existing items in the Tariff Schedule of

the General Import Duty Act ("Tarifa de la Ley del

Impuesto General de Importación"). For purposes of

reference, the goods covered by those items are broadly

identified next to the corresponding item;

Item Description

8701.20.01 Road Tractors for semi-trailers

8702.10.01 Public-transport type passenger vehicles, with

diesel or semi-diesel engine, with body mounted on

a chassis.

8702.10.02 Public-transport type passenger vehicles, with

diesel or semi-diesel engine, with an integral

body.

8702.90.03 Public-transport type passenger vehicles, with

gasoline engine, with an integral body.

8703.10.99 Other special vehicles.

8704.22.99 Motor vehicles for the transport of goods with

diesel engine and capacity of cargo of more than 5

tons but less than 20 tons.

8704.23.99 Motor vehicles for the transport of goods with

diesel engine and capacity of cargo of more than

20 tons.

8704.32.99 Motor vehicles for the transport of goods with

gasoline engine and with capacity of cargo of more

than 5 tons.

8705.20.01 Mobile drilling derricks.

8705.40.01 Concrete mixers.

8706.00.01 Chassis fitted with gasoline engine.

8706.00.99 Other chassis fitted with gasoline engine.

(b) for the first 10 years after the date of entry into

force of this Agreement, Mexico may require permits for

the importation of new automotive goods provided for in

the following existing items in the Tariff Schedule of

the General Import Duty Act ("Tarifa de la Ley del

Impuesto General de Importación"). For purposes of

reference, the goods covered by those items are broadly

identified next to the corresponding item;

Item Description

8407.34.99 Gasoline engines of more than 1,000 cm3, except

for motorcycles.

8702.90.02 Public-transport type passenger vehicles, with

gasoline engine, with body mounted on a chassis.

8703.21.01 Passenger motor vehicles with gasoline engine of

less than or equal to 1,000 cm3.

8703.22.01 Passenger motor vehicles with gasoline engine of

more than 1,000 cm3 but less than 1,500 cm3.

8703.23.01 Passenger motor vehicles with gasoline engine of

more than 1,500 cm3 but less than or equal to

3,000 cm3.

8703.24.01 Passenger motor vehicles with gasoline engine of

more than 3,000 cm3.

8703.31.01 Passenger motor vehicles with diesel engine of

less than or equal to 1,500 cm3.

8703.32.01 Passenger motor vehicles with diesel engine of

more than 1,500 cm3 but less than or equal to

2,500 cm3.

8703.33.01 Passenger motor vehicles with diesel engine of

more than 2,500 cm3.

8703.90.99 Other passenger vehicles.

8704.21.99 Motor vehicles for the transport of goods with

diesel engine and with capacity of cargo of less

than or equal to 5 tons.

8704.31.99 Motor vehicles for the transport of goods with

gasoline engine and with capacity of cargo of less

than or equal to 5 tons.

(c) for the first 25 years after the date of entry into

force of this Agreement, Mexico may require permits for

the importation of used automotive goods provided for

in the following existing items in the Tariff Schedule

of the General Import Duty Act ("Tarifa de la Ley del

Impuesto General de Importación"). As of the 26th year

after the date of entry into force of this Agreement,

Mexico may require permits for the importation of

non-originating automotive goods provided for under

such items. For purposes of reference, the goods

covered by those items are broadly identified next to

the corresponding item.

Item Description

8701.20.01 Road Tractors for semi-trailers

8702.10.01 Public-transport type passenger vehicles, with

diesel or semi-diesel engine, with body mounted on

a chassis.

8702.10.02 Public-transport type passenger vehicles, with

diesel or semi-diesel engine, with an integral

body.

8702.90.01 Trolleys.

8702.90.02 Public-transport type passenger vehicles, with

gasoline engine, with body mounted on a chassis.

8702.90.03 Public-transport type passenger vehicles, with

gasoline engine, with an integral body.

8703.10.01 Special vehicles with electric engine

(snowmobiles, golf cart).

8703.10.99 Other special vehicles.

8703.21.01 Passenger motor vehicles with gasoline engine of

less than or equal to 1,000 cm3.

