By Rebecca Yeager, Export Solutions

Following up to our blog posted in January, Canada has ratified the United States Mexico Canada Agreement (USMCA) and as a result , the USMCA will become effective on July 1, 2020. The U.S. Trade Representative (USTR) is currently working with partners in Canada and Mexico, while U.S. Customs and Border Protection (CBP) is working internally towards implementation.

Prepare Now, But Expect Changes

On April 24, 2020, the USTR issued a press release that Ambassador Lighthizer has notified Congress that Mexico and Canada have met their commitments and that the USMCA will become effective on July 1, 2020. In the release, Ambassador Lighthizer stated:

“The crisis and recovery from the Covid-19 pandemic demonstrates that now, more than ever, the United States should strive to increase manufacturing capacity and investment in North America. The USMCA’s entry into force is a landmark achievement in that effort.  Under President Trump’s leadership, USTR will continue working to ensure a smooth implementation of the USMCA so that American workers and businesses can enjoy the benefits of the new agreement.”

While the effective date has been announced, it is important to note that Customs Commercial Operations Advisory Committee (COAC) in their USMCA Recommendations & Background document has formally recommended that the effective date be delayed until January 1, 2021 and stated that:

“Now is not the time to implement a trade agreement that contains so many important and meaningful changes that will impact certain industries in a significant financial manner. The trade simply is not, and will not be, ready to shift from NAFTA to USMCA….”

However, importers and export must prepare to be in compliance with the USMCA by July 1st.

Four Key Actions to Take Prior to Implementation

CBP has issued a full set of instructions in implementing the USMCA which we recommend you review, however, here are 4 key actions to take:

 1.   Review the Rules of Origin for the specific products that you import and/or products you export and provide a  certification of origin for those items that meet the preference rules.

    • In some cases, there will not be any changes to the specific Rules of Origin, however, there are many areas where significant changes have occurred including automotive, plastics, chemicals, etc.
    • When the USMCA becomes effective, the specific Rules of Origin will be found in General Note 11 of the HTSUS.

  2.    Recognize that the NAFTA Certificate of Origin will no longer be applicable and cannot be used.

    • While the USMCA does not require a specific Certificate of Origin (as NAFTA does), it does require a claim for preferential treatment under the FTA which must include 9 data elements and can be in any format (See USMCA Origin Procedures for additional information):
      • Importer, Exporter, or Producer Certification of Origin port
      • Certifier
      • Exporter
      • Producer
      • Importer
      • Description and HS Tariff Classification of the Good
      • Origin Criteria
      • Blanket Period
      • Authorized Signature and Date
    • Importers are required to have a valid Certificate of Origin in possession when making any USMCA claim. If USMCA is not able to be claimed at the time of entry, for example, if you did not have a valid certification at that time, any future claim and refund will only include the duties paid at the time of entry and will not include the Merchandise Processing Fees.
    • The certification be for a blanket period of up to 12 months.

3. Recalculate non-originating content. De-minimis allowance will increase from 7% to 10% under the USMCA. This means that if the percentage of non-originating content is less than 10%, then the good can qualify as originating.

4. Retain records. Recordkeeping will remain the same, so don’t forget to keep your NAFTA and USMCA Certificates of Origin, as well as all supporting information for 5 years from the date of completion.

Things are much different today than even two weeks ago, so it would not be surprising if the July 1st date is pushed or enforcement of the USMCA delayed due to the current situation with COVID-19. Stay tuned to our blog for any changes to this information. If you would like more information regarding how this might affect your business, please contact us for a free consultation.

Rebecca Yeager is a Trade Compliance Consultant for Export Solutions -- a full-service consulting firm that specializes in helping companies comply with U.S. and international import/export regulations.