Are You USMCA Ready?

Effective July 1, 2020, trade throughout North America will change. The United States-Mexico-Canada Agreement (USMCA) is replacing the long-standing North American Free Trade Agreement (NAFTA), which has been in force since 1994. For some companies, the USMCA offers benefits and protection for US jobs. For others, the USMCA comes with requirements that are more stringent than NAFTA. For all importers and exporters that do business with Canada and Mexico, the USMCA will require companies to reevaluate their regulatory compliance practices in order to maximize these benefits and comply with new requirements.

What’s new under the USMCA?

While the USMCA builds on concepts developed under NAFTA, there are differences. Among the new rules[1], here are some notable changes of which you should be aware: 

First, the USMCA has changed certain rules of origin for USMCA certification. For example, the auto industry will be impacted by higher North American content requirements, as well as minimum wage requirements for products made in Mexico. This will require analysis of the new rules to confirm that imports and exports qualify for USMCA duty exemptions.

Second, Canada will provide new and expanded access for U.S. exports of various dairy products.

Third, de minimis levels—that is, the value thresholds at which imports for personal use become dutiable—will increase in Mexico and Canada.

Fourth, the USMCA has several new chapters that did not exist under NAFTA. These include chapters on Good Regulatory Practices, Digital Trade, Small and Medium-Sized Enterprises, Environment, and Labor. Each of these new chapters comes with new considerations for importers and exporters. Notably, the new Digital Trade chapter seeks to facilitate data transactions throughout North America. For example, the Digital Trade chapter prohibits customs duties and other discriminatory measures from being applied to digital products distributed electronically (e-books, videos, music, software, games, etc.).

Is my NAFTA Form 434 Certificate of Origin still valid?

No. As of July 1, 2020, the Customs and Border Protection agency will no longer accept the NAFTA Form 434 to certify the origin of good. An example of a new certification form will be issued by the government, but the USMCA allows a certifying party to use any format for its certification, as long as it includes the following nine items for each product an importer or exporter claims originated within a USMCA territory:
 

1. Importer / Exporter or Producer
2. Name and Address of Certifier
3. Name and Address of Exporter
4. Name and Address of Producer
5. Name and Address of Importer
6. Description and HS Tariff Classification of the Good
7. Specific Origin of Criteria
8. Blanket Period
9. Authorized Signature and Date

How can I prepare for the USMCA?

If you want to continue to enjoy preferential duty treatment that was provided under NAFTA, you will need to recertify the origin of your products under the USMCA. Not only will this help to protect you from unwanted duties, it will also allow you to possibly take advantage of new benefits. Additionally, if you rely on vendor certifications of origin, then you should request updated certifications that are USMCA compliant. 

Conclusion

In some cases, products either qualify for duty free entry under the USMCA or they don’t. In other cases, it may be possible to modify production processes or obtain raw materials from different sources to ensure imported products qualify. 

Ice Miller has extensive experience with trade law and regulatory compliance and can assist you with this transition. If you have questions about the USMCA, please contact Ice Miller attorneys Dale Stackhouse, Meghann Supino, or Christian Robertson.

This publication is intended for general informational purposes only and does not and is not intended to constitute legal advice.  The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstance.