New Regulations

Ratified by Canada on March 13, 2020, the USMCA will go into effect on July 1st after the parties develop uniform regulations for implementation. As many companies have been quick to dismiss the USMCA as just a new NAFTA, there are several important changes that we need to be aware of, including rules surrounding certifications of origin, de minimis, and automotive rules of origin and regional value content. Until we have the official implementation rules, due June 1, we will go by the interim implementation instructions, provided by U.S. Customs and Border Protection on April 16, 2020.

For those concerned they won’t have enough time or guidance on the implementation procedure, USCBP will be offering a help center staffed with experts from operations, legal and audit disciplines to offer guidance, clarification, and documentation for those in need to facilitate the smooth implementation of the treaty. Inquiries for the USMCA center can be directed to USMCA@CBP.dhs.gov

The USMCA updates the certificate of origin rules that importers will no longer need to submit a formal certification document. Commercial invoices can now be used as documentation of the certificate of origin and can be created by importers, exporters, or producers of the goods. According to the interim implementation instructions, “Section 202 of the USMCA Implementation Act specifies the rules of origin used to determine whether a good qualifies as an originating good under the Agreement. The HTSUS will be amended to include GN 11, which includes both the general and specific rules of origin, definitions, and other related provisions.” GN 11 can be found in the HTSUS 2014.

The goal of the USMCA is to bring manufacturing back to the United States, especially in the case of cars and car parts. The enhanced regional value content and automotive rules of origin bring the total North American content of a vehicle to 75%, up from the 62.5% needed for NAFTA. Of that 75%, the auto parts are divided into three categories: Core parts will require a 75% minimum North American content; principal parts have a 70% minimum and complementary parts require 65% content from North America. Automakers will have three years to implement these new RVC standards. In addition to the content requirements, 40% of automobiles and 45% of light trucks produced must be made using an average labor wage of $16 per hour.

Updates to the de minimis thresholds are:

Canada – $150 CAD for customs and $40 CAD for taxes

USA – $800 USD

Mexico – $117 USD for customs and $50 USD for taxes

Along with the changes, the USMCA contains a sunset clause that states the term of the agreement will be for 16 years but after 6 years it can be revisited to extend, renegotiate, or vacate it entirely.

While this in no way covers the breadth and scope of the changes, we won’t have the full requirements for implementation until June. However, we recommend everyone take a good look at their commodities, supply chains, and partnerships to ensure they’re following the interim rules as the implementation of the USMCA will bring significant changes to the way we trade with Mexico and Canada. If you have questions or concerns about the USMCA, how it differs from NAFTA or how to get started on the implementation process, please reach out to your TOC representative for guidance.