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1.25.5. North American Free Trade Agreement (NAFTA)

Attention: The Government Procurement provisions of the North American Free Trade Agreement (NAFTA) continue to apply until the recently announced United States-Mexico-Canada Agreement (USMCA) is ratified and enters into force. More information about the USMCA will be provided in the coming weeks.

  1. The North American Free Trade Agreement Implementation Act (S.C. 1993, c. 44) sets out Canada's commitment to reduce trade barriers between Canada, the United States of America and the Federal Republic of Mexico. Chapter 10 of the Agreement focuses on achieving greater competition for, and transparency in, government procurement, eliminating the protection of domestic products or suppliers or discrimination among foreign products or suppliers. The "National Treatment" clause and the "Non-discrimination" clause are similar as those found in the WTO-AGP.
  2. The use of measures to improve socioeconomic development (offsets) for procurements covered by NAFTA is prohibited. See Article 1006: Prohibition of Offsets. Note that set-asides for minority businesses are permitted as described in paragraph e.v. below.
  3. To determine whether NAFTA is applicable, the agreement (Chapter 10) must be consulted. In the following sections on determining NAFTA coverage, all references to an "Annex" are to the annexes of Chapter 10 of NAFTA.
  4. For purposes of determining coverage, a requisition is considered to be one for:
    1. goods;
    2. services; or
    3. construction services;
    based on the one that represents more than 50 percent of the estimated value of the requisition.
  5. To determine if a procurement is subject to NAFTA, refer to the following:
    1. Determine the value of the requisition. See Article 1001: Scope and Coverage, Article 1002: Valuation of Contracts, and Annex 1001.2c Country-Specific Thresholds of NAFTA. The thresholds in NAFTA are presented in U.S. dollars. The values in Canadian dollars are based upon conversion factors, as agreed upon in the Agreement, and are revised every two years. They are published in Treasury Board Contracting Policy Notice 2017-6. The conversions below are in effect until December 31, 2019.
    2. A procurement may be subject to NAFTA if the requisition value, in Canadian dollars, is as follows:
      1. for goods being procured by departments and agencies (including some Commissions and Boards): $32,900;
      2. for services being procured by departments and agencies: $100,000* (*Although the NAFTA services threshold is $106,000, as the Canada-Korea Free Trade Agreement provides the lowest threshold for services at $100,000, NAFTA procedural obligations are to be applied to all covered services procurements valued at or above $100,000);
      3. for construction services being procured by departments and agencies: $13,700,000.
    3. Determine the coverage by client. See Annex 1001.1a-1 Federal Government Entities and Annex 1001.1a-2 Government Enterprises.
    4. Determine the coverage by type of requirement:
      1. goods – See Annex 1001.1b-1 Goods; or
      2. services – See Annex 1001.1b-2 Services; or
      3. construction services – See Annex 1001.1b-3 Construction Services.
    5. Determine if an exception, such as the one for national security, should be invoked for the requirement. Article 1018: Exceptions provides the complete list of exceptions. See Supply Manual section 3.105 National Security Exceptions for more information on National Security Exceptions.
    6. Determine if the requirement is excluded from the Agreement. Annex 1001.2b General Notes provides the complete list of types of requirements that are excluded from NAFTA, for example, paragraph 1.(d) provides for set-asides for minority businesses. Therefore, procurements that are set aside (i.e. reserved) for either CLCA beneficiaries, or for aboriginal businesses under the Procurement Strategy for Aboriginal Business (PSAB), are excluded from the Agreement, making the obligations of NAFTA) no longer applicable. For more information on when procurements can be reserved for CLCA beneficiaries, see 9.35 Comprehensive Land Claims Agreements (CLCAs). For more information on PSAB, see 9.40 Procurement Strategy for Aboriginal Business.