If you’ve had your ear to industry news for the last couple of years, chances are relatively high that you’ve caught wind of the new UMSCA agreement going into effect in replacement of NAFTA. In late 2018, there was tons of talk about the new agreement as it was being considered and modified. However, it wasn’t until recently (July 2020) that the agreement was actually passed.
So what is the new USMCA agreement and how does it affect importers? Is it the same as NAFTA with a different name, or is it an entirely different international trade agreement altogether? These are a few of the larger questions we hope to provide more clarity to in this article:
New USMCA for Importers: What You Need to Know
The new USMCA was instituted as a replacement to the old NAFTA trade agreement between the U.S., Mexico, and Canada. USMCA (appropriately abbreviated for United-States-Mexico-Canada) has carried over many of the popular regulations included in NAFTA, but has changed quite a bit to accommodate new trade practices and shipping processes across the three countries.
Here are some of the higher-level important pieces you need to be aware of as an importer:
1) Certification of Origin
Certification of Origin is incredibly important when it comes to preferential tariff treatment for certain shipments. Unfortunately, this was difficult to navigate for importers, as NAFTA regulations only allowed for the shipper/exporter to issue the original Certification of Origin.
With the new USMCA agreements, importers can now make a claim for preferential tariff treatment based on the certification of origin of the goods – even without the official document. See, with USMCA, official documents are no longer required. They only need nine pieces of data listed on the invoice or another document:
– Importer/Exporter/Producer Certification of Origin
– Certifier Name
– Exporter Name
– Producer Name
– Importer Name
– Description and HS Classification of the Good
– Origin Criteria
– Blanket Period (if applicable)
– Authorized Signature and Date
A De Minimis refers to the value at which the goods are free of duties or taxes. Often, this number is $2,500 for international shipments outside of Mexico and Canada, but with USMCA agreement, that value will remain at $800 USD or less for US imports.
Mexico is continuing to provide a $50 USD tax-free de minimis. However, they have also introduced new rules for any shipments within the De Minimis range that have a commercial value up to $117 USD. So a shipment below $50 is tax and duty free. A shipment between $50 and $117 is duty free, but taxes will still be applied.
Canada raised its De Minimis tax level from $20 CAD to $40 CAD. Imports under $40 are tax and duty free, but those between $40 and $150 CAD are duty free, but taxes will still be applied.
For businesses in the clothing or textile industry, you’ll want to brief yourself on new USMCA requirements. There are a several rules regarding sewing thread, elastic, and pocket bag fabric which are outlined in chapters 61 and 62, subheadings: 6002, 5204, 5401, 5402, and 5508.
There was a pretty big crack down on the trade of automobiles between the U.S., Mexico, and Canada with the new USMCA agreement as opposed to the old NAFTA agreement. With the new USMCA trade terms, 40% of an automobile must be built from workers who are earning a bare minimum wage of $16 USD per hour. Also, new motor vehicles must be built 75% of North American origin (which is up from 62.5% in NAFTA).
Duration of USMCA
The USMCA is currently set for a duration of 16 years. Obviously, leaders will check-in and assess whether or not current measures are effective and helpful – the first review will be done at the sixth year mark. (This is also in contrast to NAFTA, which had no expiration date)
Please reach out to our TEAM if you have any additional questions!