The USMCA is Here: What You Need to Know

On July 1, 2020, a new trade agreement between the United States, Mexico, and Canada will replace the 25-year-old North American Trade Agreement (NAFTA). On January 29, 2020, President Donald Trump signed the U.S.-Mexico-Canada Agreement (USMCA), a bipartisan agreement that has been ratified by Mexico and Canada. Each country has its own name for it:

• United States - United States-Mexico-Canada Agreement (USMCA)
• Mexico - Tratado entre Mexico, Estados Unidos, y Canada (T-MEC)
• Canada - Canada-United States-Mexico Agreement (CUSMA)

Beginning July 1, 2020 in order to avoid penalties:

1. Dispose of the now invalid NAFTA Certificate of Origin document (CAUTION: it may print automatically with shipping label)
2. Download and complete the USMCA/T-MEC/CUSMA Certification of Origin document
3. Print, scan, and date the document
4. Scan and upload the completed documents using Electronic Trade Documents or print and attach to your packages

History and Overview of USMCA

The United States-Mexico-Canada Agreement (USMCA) will support: freer markets, fairer trade, and robust economic growth in North America by increasing jobs. While agriculture has performed well under NAFTA, improvements in the new agreement will enable food and agriculture to trade more fairly, and help to expand exports of American agricultural products. The United States, Mexico, and Canada have reached an agreement that supports North American manufacturing and mutually beneficial trade. The new United States-Mexico-Canada Agreement (USMCA) will create more balanced, reciprocal trade that supports high-paying jobs for Americans and grows the North American economies.

All food and agricultural products that have zero tariffs under NAFTA will remain so under USMCA.  Since the original NAFTA did not eliminate all tariffs on agricultural trade between the United States and Canada, the USMCA will create new market access opportunities of dairy, poultry, and eggs for United States exports to Canada. In exchange, the United States will provide new access to Canada for dairy, peanuts, processed peanut products, and a limited amount of sugar and sugar containing products. In addition to the current exports of dairy, poultry, and egg products, Canada will provide new tariff rate quotas exclusively for the United States. Canada and Mexico are our first and third largest exports markets for United States food and agricultural products, making up 28 percent of total food and agricultural exports in 2017. These exports support more than 325,000 American jobs and with the markets expanding, the number of American jobs should follow.

The U.S. government describes this agreement as “the most advanced, most comprehensive, highest-standard chapter on the Environment of any trade agreement.” It includes the first articles to improve air quality while supporting sustainable forest management, preventing and reducing marine litter, and ensuring quality procedures to assess environmental impacts of actions. Digital trade protections will apply to e-books, software, movies, digital music, and other products that use electronic distribution. The agreement will prohibit custom duties and related measures from being applied in relation to their electronic distribution.

USMCA Digital Trade

The agreement also helps to ensure a more seamless supply chain experience when electronic authentications and/or signatures are used.  Since the NAFTA was created before dial-up internet, the USMCA establishes the first rules on digital trade. The USMCA digital trade rules will:

• Ensure that data can be transferred across the borders.
• Regulate data location measures which are used to restrict where data can be stored and processed thus enhancing and protecting the digital ecosystem.
• Promote collaboration between nations on the challenges of cyber security.
• Protects against the forced disclosure of proprietary computer source codes and algorithms.
• Promote open access to government-generated public data.
• Guarantee enforceable consumer protections for privacy and unsolicited communication in the digital marketplace.
• Enhance viability of internet platforms that depend on interactions with users by limiting civil liability for third-party content, except for intellectual property enforcement.

Key Benefits of the USMCA:

1. Expands duty-free markets in Canada and Mexico, specifically in agriculture, manufacturing, and technology
2. Provides “more robust enforcement mechanisms” in numerous areas, including:

• environmental issues
• labor rights
• pharmaceutical issues
• Enhancing protections associated with digital trade

How will USMCA affect your shipments?

USMCA makes trade easier and addresses critical issues, including compliance of regulatory systems, e-commerce, and the protection of intellectual property. When it comes to day-to-day shipping, USMCA offers several advantages over NAFTA:

• The de minimis, or duty and tax exemption threshold, increases for imports into Canada and Mexico, potentially reducing overall shipping costs.
  • Canada will provide for duty free shipments up to C$150 and raise taxes from C$20 to C$40.
  • Mexico will continue to provide USD $50 tax free de minimis and also provide duty free shipments up to the equivalent level of USD $117.
• Quicker clearance for more shipments
• Maintaining higher integrated North American supply chains will continue to benefit all three economies and make them more competitive around the world.

9 Data Elements

Under USMCA a Certification of Origin can be substituted with a set of 9 mandatory data elements and a statement. This information may be provided on any existing shipping document or on a separate stand-alone document, not in any particular order. They include two new elements.

