What the USMCA Deal Means for Shippers

Is your business ready to comply with North America’s revised trade pact? After Canada, Mexico and the United States officially settled the updated terms of the USMCA deal in September 2018, the agreement will go into effect July 1, 2020.

Read on to learn more about the differences between the North American Free Trade Agreement (NAFTA) and the USMCA.

Visit USTR.gov for details.

What does USMCA stand for?

The USMCA stands for the United States-Mexico-Canada Trade Agreement, which replaces the North American Free Trade Agreement (NAFTA) effective July 1, 2020.

The agreement is also referred to as the Canada-United States-Mexico Agreement (CUSMA) in Canada and the Tratado entre México, Estados Unidos y Canadá (T-MEC) in Mexico. 

When does the USMCA deal go into effect?

July 1, 2020. For merchandise entered into commerce before June 30, NAFTA rules will continue to apply.

Will there be a grace period to transition from NAFTA to USMCA?

Generally, no. All parties must comply with USMCA as of July 1, 2020. There will be a transitional period for automotive products under headings 87.01 through 87.08 for as many as three years and alternative staging regime options for as many as five years. 

How long will the USMCA deal remain in force?

The USMCA will be effective for 16 years, at which point the government may choose to extend it. The USMCA also requires a joint review every six years after entry into force.

Is there a required USMCA Certificate of Origin?

No. There is no official certificate of origin requirement for USMCA, as was required under NAFTA.

If there is no official form, how will certification work?

Any document stating the goods’ origin is acceptable, including a commercial invoice or other transactional documents, provided the document contains the following nine pieces of information: certification of origin; certifier; exporter; producer; importer; description and harmonized system classification of the good; origin criteria; blanket period (if applicable); and authorized signature and date.

Learn more about the certificate of origin requirements.

What is the low-value threshold amount goods must meet to enter member countries duty free?

The value thresholds are as listed below:

United States
Unchanged from NAFTA at US$800

Mexico
The customs duties limit increased to US$117 and taxes increased to US$50

Canada
The customs duties limit increased to CA$150 and taxes increased to CA$40

What is the $16 average wage requirement for automotive goods?

U.S. Customs and Border Protection (CBP) is coordinating with the U.S. Department of Labor on the verification process of USMCA claims on automotive goods. The rules of origin for such goods include the new criterion of labor value content, which requires that a specified percentage of a vehicle’s value be derived from manufacturing facilities that pay an average wage of at least US$16 per hour.

The U.S. Department of Labor will assess the wage practices of the manufacturing facilities involved in the production of such vehicles and their components. This information will be used in CBP’s labor value calculation.

What criteria is changing for imported automotive parts and products?

The USMCA requires new criteria for automotive goods that were not applicable under NAFTA, including:

Regional value
To be increased in stages from 62.5 percent to 75 percent across a three-year period.

Labor value
Forty to 45 percent of the value of the imported automobile must be sourced from manufacturing facilities where workers earn at least US$16 per hour. The U.S. Department of Labor assesses manufacturing facility eligibility, with CBP determining value of parts, the overall automobile and the overall labor value.

Steel and aluminum origin
At least 70 percent of a vehicle producer’s annual steel and aluminum procurement must originate from North America.

What changes were made to the agreement’s monitoring and enforcement mechanisms?

The USMCA contains new provisions to combat antidumping and countervailing duties evasion, commitments to ban the trade of goods that infringe on intellectual property or are sourced from forced or compulsory labor, as well as requirements intended to prevent the illegal seizure of wild flora and fauna (including timber).

How long should I retain import or export records to comply with the USMCA deal?

Importers must maintain records for five years from date of importation. Exporters and producers must maintain records for five years from the date the certification of origin was completed.

Where can I locate the full USMCA text?

Read the complete agreement on the Office of the United State Trade Representative’s website.

Is CBP offering resources to assist with USMCA compliance?

Yes. The CBP’s USMCA Center includes communication directly from the agency, as well as insights from operations, legal and audit experts. For implementation instructions, compliance guidance and more, visit CBP.gov.

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