United States: Withdrawal From NAFTA Remains An Option If Renegotiation Talks Fail

On April 27, 2017, US President Donald Trump announced that he would not withdraw from the North American Free Trade Agreement (NAFTA) "at this time," after securing agreement from Canada and Mexico to renegotiate elements of the agreement. The administration is expected to submit the formal notification of its intent to enter into negotiations in the very near future. It remains to be seen how patient the administration will be if Mexico and Canada drag out the negotiations without making a serious effort to renegotiate. The option to withdraw from NAFTA, while on the back burner for now, could re-emerge at some point in the future. It is worth understanding what the administration's options really are with regard to withdrawing from NAFTA.

NAFTA was enacted domestically by statute when Congress passed the implementing legislation making the required changes to US law. However, Chapter 22 of the NAFTA agreement provides a mechanism for parties to the agreement to withdraw—specifically, Article 2205 Withdrawal, which states: "A Party may withdraw from this Agreement six months after it provides written notice of the withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties." It is generally assumed, although untested in trade agreements that are in force, that the president, exercising his constitutional power over foreign policy, is authorized to give notice on behalf of the United States to terminate a treaty, including NAFTA. In fact, President Trump used this authority earlier this year to withdraw from the Trans-Pacific Partnership agreement (although this was not in force).

Once the United States has announced its intention to withdraw from NAFTA, there still must be, in most cases, additional steps taken to return the United States' trade regime to a pre-NAFTA state. The preferential tariff rates for goods from Mexico and Canada established by NAFTA were authorized through the grant of proclamation authority to the president by Congress under Sec. 201(a)(1) of the NAFTA implementing legislation. Specifically, the statute states: "[T]he President may proclaim (A) such modifications or continuation of any duty, (B) such continuation of duty-free or excise treatment, or (C) such additional duties." The NAFTA preferential tariff rates were proclaimed by former President Bill Clinton on December 15, 1993. Some have questioned whether President Trump could unilaterally eliminate these preferential tariffs without approval from Congress. It would appear that there are several sources of proclamation authority that could be used by President Trump to return tariffs on goods from Mexico and Canada to the prevailing "most-favored nation" (MFN) rates that apply to most other WTO members that are not part of a free trade agreement with the United States.

Section 125(b) of the Trade Act of 1974 authorized the president to terminate at any time, in whole or in part, any proclamation made under this Act. Because the NAFTA preferential tariff rates were proclaimed pursuant to Section 604 of the Trade Act of 1974, President Trump has the authority to withdraw President Clinton's proclamation setting the NAFTA tariff rates.

Even if this authority is not sufficient, the administration could rely on section 111 of the Uruguay Round Agreements Act, which states: "[T]he President shall have the authority to proclaim - (1) such other modification of any duty, (2) such other staged rate reduction, or (3) such additional duties, as the President determines to be necessary or appropriate to carry out Schedule XX." Schedule XX refers to the United States' MFN tariff rates that apply broadly to all WTO Members unless more liberal access is provided through a free trade agreement. Should the United States withdraw from NAFTA, it may be able to rely on this authority to increase duties on imports from Canada and Mexico to the bound MFN rates.

While certain provisions of NAFTA will expire upon withdrawal, additional action will be needed in other instances to change existing US law and regulations. Section 109(b) of the NAFTA implementing legislation states that if "a country ceases to be a NAFTA country, sections 101 through 106 shall cease to have effect with respect to such country." Section 101 of the implementing legislation provides congressional approval for the agreement and Statement of Administrative Action that was submitted to Congress. Section 102 governs how the agreement relates to state law. Section 103 governs provisions that require consultation and layover of provisions by Congress. Section 104 provides the authority for the president to take executive action to implement regulations necessary to implement the agreement. Section 105 establishes the NAFTA Secretariat. Section 106 governs the appointment of individuals to NAFTA dispute settlement panels. Aside from the expiration of these specific provisions, where NAFTA obligations were incorporated into US law through statutory amendments, further legislative action may be necessary to remove those provisions from US law. For example, NAFTA obligated the Parties to impose restrictions on the availability of duty drawback. The NAFTA Implementation Act amended the US duty drawback statute to reflect those restrictions. The duty drawback statute would have to be amended after withdrawal from NAFTA, or else those restrictions would remain part of US law. Similarly, any regulations that were issued to implement NAFTA obligations will remain in effect until they are officially withdrawn or revised.

It appears clear that President Trump could withdraw from NAFTA based on the language in Article 2205. Based on that language and section 125(b) of the Trade Act of 1974, there is an argument that Congress has granted this authority to the president without requiring further consultation with Congress. It is not clear, however, that this action would automatically reverse the duty reductions implemented under NAFTA. However, there are statutory authorities the administration could cite as justification for raising duties.

Originally published 1 May 2017

Learn more about our Government Relations & Public Law and International Trade practices.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2017. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions