Leveraging USMCA

After two years in the making, the United States-Mexico-Canada Agreement, or USMCA, is officially a reality. Here’s how to use the new rules to your advantage.

1. Take a Revised Approach to Certification of Origin. Importers are no longer required to complete a certificate of origin document; they can achieve certification of origin by using informal documentation, such as commercial invoices, which the importer, exporter, or producer can complete. The five-year record-keeping requirement remains the same under the USMCA.

2. Pay Attention to New Automotive Rules. During the next three years, 40% to 45% of all auto parts must be made by workers who earn at least $16 per hour. Mexico has agreed to change its labor laws, which sets the stage for unionizing. Regarding country-of-origin rules, the deal requires that 75% of vehicle componentry be manufactured in the United States, Mexico, or Canada; NAFTA requires 62.5%. In addition, 70% of all steel, aluminum, and glass used in producing an automobile must originate in North America.

3. Revisit Canadian Dairy Imports. Restrictions on the import of U.S. ultra-filtered milk into Canada are no longer in place, which allows U.S. farmers to sell milk in Canada without pricing arrangements. In addition, U.S. producers will have access to an additional 3.6% of Canada’s dairy market.

4. Leverage De Minimis Thresholds. Relating to tariffs and taxes, the USMCA increases de minimis thresholds to encourage e-commerce trade among the three countries. These thresholds determine at what price point a tariff or tax will be applied. NAFTA, which was developed before the advent of online shopping, did not address this issue.

5. Take Note of Section 232 Tariffs. The United States maintains the right to impose tariffs under Section 232 of the Trade Expansion Act of 1962, which authorizes the president to impose tariffs on the grounds of national security.

6. Expect Enhanced Protection of Intellectual Property. Modernizing intellectual property terms to keep up with the pace of innovation was a top priority of the new agreement. The USMCA features stronger protection for patents and trademarks in financial services and biotech. It also includes regulations for overseeing the growth of digital trade as well as investing in innovation.

7. Tap Into Monitored Exchange Rates. The three countries agreed not to manipulate exchange rates and to consult each other on their respective economic policies.

8. Remember the Sunset Clause. The three countries agreed to the Sunset Clause, which states that the USMCA will expire after 16 years. Then they can choose to revisit, renegotiate, or withdraw from the deal, and will review the agreement every six years.

9. Leverage Advance Rulings Provisions. Advance rulings are written documents from the customs authority of a USMCA country that address specific questions. Now, anyone related to the trade transaction, not only a domestic resident, can request an advance ruling for an exporter or producer.

10. Take Into Account the China Clause. A USMCA country that intends to negotiate a trade agreement with China, North Korea, or Cuba must notify the other two partners in advance. Before signing the agreement, it must allow the two partners to examine the final text. If the agreement is signed, the other two members have the right to withdraw from the same USMCA, if they consider it.

SOURCE: Vincent Touya, Managing Director, DACHSER USA