ANNEX 300-A

          Trade and Investment in the Automotive Industry Sector


1.   Except as provided in this Annex, each Party shall apply
this Agreement to automotive goods of another Party and to
enterprises of the automotive industry sector in its territory.

2.   Except as provided in this Annex, each Party shall promptly
accord to existing producers of vehicles in its territory
treatment no less favorable than that it accords, in like
circumstances, to a new producer of vehicles in its territory
regarding measures covered by this Annex.  

3.   The Parties shall review, no later than December 31, 2003,
the status of the North American automotive industry sector and
the effectiveness of the measures contained in this Annex to
determine actions that could be taken to strengthen the
integration and global competitiveness of the industry.

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                            Appendix A: Canada

     Existing Measures

1.   Canada and the United States may maintain the Agreement
Concerning Automotive Products between the Government of Canada
and the Government of the United States of America which entered
into force on September 16, 1966, in accordance with Article
1001, Article 1002(1) and (4) (as they refer to Annex 1002.1,
Part One), Article 1005(1) and (3), and Annex 1002.1, Part One
(Waivers of Customs Duties) of Canada - United States Free Trade
Agreement.

2.   Canada may maintain the measures referred to in Article
1002(1) and (4) (as they refer to Annex 1002.1, Parts Two and
Three), Article 1002(2) and (3), Article 1003, and Annex 1002.1,
Parts Two (Export-Based Waivers of Customs Duties) and Three
(Production-Based Waivers of Customs Duties) of the Canada -
United States Free Trade Agreement.  Canada shall eliminate those
measures in accordance with the terms set out in that agreement.

     Used Vehicles

3.   Canada may adopt or maintain prohibitions and restrictions
on imports of used vehicles from the territory of Mexico, except
as follows:

     (a) after January 1, 2009, Canada may not adopt or maintain
 prohibitions or restrictions on imports from the
 territory of Mexico of originating used  vehicles that
 are at least 10 years old;

     (b) after January 1, 2011, Canada may not adopt or maintain
 prohibitions or restrictions on imports from the
 territory of Mexico of originating used  vehicles that
 are at least eight years old;

     (c) after January 1, 2013, Canada may not adopt or maintain
 prohibitions or restrictions on imports from the
 territory of Mexico of originating used  vehicles that
 are at least six years old;

     (d) after January 1, 2015, Canada may not adopt or maintain
 prohibitions or restrictions on imports from the
 territory of Mexico of originating used  vehicles that
 are at least four years old;

     (e) after January 1, 2017, Canada may not adopt or maintain
 prohibitions or restrictions on imports from the
 territory of Mexico of originating used  vehicles that
 are at least two years old; and

     (f) after January 1, 2019, Canada may not adopt or maintain
 prohibitions or restrictions on imports from the
 territory of Mexico of originating used  vehicles
 regardless of age.

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                            Appendix B:  Mexico

     Auto Decree and Auto Decree Implementing Regulations

1.   Subject to this Appendix, Mexico may maintain, until January
1, 2004, the Decree for Development and Modernization of the
Automotive Industry ("Decreto para el Fomento y Modernización de
la Industria Automotriz") (December 11, 1989) (the "Auto Decree")
and the Resolution that Establishes Rules for the Implementation
of the Auto Decree ("Acuerdo que Determina Reglas para la
Aplicación para el Fomento y Modernización de la Industria
Automotriz") (November 30, 1990) (the "Auto Decree Implementing
Regulations").  Mexico may adopt or maintain any measure
respecting automotive goods or manufacturers of automotive goods
in its territory provided that such measure is not inconsistent
with this Agreement.

     Autoparts Industry, National Suppliers and Independent
Maquiladoras

2.   Mexico may not require that an enterprise attain a level of
national value added in excess of 20 percent of its total sales
as one of the conditions to qualify as a national supplier or
enterprise of the autoparts industry.

2a.  For purposes of paragraph 2, "national value added" means
the total value of sales of such enterprises (excluding those for
the aftermarket) minus the value of its total imports, direct and
indirect, excluding those imports incorporated in aftermarket
parts and components, as modified by paragraph 3.

3.   Mexico may require that a national supplier or an enterprise
of the autoparts industry, in calculating its national value
added solely for the purposes of paragraph 2, include customs
duties in the value of imports incorporated into the parts and
components produced by such enterprises. 

