1994-1996 Report on the NAFTA
Government Procurement Working Group


The NAFTA Government Procurement Working Group (Chapter 10 of the Agreement) was established by the signatories to resolve issues related to government procurement, to provide a forum for future negotiations, and to facilitate technical cooperation between the Parties.

NAFTA Chapter 10 and the GATT/WTO Agreement on Government Procurement

At the October 1994 meeting, the US delegation proposed to undertake a comprehensive comparison of the WTO Agreement on Government Procurement (AGP) and Chapter l0 of NAFTA. The Working Group agreed to continue the analysis of the basic components of the two agreements.

Canada and the U.S. have expressed that such analysis would give the Parties a clear idea of the level of obligations identified in each Agreement, in order to identify similarities and promote consistency between the two agreements. For such purpose, each Party designated a delegate responsible for the follow-up of this analysis.

Calculation of PEMEX and CFE Set-Asides

Chapter 10, Annex 1001.2a, allows Mexico to set-aside (from the obligations of Chapter 10), for a transitional period, a certain specified percentage of procurement for goods, services and construction services by the state petroleum company, PEMEX and the utility company, CFE.

The Mexican delegation has stated that in accordance with Annex 1001.2a of the NAFTA, the base from which the set-asides should be calculated should be total procurement by PEMEX and CFE where only procurement contracts that are financed by loans from, regional and multilateral financial institutions and contracts below thresholds shall not be included in the calculation of the base value.

The US and Canadian delegations stated that it was the intent of the drafters of the Agreement to calculate these set-asides as a percentage of total covered procurement by PEMEX and CFE. During 1996, the United States and Canada continued to question certain elements Mexico proposes to include in their set-aside calculation, such as inter-entity transactions and excluded services.

At the October 1996 meeting, Mexico agreed to provide a further detailed breakdown of the data included in the Mexican proposed set-aside calculation.

Goods/Services/Construction Classifications System

Agreement was reached by all three NAFTA Parties to utilize, in their final reporting, the NAFTA classification system for Goods. Mexico has agreed to utilize the FSC (NAFTA) coding for reporting.

Update on Entity Coverage

Annexes 1001.1a-1 and 1001.1a-2 of Chapter 10 list the respective federal government entities and government enterprises which are within the scope and coverage of the NAFTA. Mexico identified a number of items in the Mexican schedules for theses annexes, which they believed required adjustment (see Attachment 1). The Parties agreed to the changes proposed by Mexico in their adjusted list.

Parties are studying ways to update in a more systematic manner ongoing changes to the entity and enterprise annexes. They are examining the possibility of using a "loose-leaf" system, similar to that of the WTO/AGP. A Working Group sub-committee was formed to assess the feasibility of this and other possible approaches for incorporating changes to the NAFTA and to provide recommendations. The Working Group noted that, however, unlike the WTO, the NAFTA does not have a central secretariat to assume responsibility for this task.

Proposed Modification to Annex 1001.1B-1 (exemption for goods)

The Parties agreed on new language to clarify current wording in this Annex (see Attachment 2). The mechanism to substitute current wording is being defined.

US Federal Acquisition Streamlining Act of 1994

The Parties continued with their analysis of the implications of the new U.S. Federal Acquisition Streamlining Act (FASA) of 1994, the Federal Acquisition Streamlining Reform Act (FARA) of 1995 and the consequent required changes to the U.S. Federal Acquisition Regulations (FAR). The US delegation described the new Acts as complex legislation representing a radical policy change. They noted that, as the title of the Acts suggest, the purpose of this new legislation is to open procurement by reducing obstacles and simplifying and streamlining procurement administrative procedures.

ln 1996, Canada and Mexico continued to express serious concern that the effect of some of the changes in the U.S. legislation are to make U.S. government procurement more restrictive for non-U.S. suppliers. The US agreed to answer Canadian and Mexican questions pertaining to the scope and coverage of these legislative changes, including those programmes and policies dealing with partial set-asides and subcontracting.

