The United States – Mexico- Canada Agreement (USMCA), known in Canada as Canada – US – Mexico agreement (CUSMA), establishes a framework for duty-free trade among the three nations, provided goods meet specific rules of origin.  Recent developments have underscored the importance of ensuring goods qualify under CUSMA to avoid newly imposed tariffs. 

Understanding CUSMA’s Rules of Origin

To qualify for CUSMA’s preferential tariff treatment, goods must meet the agreement’s rules of origin, which outline the required North American content:

• Wholly Obtained or Produced Goods:  items entirely sourced or manufactured within Canada, The US, or Mexico.
• Regional Value Content (RVC) Requirement: Certain products must contain a minimum percentage of their value originating from North America.
• Tariff Shift Rule:  Non-originating materials used in production must undergo a specified change in tariff classification within North America.

Recent Tariff Developments

President Donald Trump announced a 25% tariff on imports from Mexico and Canada, citing concerns over illegal immigration and drug trafficking.  However, goods that qualify under CUSMA are exempt from these tariffs, emphasizing the importance of exporters ensuring compliance with the agreement’s rules.

Steps to Ensure Goods Qualify Under CUSMA

1. Classify Your Products Accurately:  Determine the correct HS code for your product, as it’s essential for applying the rules of origin.
2. Analyze the Rule of Origin:  Consult CUSMA’s specific rules to verify that your product meets the criteria, considering RVC thresholds and any required tariff shifts.
3. Maintain Detailed Documentation:  Keep comprehensive records of sourcing, production processes, and costs to substantiate your products’ origin status.
4. Complete the Certification of Origin:  A formal certificate isn’t mandated, but a written statement confirming that the goods meet CUSMA’s origin requirements is necessary.  It must include all of the data elements set out in the agreement. 
5. Stay Updated on Regulatory Changes:  Trade policies can evolve.  Regularly monitor updates from official trade authorities to ensure ongoing compliance.

In light of recent tariff implementations, ensuring your goods qualify under CUSMA is crucial for maintaining competitive access to the US and Mexican markets.  By diligently following the agreement’s rules of origin and keeping abreast of policy changes, Canadian exporters can continue to benefit from tariff-free under CUSMA. 

For more information about managing the tariffs in place, contact Tradewin for assistance.