4.   Mexico shall grant national supplier status to an
independent maquiladora that requests such status and meets the
requirements for that status set out in the existing Auto Decree. 
Mexico shall continue to grant to all independent maquiladoras
that request national supplier status all existing rights and
privileges accorded to independent maquiladoras under the
existing Decree for the Promotion and Operation of the
Maquiladora Export Industry ("Decreto para el Fomento y Operación
de la Industria Maquiladora de Exportación") (December 22, 1989)
(the "Maquiladora Decree").  

4a.  For purposes of paragraph 4, "independent maquiladora" means
an enterprise registered as an export maquiladora enterprise
under the Maquiladora Decree which has no common majority
shareholder with any manufacturer, and for which no manufacturer
is directly or indirectly a majority shareholder.

     National Value Added

5.   Mexico may provide that a manufacturer ("empresa de la
industria terminal") calculate its required national value added
from suppliers (VANp) as a percentage of:

     (a) a manufacturer's reference value as defined in
 paragraph 8; or

     (b) a manufacturer's total national value added (VANt),

whichever is greater.

6.   Mexico shall not require that the percentage referred to in
paragraph 5 be greater than:

     (a) 34 percent for each of the first five years beginning
 January 1, 1994;

     (b) 33 percent for 1999;

     (c) 32 percent for 2000;

     (d) 31 percent for 2001;

     (e) 30 percent for 2002; and

     (f) 29 percent for 2003.

7.   Notwithstanding paragraph 6, Mexico shall allow a
manufacturer that produced vehicles in Mexico before model year
1992 to use as its percentage referred to in paragraph 5 the
ratio of actual national value added from suppliers (VANp) to
total national value added (VANt) that such manufacturer attained
in model year 1992, for so long as that ratio is lower than the
applicable percentage specified under paragraph 6.  In
determining such ratio for 1992, purchases that such manufacturer
made from independent maquiladoras that would have been eligible
to receive national supplier status had paragraphs 2, 3 and 4 of
this Appendix been in effect at that time, shall be included in
the calculation of the manufacturer's national value added from
suppliers (VANp), in the same manner as parts and components from
any other national supplier or enterprise of the autoparts
industry.

8.   "The annual reference value for a manufacturer" ("reference
value") shall be:

     (a) for each of the years 1994 through 1997, the base value
 for the manufacturer, plus no more than 65 percent of
 the difference between the manufacturer's total sales
 in Mexico in that year and its base value;

     (b) for each of the years 1998 through 2000, the base value
 for the manufacturer, plus no more than 60 percent of
 the difference between the manufacturer's total sales
 in Mexico in that year and its base value; and

     (c) for each of the years 2001 through 2003, the base value
 for the manufacturer, plus no more than 50 percent of
 the difference between the manufacturer's total sales
 in Mexico in that year and its base value.

9.   Mexico shall provide that where a manufacturer's total sales
in Mexico in a year are lower than its base value, the reference
value for such manufacturer for that year shall be equal to the
manufacturer's total value of sales in Mexico for the year.

9a.  For purposes of paragraphs 8 and 9:

     (a) "base value" means the average annual value of the
 manufacturer's production in Mexico for sale in Mexico
 (VTVd) in model years 1991 and 1992, adjusted for
 inflation, using the Mexican producer price index for
 automotive goods published by the Bank of Mexico
 ("Banco de Mexico"); and

     (b) "manufacturer's total sales in Mexico in that year"
 means the invoice value of sales by a manufacturer of
 vehicles it produced in Mexico for sale in Mexico plus
 the invoice value of its sales of imported vehicles.

10.  In the event an abnormal production disruption affects a
manufacturer's production capability, Mexico shall allow such
manufacturer to seek a reduction in its reference value before
the Intersecretariat Automotive Industry Commission, established
under Chapter V of the Auto Decree.  If the Commission finds that
the production capability of the manufacturer has been impaired
by such an abnormal production disruption, the Commission shall
reduce the manufacturer's reference value in an amount
commensurate to such event. 

10a. For purposes of paragraph 10, "abnormal production
disruption" means a disruption in a manufacturer's production
capability resulting from a natural disaster, fire, explosion or
other unforeseen event beyond the manufacturer's control.

11.  If, upon the request of a manufacturer, the Intersecretariat
Automotive Industry Commission finds that the production
capability of such manufacturer has been significantly disrupted
as a result of a major retooling or plant conversion in the
facilities of the manufacturer, the Commission shall reduce the
reference value for the manufacturer for that year in an amount
commensurate with the disruption, provided that such reduction in
that manufacturer's required national value added from suppliers
(VANp) that may result from the Commission's determination to
lower the manufacturer's reference value shall be fully made up
by the manufacturer over the following two model years.  

