USMCA Takes Effect – Key Changes & Tips

The US-Mexico-Canada Agreement (USMCA) trade pact went into effect July 1, replacing 26-year-old NAFTA and bringing new regulations aimed at boosting North American economies. While the USMCA retains a structure similar to NAFTA, changes to rules of origin (ROO) requirements, de minimis levels, the sunset clause and more will have wide-ranging impact for shippers going forward.

RULES OF ORIGIN REQUIREMENTS

• Significant adjustments have been made to NAFTA’s rules of origin (ROOs), particularly for certain textiles and apparel, chemicals, pharmaceuticals, electronic projects, energy products, and automotive products.
• Products that previously qualified for duty preferences may no longer qualify; products that previously did not qualify may now qualify (e.g., certain elastic fabric or sewing thread must be sourced from a USMCA Party to receive preferential treatment).
• Automotive ROOs: Automakers must annually certify that 75% of auto content originates from Canada, the US, or Mexico. A certain percentage of vehicle content must be made by workers earning at least $16/hr.

DE MINIMIS

• De minimis thresholds determine which low-value parcels can be shipped across international borders tax free, tariff free, and with simple customs forms.
• Canada will raise de minimis levels from 20 to 40 Canadian dollars and provide duty-free shipments for items valued up to 150 Canadian dollars.
• Mexico’s de minimis values will remain at $50 and provide duty-free shipments up to the equivalent level of $117.
• These improvements will encourage online shopping, a benefit not only to US sellers but also to Mexican and Canadian buyers.

CERTIFICATES OF ORIGIN

• USMCA’s process of obtaining a certificate will be administratively less burdensome.
• While previously only exporters or producers could complete certificates of origin, an importer can now do so as well.

SUNSET CLAUSE

USMCA will terminate 16 years after its entry into force unless all Parties agree to extend it by another 16 years. The decision will be made during a joint review conducted six years after its entry into force. If a Party determines that it does not want to extend USMCA during any joint review, the Parties will conduct annual joint reviews during the remainder of the USMCA’s term.

OTHER AREAS WITH KEY CHANGES

Labor Investigations, Intellectual Property Rights Protections, Investor-State Dispute Settlements, Digital Trade.

VISIBLE SUPPLY CHAIN ADVICE

• Review previous NAFTA Certificates of Origin and ensure that suppliers are compliant with the new USMCA deal.
• Keep the sunset clause in mind when restructuring the supply chain; contingency plans should be made over the long term due to the agreement’s possible termination.
• Get in a better position to benefit from the USMCA by mapping the supply chain and establishing visibility into supplier networks.
• Invest in visibility tools that allow supply chain managers to quickly qualify, onboard and monitor suppliers remotely, which will be key throughout the pandemic.

Contact Visible Today

Visible Supply Chain Management has thousands of satisfied customers and clients that rely on our company for their various shipping and logistics needs.  We’re here to help you today.  Contact us at 877.728.5328 to start the conversation about how we can help your company.