The FASA of 1994 included the creation of a U.S. procurement simplified acquisition threshold of $100,000. In order to re-balance procurement market access among the NAFTA countries, as well as to harmonize the various NAFTA thresholds, Canada and the United States proposed raising the threshold applicable to the procurement of goods and services by Federal Government entities in all three NAFTA countries to $100,000 U.S.

Mexican Services List

NAFTA Appendix 1001.lb-2-A. Temporary Schedule of Services for Mexico, requires Mexico to provide, by July 1995, a permanent list of services excluded from NAFTA coverage.

In 1996, discussion continued on this issue. The Parties held a special sub-committee meeting on the Mexican services list in Washington on November 12. Canada and the United States agreed to assist the Mexican delegation by providing further clarification on the definition of specific FSC codes, with Mexico to finalize their schedule of services expeditiously thereafter.

Article 1024, Paragraph 5 - Further Negotiations on Electronic Tendering

Article 1024, paragraph 5, outlines that the "Parties shall undertake further negotiations, to commence no later than one year after the date of entry into force of this Agreement, on the subject of electronic transmission". Agreement was reached at the October 1994 meeting that this issue should be extensively examined in future meetings. In October 1995, the US presented plans within the US legislation to accelerate the introduction of electronic commerce in federal procurement. The Parties reaffirmed their support for electronic exchange of information, expressing that the implementation of electronic means in tendering procedures shall not contravene NAFTA provisions or otherwise impair market access regarding government procurement. This issue will be further discussed in 1997.

Update on Subcentral Government Consultations and Legislative Exceptions

Article 1024 provides that the Parties shall endeavor to consult with their state and provincial governments with a view to obtaining commitments on a voluntary and reciprocal basis, to include sub-central entities. Canada noted that coverage of subcentral entities would need to be addressed in tandem with legislated exceptions such as the U.S. Small Business Set-Aside program, Buy American provisions and local preferences, Mexico considers that a more liberal environment on Small Business Set-Asides would help the process of consultations with its own states.

Aboriginal Business Procurement Policy in Canada

Canada provided information on a recently introduced limited programme for advancing aboriginal business interests through government procurement. Mexico and the United States indicated that they will provide comments after reviewing the Canadian documentation.

1994-1996 Report of the Committee on Small Business
to the NAFTA Free Trade Commission


Article 1021 of NAFTA's government procurement chapter calls for the creation of a Committee on Small Business. The Committee is required to meet at least once a year and report to the Free Trade Commission on the efforts of the parties to promote government procurement opportunities for small businesses. (This report covers from 1994 to 1996.)

The Committee was established soon after the initiation of NAFTA implementation and convened twice in both 1994 to 1996;

  • March 23-24, 1994, in Washington, D.C.;
  • June 21-23, 1994, in Washington, D.C.;
  • October 27-28, 1994, in Ottawa;
  • April 26, 1995, in Mexico City;
  • October 19, 1995, in Washington, D.C.;
  • February 20-21, 1996, in Ottawa; and
  • October 9-10, 1996, in Mexico City.

The parameters and structure of the Committee were defined and the groundwork was laid for several useful programs.

Committee Composition

Members agreed at the first meeting that the Committee would consist solely of government officials. Nevertheless, each country emphasized its intention to consult closely with its small business community regarding the Committee's work.

Each delegation indicated the government agencies that would participate:

For the Mexican delegation, representatives from the Secretaría de Comercio y Fomento Industrial, Secretaría de Hacienda y Crédito Público, and Secretaría de la Contraloría General de 1a Federación. Hector Olea and Gerardo Traslosheros of SECOFI chaired the Mexican delegation from 1994 to 1996.

For the Canadian delegation, representatives form Foreign Affairs and International Trade Canada, Industry Canada, Public Works and Government Services Canada, and the Treasury Board Secretariat. David Devine of FAITC chaired the Canadian delegation.

For the U.S. delegation, representatives from the Department of Commerce, Small Business Administration, State Department, and the U.S. Trade Representative, Regina Vargo of DOC and Gene Van Arsdale of SBA co-chair the U.S. delegation in 1994 and 1995, Juliet Bender of the Department of Commerce and Catherine Thomas of Small Business Administration in 1996.

Committee Scope

In accordance with the NAFTA text, Members agreed that the main emphasis of the Committee would be the:

  1. identification of available opportunities for the training of small business personnel in government procurement procedures;

  2. identification of small businesses interested in becoming trading partners of small business in the territory of another Party;

  3. development of data bases of small businesses in the territory of each Party for use by entities of another Party wishing to procure from small businesses;

  4. consultations regarding the factors that each Party uses in establishing its criteria for eligibility for any small business programs; and

  5. activities to address any related matter.

Information Exchange on Government Databases

The early work of the Committee focused on an information exchange on government databases that could be useful in carrying out the Committee's activities.

All three countries have developed electronic databases which could be useful in promoting small business procurement, although the databases were designed with different goals in mind. For example, the U.S. system (PASS) is designed to help procurement officials locate U.S. small businesses, while the Mexican system (SIMPEX) is designed to allow foreign imports and investors to locate Mexican sales and investment partners. Mexico presented its public Sector Electronic Procurement System (Compranet). Canada's Open Bidding Service (OBS) is the only one which allows subscribing small businesses to obtain solicitations and bid documents via computer or fax.

Presentations on databases disclosed that foreign companies and governments are eligible to subscribe to each database and obtain contract information.

Outreach and Education Programs

The Committee considered two proposals for educating the private sector about doing business with the federal government and how NAFTA can open new opportunities for them.

All members endorsed a proposal to produce a country specific handbook or "How To Guide" on selling to the federal governments in North America. A proposed outline of the handbook was presented by the United States in 1994. The Parties submitted their guides to government procurement and agreed to make it available to the public.

Given budget constraints in all three countries, Member's expressed an interest in having each government determine what material it would publish, choose its own methods of distribution, and cover its own costs.

Members also discussed various ideas for advising small businesses on how to bid for contracts in all three NAFTA countries. Both the U.S. and Canada have experience in running these types of programs domestically.

Private Sector Matching for Small Business

In addition to these efforts at improving coordination and understanding of the business-government sales relationship, the Committee also has been a conduit for information exchanges on private sector business.

The Committee discussed and presented information on four different services designed to match private sector buyers with sellers as well as find investment partners: International Business Exchange (IBEX). Unisphere, B. C. Net, and NAFTA Links. While these services do not deal directly with government procurement, they can be very useful for small businesses trying to expand into foreign markets.

Further, at the suggestion of the U.S. small business community, the Members exchanged information on their small business trade associations. The intention of this exercise was to enable the small business communities in each country to contact their foreign counterparts in an effort to promote partnerships and sales opportunities.

In 1995, the U.S. delegation expressed its interest in expanding the Committee efforts to facilitate general trade and investment among North American small businesses, noting that such an initiative could fall within a broad interpretation of (b) above. Among other things, the U.S. delegation proposed that a portion of future meetings be open for private sector presentations on efforts to facilitate cross-border matchmaking. However, Canada and Mexico agreed that it would be premature to invite direct private sector participation until the Committee further defined its goals, and stated their Preference for the Committee to maintain a focus on government procurement.

Small Business Programs

Members exchanged information on their respective programs in support of small business and the definitions and criteria for eligibility under these programs. In 1994, the United States gave a detailed presentation on the activities of the Small Business Administration, including specifics of the operation of the procurement-based Small Business Set-Aside programs. In response to concerns expressed by Canada and Mexico, the U.S. delegation also provided detail on the scope and application of changes being introduced through the Simplified Federal Acquisition Threshold legislation.

