7 Things to Know about USMCA
Sunset is following the current USMCA (a “new” NAFTA) and its potential impacts on import and export activities for its member countries of the U.S., Canada, and Mexico.
Below are seven (7) things to know as this important regulation is being negotiated:
- The deal is extensive and all-encompassing. The USMCA comprises 34 chapters and governs more than $1 trillion in trade, the BBC reports in US and Canada reach new trade deal to replace Nafta. Some of those details relate to specific products. For example, Canada and Mexico now have a quota of 2.6 million of exportable cars to the U.S. as a protection for their car industry (i.e., should the U.S. impose a global tariff on car imports). In addition, 40% of car parts of vehicles produced in the USMCA area must be made in areas of North America that are paying wages of $16 an hour.
- It may not be around for more than 16 years. The USMCA’s automatic sunset clause (meaning the terms of the agreement expire, or “sunset”) could result in the loss of this agreement in just 16 years.
The deal is also subject to a review every six (6) years, at which point the member countries can decide to extend the agreement.
- There are new rules for express shipments. From a transport perspective, the new NAFTA requires each of the member countries to either adopt or maintain specific expedited customs procedures for express shipments.
- No more certificates of origin needed. USMCA has eliminated the need for a NAFTA Certificate of Origin (CBP-434) and now allows importers to certify the origin of the merchandise. The new agreement also requires Canada to raise its de minimis level from $20 to $150 (Mexico agreed to raise its de minimis from $50 to $100 and the U.S. de minimis level is $800). This is the threshold for a product’s value below which no duty or tariff is charged. Products below the level undergo minimal clearance procedures, such as customs and paperwork requirements.
- Farmers will have new export opportunities to sell dairy products into Canada. Canada will provide new access for U.S. products, including fluid milk, cream, butter, skim milk powder, cheese, and other dairy products, the Treasury points out. (Under the original NAFTA, Canada limited how much milk, cheese, and other dairy products could come in from the U.S.). The new agreement also eliminates the tariffs on whey and margarine. For poultry, Canada will provide new access for U.S. chicken and eggs and increase its access for turkey. Under the modernized agreement, all other tariffs on agricultural products traded between the United States and Mexico will remain at zero.
- More vehicle parts manufacturing in North America. The new deal will require more of a vehicle’s parts to be made in North America in order for the car to be free from tariffs. It requires that 75% of the parts must be made in Canada, Mexico, or the United States, about 12 percentage points higher than under the original NAFTA. The provision will help keep the production of car parts in the United States and bring back some production that moved abroad.
- More coordinated transportation moves. USMCA also includes commitments to streamline the way goods are moved across the border. Each country, for example, commits to using information technology that expedites procedures followed when releasing goods. There’s also the pledge to coordinate procedures at adjacent ports of entry where specific facilities or examinations are needed to process the freight. Although the countries are making these commitments the Mexico infrastructure will not be changed and delays will continue to be inevitable.
For questions regarding shipments being impacted by these new regulations, please contact your logistics rep directly. For cross-border inquiries, contact [email protected].
Source: DB Schenker