Posted on July 09, 2020
On July 1st, the new United States-Mexico-Canada Agreement (USMCA) went into effect. Also known as the Canada-United States-Mexico Agreement (CUSMA) and the Tratado entre México, Estados Unidos y Canadá (T-MEC) in Canada and Mexico respectively, this free trade agreement was designed to replace the 26-year-old NAFTA. Rather than completely restructuring the previous NAFTA, the USMCA is primarily a renegotiation of the original agreement intended to benefit each participating country. In addition to renegotiated terms, the USMCA also includes new stipulations on labor rights, environmental standards, intellectual property, and digital trade.
Some of the significant provisions outlined in the USMCA are:
De Minimis Values
The updated and new provisions regulate which goods qualify for preferential tariff treatment, but there have been minimal process changes from an actual shipping perspective. The primary change is the updated proof of origin requirement for shipments meeting certain value thresholds. The new “Certification of Origin” replaces the previous “Certificate of Origin”. There is no set format outlined for the Certification of Origin, but the following data elements are required.
Compared with the NAFTA, whose provisions mostly went unchanged for 24 years, the USMCA has more frequent reviews and a shorter minimum lifespan. Some businesses affected by the new trade agreement are worried that the agreement could end up being too short-lived. The USMCA features enhanced favor for domestic production of goods, which leads to a greater incentive for countries to shift production to the dominant US consumer market. If the USMCA’s lifespan ends up being shorter than expected, the businesses which fund US-based production and supply chain infrastructure to take advantage of these favorable tariffs may not see a return on their investment.
The USMCA must be reviewed by the three constituent nations every six years. The agreement is set to expire after 16 years unless the countries agree to extend the deal during these reviews. Further information on the USMCA can be found on the US Trade Representative website: https://ustr.gov/usmca
Contributor: Tyler Lesley
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