The United States-Mexico-Canada Agreement (USMCA) remains on target for implementation this Summer. The governments of all three nations are planning on full implementation on July 1st and so it is important for all importers and exporters are ready for it.
The major changes are with the Automotive Trade in which they are looking to revise the rules to require additional North American content. Under NAFTA, in order to qualify for duty-free treatment producers would have to have 62.5% of the vehicle’s parts made in North America. Under USMCA, that is upped to 75%.
There are also labor protections for the auto industry, with a mandate that for a product to qualify for zero duties the minimum wage for workers who make the product must be $16 an hour by 2023. While this will not likely be an issue for US producers, it does mean that importers of cars from Mexico will have to make sure that that the wages will be more in parity with US and Canadian workers.
One relief is that the NAFTA Certificate of Origin, CBP form 434, will no longer be necessary. There will be certain information that is required to be allowed duty-free treatment, but these data points can be part of documents in the regular course of business, such as invoices.
There will be some additional intellectual property protections and enforcement going into effect. Companies can now maintain copyright for 20 more years- from 50 years to 70. Duties are being eliminated on many electronic products and protections for international tech companies are being standardized across international lines.
Drawback remains the same as before, with direct identification still necessary to claim refunds. The rules involved for applying for and claiming drawback have the same requirements as under NAFTA, and so all claimants can expect to continue business as usual here.
One unique aspect of USMCA is that it has a sunset clause, which will cause the agreement to expire in only 16 years unless renewed. This sets up USMCA to be more of a changing agreement than NAFTA, with regular negotiations happening every few years.
With the changes almost immediately upon us, every company moving their products in North America needs a broker and drawback specialist that has the expertise to stay compliant- and JM Rodgers can help you in every aspect, please contact us at www.jmrodgers.com
James Rodgers CEO