10 Things to Know About USMCA, the NAFTA 2.0

Posted by Jim Conrad
Blog originally posted on 13/12/2022 07:45 AM

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It has been two years since the implementation of the United States – Mexico – Canada Free Trade Agreement. For those of you reading this outside of the US, the agreement is referred to in Canada as the Canada – United States – Mexico Agreement (CUSMA); and in Mexico, this agreement is referred to as Tratado entre México, Estados Unidos y Canadá (T-MEC). All three names refer to the same trade agreement.

The USMCA/CUSMA/T-MEC (ok… maybe we should just call it the new NAFTA!) is an attempt to create a more balanced approach to trade in a reciprocal manner and has now been integrated into most US companies’ financial and logistics plans. The long-term view is that it will support higher-paying jobs and grow the economy of the signatories. The Agreement covers $1.3T in annual trade value and is said to support more than 3 million US jobs... somewhat breathtaking numbers.

The USMCA is thought by some to be just a modernized NAFTA, and in some circumstances, that is true. however, there are several areas to pay particularly close attention to. We are continually asked questions surrounding the below.

  • The USMCA does not require a specific certificate of origin. CBP Form 434 is not mandatory under NAFTA. However, claims for trade preference should still contain nine (9) minimum data elements, as noted in Chapter 5 of the Agreement. Missing any one of the nine could cost your company money.
  • The certification of origin may be completed by the importer, producer, or exporter of the good. NAFTA required that only the producer or exporter could complete the certification, so this is a good change but does present some measure of risk as the importer may not have access to accurate component cost or origin information.
  • Certifications may now be electronically submitted with a digital signature, increasing the value of electronic free trade databases like Tradewin’s FTANavigator.
  • Certifications may be for a single shipment of a good or cover multiple shipments of identical goods covering a period not to exceed 12 months.
  • A Party to the Agreement may request that an importer PROVE that goods have been shipped in accordance with the Rules of Origin, Transit and Transshipment delineated in Article 4.18 of the Agreement. Expect CBP to ask for validating information from time to time.
  • Updated criteria for Regional Value Content and new Labor Value Content rules. Auto and textile imports are particularly complex. Get some experienced help.
  • New Anti-Dumping and Countervailing Duty (AD/CVD) provisions. AD/CVD is a priority trade issue for CBP with high penalty risks.
  • A focus on goods sourced from forced labor. This is a growing area of concern for CBP.
  • Commercial shipments where the value of originating goods does not exceed US$2,500
  • Post-entry duty refunds and MPF claims for USMCA-eligible goods

There are new chapters covering Digital Trade, Anticorruption, and Good Regulatory Practices, as well as chapters devoted to the benefits for Small and Medium Sized Enterprises. We are seeing countless new opportunities for those currently utilizing USMCA as well as for those that have not started their program.

Utilizing the USMCA offers excellent cost savings but places significant responsibility on the importer. We urge you to review your company’s free trade program or consider implementing one and to call on relevant free trade experts for guidance.

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Topics: Free Trade Agreements, North America

Blog originally posted on 13/12/2022 07:45 AM

Jim Conrad

Written by Jim Conrad

Jim joined Tradewin in 2009, continuing a successful career in international logistics and trade compliance that began in 1980. He has spent more than three decades in leadership roles overseeing international trade compliance including the positions of corporate Director of Operations and as Chairman of the Board of Directors for a large U.S. shipper’s association. Jim’s technical background covers a wide range of international trade areas including harmonized tariff classification, valuation, anti-dumping and risk analysis. Jim is a graduate of North Shore Community College and majored in Business Administration at Salem State University. He is a member of the International Compliance Professionals Association and a U.S. Licensed Customs House Broker.