11a.  For purposes of paragraph 11, "significant disruption"
means a sizable impairment in the manufacturer's production
capability that lasts at least six months but no longer than 12
months. 

     Trade Balance

12.  Mexico shall not require a manufacturer to include in the
calculation of its trade balance (S) a percentage of the value of
direct and indirect imports of parts and components that such
manufacturer incorporated into vehicles it has produced in Mexico
for sale in Mexico (VTVd) in the corresponding year, greater than
the following:

     (a) 80 percent for 1994; 

     (b) 77.2 percent for 1995;
     
     (c) 74.4 percent for 1996;

     (d) 71.6 percent for 1997;

     (e) 68.9 percent for 1998;

     (f) 66.1 percent for 1999; 

     (g) 63.3 percent for 2000;

     (h) 60.5 percent for 2001;

     (i) 57.7 percent for 2002; and

     (j) 55.0 percent for 2003.

13.  For purposes of determining a manufacturer's total national
value added (VANt), paragraph 12 shall not apply to the
calculation of its trade balance (S).

14.  Mexico shall permit a manufacturer with a surplus in its
extended trade balance to divide its extended trade balance by
the applicable percentages in paragraph 12 to determine the value
of new vehicles that it may import.

15.  Mexico shall provide that in the calculation of a
manufacturer's adjustment factor (Y) in its extended trade
balance:

     (a) a manufacturer's total national value added (VANt) be
 replaced by that manufacturer's reference value in any
 year in which the manufacturer's total national value
 added (VANt) is lower than its reference value; and

     (b) the applicable percentage under paragraphs 6 or 7, as
 appropriate, be used.

16.  In determining the annual amount that a manufacturer may
apply to its extended trade balance from surpluses earned prior
to model year 1991, Mexico shall in any given year allow such
manufacturer to elect:

     (a) to use the procedures of the existing Auto Decree
 Implementing Regulation; or

     (b) to apply up to $US 150 million, adjusted for inflation
 in accordance with the U.S. GDP Price Deflator or its
 equivalent in Mexican pesos, 

until such surpluses have been exhausted.

     Other Restrictions in the Auto Decree

17.  Mexico shall eliminate the restriction set out in the
existing Auto Decree that limits the number of vehicles that a
manufacturer may import into Mexico in relation to the total
number of vehicles that such manufacturer sells in Mexico. 

     Autotransportation Decree and Autotransportation
Implementing Regulations

18.  Mexico shall eliminate the Mexican Decree for Development
and Modernization of the Autotransportation Vehicle Manufacturing
Industry (December 1989) ("Decreto para el Fomento y
Modernización de la Industria Manufacturera de Vehiculos de
Autotransporte") (the "Autotransportation Decree") and the
Resolution that Establishes Rules for the Implementation of the
Autotransportation Decree (November 1990) ("Acuerdo que Establece
Reglas de Aplicacion del Decreto para el Fomento y Modernización
de la Industria Manufacturera de Vehículos de Autotransporte")
(the "Autotransportation Decree Implementing Regulations"). 
Mexico may adopt or maintain any measure respecting
autotransportation vehicles or manufacturers of
autotransportation vehicles in its territory provided that such
measure is not inconsistent with this Agreement.  

     Importation of Autotransportation Vehicles

19.  Except as provided in paragraphs 20 and 21, Mexico may adopt
or maintain a prohibition or restriction on the importation of
autotransportation vehicles of another Party until January 1,
1999.

20.  For each of the years 1994 through 1998, Mexico shall allow
any manufacturer of autotransportation vehicles to import, for
each type of autotransportation vehicle, a quantity of
originating autotransportation vehicles equal to at least 50
percent of the number of vehicles of such type that such
manufacturer produced in Mexico in that year.  

20a.  For purposes of paragraph 20, "manufacturer of
autotransportation vehicles" means an enterprise, established in
Mexico, that produces autotransportation vehicles, is registered
with the Ministry of Trade and Industrial Development
("Secretaría de Comercia y Fomento Industrial"), and whose sales
in Mexico incorporate at least 40 percent national value added,
where national value added is the result of subtracting from the
total sales (excluding imports of autotransportation vehicles) of
an autotransportation manufacturer the invoice value of its
direct and indirect imports of parts and components.

