Skip to main content

On July 1, NAFTA expired and was replaced by the newly ratified USMCA agreement.

Like NAFTA this trade agreement covers the US, Mexico and Canada and provides for the elimination or reduction of duties on many goods produced in and traded among the member nations. In fact, most of the rules remain the same though some important changes have been made. Included in the final rules are enhanced protections for intellectual property rights and more comprehensive obligations to protect the environment.

In an effort to keep this agreement up to date on changing trade issues, USMCA has a 16 year sunset clause and provides for a periodic review every six years. This corrects a perceived problem with NAFTA in that it was difficult to adapt the agreement to meet current trends.

USMCA provides for higher de minimus levels for member’s imports into each country and will address service market as well as trade issues. Most of the rules will become effective immediately upon implementation though the automotive sector will see a “phase in period” for some rules.

NAFTA country of origin forms ceased to be accepted on July 1 and the new reporting requirements must now be met. There is no specific USMCA form on which the preference claim is to be made. Instead there are nine required data elements which must be provided on the invoice or another shipping document. A generic form containing the required elements may also be utilized and records to support the preference claim must be maintained for five years.

The automotive sector is seeing the most sweeping changes. The Regional Value Content requirement will increase from the current 62.5 percent to 75 percent over a four year period. There are requirements for the use of steel and aluminum originating in North American and a new labor value rule that requires a significant portion of qualifying vehicles to be produced in facilities where workers are paid an average of $16 per hour. These rules cover new automobiles and most parts used in their manufacture.

Textiles are subject to their own product specific rules of origin just as they were under NAFTA. Additionally, new rules regarding specific components to be sourced in North America should be beneficial to manufacturers in USMCA countries. Revised rules will allow manufacturers to use textile inputs not generally available in North America, think rayon fibers.

Revising or replacing the NAFTA agreement was a central objective of the Trump administration, and the ratification of USMCA is a significant accomplishment. For the US, this agreement focused on providing more protections for workers, copyright holders and service providers. It also requires more manufacturing be done in North America in order to qualify for preferential treatment, something that should benefit all members. In addition to the formal agreement, side letters between the governments address concerns specific to each member nation.

This is just an overview of what is a voluminous and complex agreement, but it does mirror NAFTA in many ways and requires a complete rethinking of regional trade. With some exceptions, such as those mentioned above,  importers and exporters can continue to operate this month very similarly as they have the past 26 years.

USMCA is viewed by most organizations as an improvement and more adaptable due to the provision for periodic review. We invite your questions on this very important agreement.

For more information, please contact Sam McClure, Director of Customs & Compliance Services, .

Close Menu

Ready to Get Started?

Sign up for a CVI account or ask to see our services in action.

Get started »