8703.22.01 Passenger motor vehicles with gasoline engine of

more than 1,000 cm3 but less than 1,500 cm3.

8703.23.01 Passenger motor vehicles with gasoline engine of

more than 1,500 cm3 but less than or equal to

3,000 cm3.

8703.24.01 Passenger motor vehicles with gasoline engine of

more than 3,000 cm3.

8703.31.01 Passenger motor vehicles with diesel engine of

less than or equal to 1,500 cm3.

8703.32.01 Passenger motor vehicles with diesel engine of

more than 1,500 cm3 but less than or equal to

2,500 cm3.

8703.33.01 Passenger motor vehicles with diesel engine of

more than 2,500 cm3.

8703.90.01 Electrical motor cars.

8703.90.99 Other passenger vehicles.

8704.21.99 Motor vehicles for the transport of goods with

diesel engine and with capacity of cargo of less

than or equal to 5 tons.

8704.22.99 Motor vehicles for the transport of goods with

diesel engine and capacity of cargo of more than 5

tons but less than 20 tons.

8704.23.99 Motor vehicles for the transport of goods with

diesel engine and capacity of cargo of more than

20 tons.

8704.31.99 Motor vehicles for the transport of goods with

gasoline engine and with capacity of cargo of less

than or equal to 5 tons.

8704.32.99 Motor vehicles for the transport of goods with

gasoline engine and with capacity of cargo of more

than 5 tons.

8705.10.01 Mobile crane vehicles.

8705.20.01 Mobile drilling derricks.

8705.20.99 Other drilling derricks.

8705.40.01 Concrete mixers.

8705.90.01 Spraying vehicles.

8705.90.99 Other special purpose vehicles.

8706.00.01 Chassis fitted with gasoline engine.

8706.00.99 Other chassis fitted with gasoline engine.

=============================================================================

Section C - United States Measures

Articles 301 and 309 shall not apply to:

(a) controls by the United States on the export of logs of

all species;

(b) taxes on imported perfume containing distilled spirits

under existing provisions of Section 5001(a)(3) and

5007(b)(2) of the Internal Revenue Code of 1986 (26

U.S.C. 5001(a)(3), 5007(b)(2));

(c) measures under existing provisions of section 27 of the

Merchant Marine Act (46 U.S.C. App. 883), the Passenger

Vessel Act of 1920 (46 U.S.C. App. 289), the Merchant

Ship Sales Act of 1946 (46 U.S.C. App. 292, 316, and 46

U.S.C. 12108); and

(d) import restrictions with respect to Canada imposed

under existing provisions of section 22 of the

Agricultural Adjustment Act of 1933 (7 U.S.C. 624).

=============================================================================

ANNEX 302.2

Tariff Elimination

1. Except as otherwise provided in a Party's Schedule attached

to this Annex, the following staging categories apply to the

elimination of customs duties by each Party pursuant to Article

302(2):

(a) duties on goods provided for in the items in staging

category A in a Party's Schedule shall be eliminated

entirely and such goods shall be duty-free, effective

January 1, 1994;

(b) duties on goods provided for in the items in staging

category B in a Party's Schedule shall be removed in 5

equal annual stages commencing on January 1, 1994, and

such goods shall be duty-free, effective January 1,

1998;

(c) duties on goods provided for in the items in staging

category C in a Party's Schedule shall be removed in 10

equal annual stages commencing on January 1, 1994, and

such goods shall be duty-free, effective January 1,

2003;

(d) duties on goods provided for in the items in staging

category C+ in a Party's Schedule shall be removed in

15 equal annual stages commencing on January 1, 1994,

and such goods shall be duty-free, effective January 1,

2008; and

(e) goods provided for in the items in staging category D

in a Party's Schedule shall continue to receive duty-

free treatment.

(other staging categories will be displayed in the

tariff schedules of each Party and may be incorporated

here.)

2. The base rate of duty and staging category for determining

the interim rate of duty at each stage of reduction for an item

are indicated for the item in each Party's Schedule attached to

this Annex. These rates generally reflect the rate of duty in

effect on July 1, 1991, including rates under the U.S.

Generalized System of Preferences and the General Preferential

Tariff of Canada.

3. For the purpose of the elimination of customs duties in

accordance with Article 302, interim staged rates shall be

rounded down, except as set out in each Party's Schedule attached

to this Annex, at least to the nearest tenth of a percentage

point or, if the rate of duty is expressed in monetary units, at

least to the nearest .001 of the official monetary unit of the

Party.

4. Canada shall apply the rate applicable under the staging

category set out for an item in Annex 401.2, as amended, of the

Canada - United States Free Trade Agreement which Annex is hereby

incorporated into and made part of this Agreement, to an

originating good provided that:

(a) notwithstanding any provision in Chapter Four of this

Agreement, in determining whether such good is an

originating good, operations performed in or materials

obtained from Mexico are considered as if they were

performed in or obtained from a non-Party; and

(b) any processing that occurs in Mexico after the good

would qualify as an originating good in accordance with

subparagraph (a) does not increase the transaction

value of the good by greater than seven percent.

5. Canada shall apply the rate applicable under the staging

category set out for an item contained in column I of section A

of this Annex to an originating good provided that:

(a) notwithstanding any provision to the contrary in

Chapter Four, in determining whether such good is an

originating good, operations performed in or materials

obtained from the United States are considered as if

they were performed in or obtained from a non-Party;

and

(b) any processing that occurs in the United States after

the good would qualify as an originating good in

accordance with subparagraph (a) does not increase the

transaction value of the good by greater than seven

percent.

6. Canada shall apply to an originating good to which neither

paragraph 4 nor paragraph 5 applies, the applicable rate

indicated for an item contained in column II, reduced in

accordance with the staging category of column I of section A of

this Annex except as otherwise indicated, or where there is a

letter "X" (to be replaced with descriptive language) in column

II, the applicable rate of duty for the item shall be the higher

of:

(a) the General Preferential Tariff rate of duty for that

item applied on July 1, 1991, reduced in accordance

with the applicable staging category set out for that

item in column I of its Schedule; or

(b) the applicable rate under the staging category for that

item set out in Annex 401.2, as amended, of the Canada -

United States Free Trade Agreement.

7. Paragraphs 4, 5 and 6 shall not apply to goods provided for

under Chapters 50 through 63 of the Harmonized System and to

other goods identified in Appendix 1.1 of Annex 300-B (Textiles

and Apparel Goods).

8. Mexico shall apply the rate applicable under the staging

category set out for an item in column II of section B of this

Annex to an originating good when the good qualifies to be marked

as a good of Canada, pursuant to Annex 312, without regard to

whether the good is marked.

9. Mexico shall apply the rate applicable under the staging

category set out for an item in column I of section B of this

Annex to an originating good when the good qualifies to be marked

as a good of the United States, pursuant to Annex 312, without

regard to whether the good is marked.

10. The United States shall apply the rate applicable under the

staging category set out for an item in Annex 401.2, as amended,

of the Canada - United States Free Trade Agreement to an

originating good when the good qualifies to be marked as a good

of Canada pursuant to Annex 312, without regard to whether the

good is marked.

11. The United States shall apply the rate applicable under the

staging category set out for an item in section C of this Annex

to an originating good when the good qualifies to be marked as a

good of Mexico pursuant to Annex 312, whether or not the good is

marked.

=============================================================================

SECTION A - SCHEDULE OF CANADA

(TARIFF SCHEDULE TO BE ATTACHED)

SECTION B - SCHEDULE OF MEXICO

(TARIFF SCHEDULE TO BE ATTACHED)

SECTION C - SCHEDULE OF THE UNITED STATES

(TARIFF SCHEDULE TO BE ATTACHED)

=============================================================================

ANNEX 303.6

Goods Not Subject to Article 303

1. For exports from the territory of the United States to the

territory of Canada or Mexico, a good, provided for in U.S.

tariff item 1701.11.02, that is imported into the territory of

the United States and used as a material in the production of, or

substituted by an identical or similar good used as a material in

the production of, a good provided for in Canadian tariff item

1701.99.00 or Mexican tariff items 1701.99.01 and 1701.99.99

(refined sugar).