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The USA, Canada and Mexico agreement that will change trading rules in North America

On April 24, 2020, the Trump administration notified Congress that the U.S.-Mexico-Canada Agreement (USMCA) will take effect on July 1, 2020.

This agreement will replace NAFTA (the North American Free Trade Agreement). And this agreement will create a modernized free-trade system between Canada, The USA and Mexico that addresses recent and emerging critical trade issues, such as the harmonization of regulatory systems, e-commerce and the protection of intellectual property including automobiles, agriculture, healthcare products, chemicals, cosmetic products etc.

USMCA, CUSMA and T-MEC is the same agreement that has different names in Canada, U.S. and Mexico. In The USA it is USMCA (the United States-Mexico-Canada Agreement). In Canada it is CUSMA (the Canada-United States-Mexico Agreement). And in Mexico it is T-MEC (Tratado entre México, Estados Unidos y Canadá).

So, lets talk about some key changes under this agreement. From July 1, 2020:

Certification of Origin

  • Under the agreement, importers will no longer be required to complete a formal certification document.
  • Certification of origin can be achieved using informal documentation, such as commercial invoices and can be completed by importer, exporter or producer.
  • Previous NAFTA certificates and certification documentation under USMCA must be kept for a minimum of five years.

De Minimis

Now Low Value Shipments could entry each country duty free:

  • If you ship to Canada from USA or Mexico and the value of your cargo is less than 200 CAD – it is duty free
  • If you ship to the USA from Canada or Mexico and the value of your cargo is less than 800 USD – it is duty free
  • Mexico – $117 USD for customs and $50 USD for taxes

Dispute Resolution

  • NAFTA Chapter 20, country-to-country dispute resolution mechanism maintained
  • NAFTA Chapter 19, anti-dumping/countervailing duty dispute-resolution mechanism maintained
  • NAFTA Chapter 11, investor-state dispute resolution mechanism (ISDS) eliminated between Canada and the United States but maintained between the U.S. and Mexico.

Automotive Rules of Origin and Regional Value Content

  • Total North American content of a vehicle must equal 75% (Previous agreement NAFTA required only 62.5%).
  • 70% of all steel, aluminum, and glass used in the production of the automobile must originate in North America. In the Protocol of Amendment, the definition of steel was modified to note that it must be “melted and poured” in North America in order to qualify for duty exemption. The new definition will take effect seven years after the USCMA’s implementation. The definition of aluminum remains the same as under NAFTA but will be revisited 10 years after the USMCA’s implementation.
  • Part content will be divided up into core, principal, and complementary parts with content requirements of 75%, 65%, and 60% respectively.
  • 40% of an automobile and 45% of a light truck must be produced using an average labor wage of $16/hour.
  • Quotas totalling 2.6 million Canadian and Mexican vehicles (well above the current 1.8 million) were established the USMCA
  • Quotas of $32.4 billion in Canadian auto parts imports and $108 billion in Mexican auto parts imports were established in the USMCA

Dairy Market Access

  • Restrictions on the import of U.S. ultra-filtered milk into Canada have been removed
  • U.S. producers will have access to an additional 3.6% of Canada’s dairy market
  • Canada’s dairy supply management system, which places limits on foreign imports is maintained

Intellectual Property

  • Patent changes on biologics in the original agreement were to be set at 10 year for all countries. However, the Protocol of Amendments removed this provision, leaving the patent period the same as it was under NAFTA – five years in Mexico, 12 years in U.S. and eight years in Canada.
  • The term of copyright was extended from 50 years after an author’s death to 70 years.

Sunset Clause

  • The terms of USMCA will remain in effect for a period of 16 years, at which time the parties can choose to revisit and/or renegotiate those terms, or withdraw from the agreement altogether.
  • However, after six years, the term of USMCA’s sunset (16 years) can be revisited and potentially extended if the parties feel doing so would be beneficial.

You must know that every country operates under a special customs law regarding the moving of goods entering or leaving their borders. Customs regulations and laws of import and export of goods are constantly changing in Canada and the USA, sometimes even on a daily basis.

Milestime Inc Customs Brokerage Division is responsible to monitor all these rules and regulations changes and ensure that they are followed properly, in order to process customs clearance of the goods quickly as possible without any delays and issues for the individual or business.

Improve your freight shipping with our experienced logistics professionals, on demand capacity and 24/7/365 tracking and tracing access. With the same day, planned and contractual service capabilities, we would be more than happy to help you to manage your freight and to solve your the most difficult logistics demands. Any shipping need can be met by our experienced freight specialists who will effectively help to create a custom solution that fits your budget and delivery requirements. Call 647-686-6434 or fill in the contact form to request more information about our Logistics Services.