For many years, the trilateral trade bloc in North America has worked together to minimize the tariff and non-tariff barriers of trade between the United States, Canada and Mexico. The United States enacted a special trade program with Canada in 1988, called the Canada-United States Free Trade Agreement (CFTA). A few years later, Mexico joined the agreement with Canada and the United States to form the North American Free Trade Agreement (NAFTA), which entered into force on January 1, 1994. This agreement has been in force for 26 years, and the current administration believed it was time for some updates.
Negotiations for the USMCA began in 2017, and in January of 2020, the United States administration signed the USMCA Implementation Act into law. By March 13, 2020, the United States, Canada and Mexico passed the United States-Mexico-Canada Agreement (USMCA) through their national legislative bodies. The USMCA will go into effect on July 1, 2020.
The USMCA will not change 80 percent of the current NAFTA tariff structure on most manufacturing and agricultural goods. The majority of the change provisions are in the Automotive sector, which includes some of the following:
The USMCA must be reevaluated every six years and has a 16-year sunset clause, unlike its predecessor. The primary responsibility for compliance has shifted from the exporter/manufacturer to the importer.
Many have asked about the new form – will there be a new USMCA form that mirrors the NAFTA form? Customs has advised that they are creating a USMCA template that provides the shell that can be used, and it will be made available on the USMCA website. A form is not required – just the data that validates the claim at the time of entry.
The required data can be provided electronically, on a Certificate of Origin or on the Commercial Invoice itself. If Customs does request additional supporting documentation at the time of entry, or a later date, the importer will need to provide this information on a document to submit to CBP. This can be included on a Certificate of Origin, Commercial Invoice or a self-created USMCA form.
The following nine pieces of data must be provided at the time of entry to be eligible for USMCA duty deferral, including the Merchandise Processing Fee. If the importer can validate the USMCA claim at a later time, they can file a Post Summary Amendment or a Protest to request a duty refund. Still, they will not be eligible for the Merchandise Processing Fee – as the law is currently written. Discussion is underway to have this portion of the law corrected to allow for a full refund of all eligible duty at the time of PSC or Protest approval.
Below are the nine pieces of information that must be provided electronically to CBP at the time of entry.
A certification of origin that is the basis for a claim for preferential tariff treatment under this Agreement shall include the following elements:
On Tuesday, June 16, 2020, CBP published the Interim Implementing Instructions, including the Phased approach to the new trade program. Phase I Implementation will be from July 1, 2020, through December 31, 2020. This six-month period will give Customs and Trade time to work through some of the challenges that will arise with new guidelines. For more information, please view the resources provided in the USMCA Overview located on CBP’s website or contact CBP at [email protected].
Who said logistics had to be complicated? We certainly didn’t. Contact our team to learn more about our solutions.