21.  For each of the years 1994 through 1998, Mexico shall allow
persons other than manufacturers of autotransportation vehicles
to import, in a quantity to be allocated among them, originating
autotransportation vehicles of each type as follows:

     (a) for each of the years 1994 and 1995, no less than 15
 percent of the total number of vehicles of each type of
 autotransportation vehicle produced in Mexico;

     (b) for 1996, no less than 20 percent of the total number
 of vehicles of each type of autotransportation vehicle
 produced in Mexico; and

     (c) for each of the years 1997 and 1998, no less than 30
 percent of the total number of vehicles of each type of
 autotransportation vehicle produced in Mexico.

Mexico shall allocate such quantity through a non-discriminatory
auction.

     Used Vehicles

22.  Mexico may adopt or maintain prohibitions and restrictions
on imports of used vehicles from the territory of another Party,
except as follows:

     (a) after January 1, 2009, Mexico may not adopt or maintain
 prohibitions or restrictions on imports from the
 territories of Canada or United States of originating
 used vehicles that are at least ten years old;

     (b) after January 1, 2011, Mexico may not adopt or maintain
 prohibitions or restrictions on imports from the
 territories of Canada or United States of originating
 used vehicles that are at least eight years old;

     (c) after January 1, 2013, Mexico may not adopt or maintain
 prohibitions or restrictions on imports from the
 territories of Canada or United States of originating
 used vehicles that are at least six years old;

     (d) after January 1, 2015, Mexico may not adopt or maintain
 prohibitions or restrictions on imports from the
 territories of Canada or United States of originating
 used vehicles that are at least four years old;

     (e) after January 1, 2017, Mexico may not adopt or maintain
 prohibitions or restrictions on imports from the
 territories of Canada or United States of originating
 used vehicles that are at least two years old; and

     (f) after January 1, 2019, Mexico may not adopt or maintain
 prohibitions or restrictions on imports from the
 territories of Canada or United States of originating
 used vehicles, regardless of age.

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                          Appendix B: Definitions

Note:     (The following terms shall be defined as provided in
the Auto Decree and Auto Decree Implementing Regulations,
incorporating those specific modifications required by this
Appendix.

     For purposes of transparency, set out below for each term
are the corresponding Spanish term, citations to the relevant
provisions of the Auto Decree and Auto Decree Implementing
Regulations and, where appropriate, the paragraph of this
Appendix that modifies the definition in the Auto Decree or Auto
Decree Implementing Regulations.  English translations of these
definitions, amplified for clarity where appropriate, and
incorporating modifications required by this Appendix, will be
set out here at a later date.)

adjustment factor (Y) means "factor de ajuste Y" as defined in
rule 18 of the Auto Decree Implementing Regulations and as
modified by paragraph 15 of this Appendix;

enterprise of the autoparts industry means "empresa de la
industria de autopartes" as set out in Article 2, paragraph V of
the Auto Decree, as modified by paragraph 2 of this Appendix;

extended trade balance means "balanza comercial ampliada"
referred to in rule 28 of the Auto Decree implementing
Regulations, and is equal to the numerator (S+W+.3I+Sft+T-Y) of
formula (1) in rule 8, of the Auto Decree Implementing
Regulations; 

manufacturer means an "empresa de la industria terminal" as
defined in Article 2, paragraph IV of the Auto Decree that
produces any of the following classes of vehicles:
 
     (a) passenger car:  a vehicle for the transportation of up
 to 10 people or a compact car of popular use, provided
 for in subheadings (to be specified) of the Harmonized
 System;

     (b) commercial truck: a vehicle with or without a chassis,
 for the transportation of cargo or over 10 people, with
 a GVW of up to 2,727 kgs., provided for in heading (to
 be specified) of the Harmonized System;

     (c) light duty truck: a vehicle with a chassis, for the
 transportation of cargo or over 10 people, with a GVW
 of over 2,727 but less than 7,272 kgs., provided for in
 headings (to be specified); or 

     (d) medium duty truck: a vehicle with a chassis for the
 transportation of cargo or over ten people, with a GVW
 of over 7,272 kgs. but less than 8,864 kgs., provided
 for in headings (to be specified) of the Harmonized
 System;

manufacturer's production in Mexico for sale in Mexico (VTVd)
means "valor total de las ventas que realicen las empresas de la
industria terminal al mercado domestico, excluyendo vehiculos
importados" as set out in rule 18 of the Auto Decree Implementing
Regulations;

manufacturer's total national value added (VANt) means "valor
agregado nacional de la empresa de la industria terminal" as
defined in rule 18 of the Auto Decree Implementing Regulations;

national supplier means a "proveedor nacional" as defined by
article 2 paragraph VII of the Auto Decree, as modified by
paragraph 2 of this Appendix;

national value added from suppliers (VANp)  means "valor agregado
nacional de proveedores", as provided in rule 18 of the Auto
Decree Implementing Regulations;

parts and components means "partes y componentes automotrices" as
defined in article 2, paragraph X of the Auto Decree;

trade balance (S) means "saldo en balanza comercial de la empresa
de la industria terminal", as defined in rule 9 of the Auto
Decree Implementing Regulation, as modified by paragraphs 12 and
13 of this Appendix;

autotransportation vehicles means a vehicle included in any of
the following types:

     (a) heavy duty truck: a vehicle with a chassis for the
 transport of goods or more than ten people with a GVW
 over 8,864 kgs., provided for in headings (to be
 specified) of the Harmonized System;

     (b) truck tractor:  a vehicle with 2 or 3 axles for
 transporting goods by hauling trailers, semi-trailers
 or containing integrated equipment, provided for in
 subheading (to be specified) of the Harmonized System;

     (c) integral bus:  a vehicle without a chassis but with an
 integral body used to transport more than 10 people,
 provided for in heading (to be specified) of the
 Harmonized System; and

     (d) specialty vehicles: special purpose motor vehicles or
 vehicles modified for the handicapped provided for in
 heading (to be specified) of the Harmonized System, (as
 provided for in Article 2 of the Autotransportation
 Decree).

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                         Appendix C: United States

     Corporate Average Fuel Economy

1.   As provided in paragraph 2, for purposes of the Energy
Policy and Conservation Act (October 1975), as amended ("the CAFE
Act"), the United States shall consider an automobile to be
domestically manufactured in any model year if at least 75
percent of the cost to the manufacturer of such automobile is
attributable to value added in Canada, Mexico or the United
States, unless the assembly of such automobile is completed in
Canada or Mexico and such automobile is not imported into the
United States prior to the expiration of the 30 days following
the end of such model year.  

2.   The United States shall implement the obligation set out in
paragraph 1 for all automobiles of a manufacturer sold in the
United States, wherever produced and irrespective of car line or
truck line, beginning with the next model year after January 1,
2004, except as provided in the following schedule:

     (a) with respect to a manufacturer that initiated the
 manufacture of automobiles in Mexico before model year
 1992, the enterprise that provides certification under
 the CAFE Act may make a one-time election at any time
 between January 1, 1997 and January 1, 2004, to have
 paragraph 1 applied beginning with the next model year
 after such election;
 
     (b) with respect to a manufacturer initiating the
 manufacture of automobiles in Mexico after model year
 1991, paragraph 1 shall apply beginning with the next
 model year after either January 1, 1994 or the date
 that such manufacturer initiates manufacturing
 automobiles in Mexico, whichever is later;
 
     (c) with respect to any other manufacturer of automobiles
 in the territory of a Party, the enterprise that
 provides certification under the CAFE Act may make a
 one-time election at any time between January 1, 1997
 and January 1, 2004, to have paragraph 1 applied
 beginning with the next model year after such election. 
 If such a manufacturer initiates manufacturing
 automobiles in Mexico, it shall be subject to
 subparagraph (b) on the date it initiates such
 manufacturing; and
      
          (d) with respect to all manufacturers of automobiles not
 manufacturing automobiles in the territory of a Party,
 paragraph 1 shall apply beginning with the next model
 year after January 1, 1994.
 
3.   The United States shall make any future changes pertaining
to the definition of domestic production in the CAFE Act or its
implementing regulations equally applicable to value added in any
of the Parties.

4.   Nothing in this Appendix shall require the United States to
make any changes in its fuel economy requirements for
automobiles.                 

5.    For purposes of this Appendix, "automobile" means a motor
vehicle that complies with the definition in the CAFE Act and its
implementing regulations.      

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                   Appendix D: General Definitions 
                                    
                                    
                                    
    existing producer of vehicles means a producer that was producing
    in the territory of the relevant Party prior to model year 1992;
                                   and
                                    
    automotive goods means all types of motor vehicles, and parts and
             components intended for use in motor vehicles.
                                    
         Note:  (Additional terms may be added where appropriate)