Looking Ahead

The Committee will continue to discuss ways to assist its small business community take advantage of NAFTA's government procurement opportunities, including best use systems for dissemination of government solicitations and producing/ distributing guides to government procurement in North America. Each Party will continue to consult with its private sector for suggestions on programs or information exchanges which can help promote opportunities for small businesses.

Government Procurement Working Group

VI. Update on Coverage Lists

Mistaken Denomination

Mistaken denomination shall be substituted for

Centro Nacional de Estudios Municipales

Centro Nacional de Desarrollo Municipal

Patronato de Asisitencia para la Reincorporación Social

Patronato de Asisitencia para la Reincorporación Social por el Empleo en el Distrito Federal

Secretaría de Agricultura y Recursos Hidráulicos*

Secretaría de Agricultura, Ganadería y Desarrollo Rural

Instituto de la Comunicación Humana Dr. Andrés Bustamante Gurría

Instituto Nacional de la Comunicación Humana

Instituto Nacional de Medicina de la Rehabilitación

Instituto Nacional de Medicina de Rehabilitación

Centro para el Desarrollo de la Infraestructura en Salud

Coordinación General de Obras, Conservación y Equipamiento

Secretaría de Pesca*

Secretaría de Medio Ambiente, Recursos Naturales y Pesca

Secretaría de Energía, Minas e Industria Paraestatal*

Secretaría de Energía

Secretaría de la Contraloría General de la Federación*

Secretaría de Contraloría y Desarrollo Administrativo

Entity that does not exist

Entity shall be deleted from

Consejo de Recursos Mineros

Anexo 1001.1a-2

Subsidiary companies for Pemex do not appear

Subsidiary companies for Pemex shall be included under Annex 1001.1a-2 (paragraph 8)

Petróleos Mexicanos (PEMEX)

Petróleos Mexicanos (PEMEX)

    PEMEX-Exploración y Producción
    PEMEX-Ges y Petroquímica Básica

Entity that became part of another entity

The entity shall be deleted from

Instituto Nacional des Consumidor

Annex 1001.1a-2 (paragraph 17)

Government enterprises mistakenly identified as federal government entities

The entities referred herein shall be included in Annex 1001.1a-2 under the following concepts

Comisión Nacional de Zonas Aridas


Comisión Nacional de Libros de Texto Gratuito

Printing and editorial

Comisión Nacional de Derechos Humanos


Consejo Nacional de Fomanto Educativo


Annex 1001.1b-1: Goods

Section A - General Provisions

  1. This Chapter applies to all goods, subject to paragraphs 2 through 5.

  2. With respect to Canada, for procurement by the Department of National Defense and the Royal Canadian Mounted Police, only the goods listed in Section B are included in the coverage of this Chapter, subject to the application of Article 1018(1).

  3. With respect to Mexico, for procurement by the Secretaría de la Defensa Nacional and the Secretaría de Marina, only the goods listed in Section B are included in the coverage of this Chapter, subject to the application of Article 1018(1).

  4. With respect to the United States, for procurement by the Department of Defense, only the goods listed in Section B are included in the coverage of this Chapter, subject to the application of Article 1018(1).

  5. This Chapter does not apply to procurement by the U.S. Department of Defense of:

    Specialty metals, defined as

    • steel melted in steel manufacturing facilities located in the U.S. or its possessions where the maximum alloy content exceeds one or more of the following limits: manganese, 1.65 percent; silicon 0.60 percent; or copper, 0.06 percent; or which contains more than 0.25 percent of any of the following elements: aluminium, chromium, cobalt, columbium, molydebdum, nickel, titanium, tungsten, or vanadium;
    • metal alloys consisting of nickel, iron-nickel, and cobalt base alloys, containing a total of other alloying metals (except iron) in excess of 10 percent;
    • titanium and titanium alloys; or
    • zirconium and zirconium base alloys.

Section B - List of Certain Goods

Add the following:



Pins, needles, sewing kits, flagstaffs, flagpoles and flagstaff trucks only (United States only).


8460: luggage only (United States only).


8975: Tobacco products only (United States only).


Source: International Trade Canada >

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