1. NEW: Indicate the certifier (importer, exporter, or producer)
2. NEW: Certifier name, address (including country) and contact information
3. Exporter name, address and contact information (add if different from certifier)
4. Producer name, address and contact information (add if different from certifier)
5. Importer name, address and contact information (add if different from certifier)
6. Description of goods
7. HS tariff classification number
8. Origin criterion*
9. Blanket period (can cover multiple shipments of identical goods for a specified period of up to 12 months)

* The general principles for determining origin under the USMCA are similar to those found in the NAFTA. Under the USMCA, a good will qualify as originating, and will therefore be eligible for preferential tariff treatment, if it satisfies one of the following criteria:

1. The good is wholly obtained or produced entirely in the territory of one or more parties.
2. The good is produced entirely in the territory of one or more of the parties using non-originating materials, provided the good satisfies the applicable product-specific rules of origin set forth in the agreement.
3. The good is produced entirely in the territory of one or more of the parties exclusively from originating materials.
4. The good is produced entirely in the territory of one or more of the parties, is classified with its materials or satisfies the "unassembled goods" requirement, and meets an RVC threshold.

Use of Commercial Invoices

The commercial invoice can be used if it contains the nine data elements and the following certification statement:

"I certify that the goods described in this document qualify as originating and the information contained in this document is true and accurate. I assume responsibility for proving such representations and agree to maintain and present upon request or to make available during a verification visit, documentation necessary to support this certification."

Certification statement for low value shipments:

"I hereby certify that the goods covered by this shipment qualifies as an originating good for the purposes of preferential tariff treatment under USMCA/T-MEC/CUSMA."

This statement can be included on the commercial invoice as long as shipment values are below the following:

• Equal to or less than USD $2,500 - Imports into the U.S.
• Equal to or less than USD $1,000 - Imports into Mexico
• Equal to or less than CAD $3,300 - Imports into Canada

Commodity restrictions

There are NO new commodity restrictions specific to USMCA. The current commodities prohibited from import into the US, Mexico and Canada still apply:

• Items prohibited by CBP (19 CFR Part 12, examples include threatened animal species, counterfeit money/coins and merchandise under economics sanctions.)

Blanket certification

• The certification of origin can be applicable to a single shipment or for multiple shipments and is valid for up to 12 months.
• Blanket certifications currently being used under NAFTA will become invalid on June 30, 2020.
• As of July 1, to continue use of a blanket certification of origin, a new document will be required. You will need to contact your carrier account manager to obtain your new document.

Visit the CBP site for more information on the USMCA.

FAQs

When does the USMCA begin?

All products moving beginning July 1, 2020 are subject to the rules and regulations under the USMCA. NAFTA rules and regulations will continue for all products moving on or before June 30, 2020.

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

USMCA is the superseding law beginning July 1, 2020. There are a few specific areas requiring transitions over a predetermined period of time, for those specific areas you can view the CBP information here.

Is the USMCA here to stay?

There is a joint review of the agreement among the three countries every 6 years. As of now, the USMCA is effective through 2036 unless the government chooses to extend it.

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

• Importers: maintain records for five years from date of importation.
• Exporters: maintain records for five years from the completion date of the certification of origin (or qualifying paperwork).

Is there a required USMCA Certificate of Origin?

No. There is no official certificate of origin requirement for USMCA, as was required under NAFTA. There are nine data points that need to exist on some piece of paperwork whether it be the Commercial Invoice or a separate document. See next question for quick answer or above for full context.

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

Any document stating the product’s origin is acceptable, including a commercial invoice or other transactional documents, but it must also include nine data points:

1. NEW: Indicate the certifier (importer, exporter, or producer)
2. NEW: Certifier name, address (including country) and contact information
3. Exporter name, address and contact information (add if different from certifier)
4. Producer name, address and contact information (add if different from certifier)
5. Importer name, address and contact information (add if different from certifier)
6. Description of goods
7. HS tariff classification number
8. Origin criterion*
9. Blanket period (can cover multiple shipments of identical goods for a specified period of up to 12 months)

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 are the new regulations for imported automotive products?

New regulations for automotive goods that did not exist under NAFTA:

1. Regional value
   Increasing to 75% from 62.5% over the next three years.
2. Labor value
   In order to import a passenger vehicle, the vehicle producer must certify that 40-45% of its value was sourced from manufacturing facilities where workers earned a minimum salary of US$16/hr. Facility eligibility is determined by the U.S. Department of Labor. The value of automotive parts, automobiles, and the value of automotive labor is determined by the CBP.
3. Steel and aluminum origin
   A minimum of 70% of a vehicle manufacturer’s steel and aluminum procurement (annually) must be sourced from North America.

Where can I locate the full USMCA text?

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