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On January 29, 2020, U.S. President Donald Trump signed the new trade deal into law, replacing the 26 year old North American Free Trade Agreement (NAFTA). On the same day, a bill was introduced into the House of Commons to ratify the deal in Canada. With a minority Canadian government, opposition have requested analysis on forestry, agriculture, aluminum and steel sectors which may delay Canadian ratification.
The agreement will come into force on the first day of the third month after the final country, i.e. Canada, has ratified and serves notice it is ready to proceed. The period provides all parties time to develop their uniform regulations.
The new deal is referred to as USMCA (United States-Mexico-Canada Agreement) in the U.S., CUSMA (Canada-United States-Mexico Agreement) in Canada and T-MEC (Tratado entre Mexico, Estados Unidos y Canada) in Mexico.
The full text of the agreement can be found here and following are links to some key provisions:
National Treatment and Market Access for Goods
Agriculture
Rules of Origin
Origin Procedures
Textile and Apparel Goods
Key points of interest:
- Facilitating trade in goods:
- The original NAFTA eliminated virtually all tariffs between Canada, the U.S. and Mexico, with very few exceptions. The USMCA maintains these benefits and ensures that the vast majority of USMCA trade will continue to be duty-free. Additionally, a new Customs Administration and Trade Facilitation Chapter, standardizes and modernizes customs procedures throughout North America to facilitate the free-flow of goods.
- Automotive country of origin rules:
- To qualify for zero tariffs, automobiles must have 75 percent (previously 62.5 percent) of their components manufactured in Mexico, the U.S. or Canada, including 70% North American steel and aluminum.
- Labour provisions: By 2023, an increased percentage of automobile parts (40 to 45 percent) has to be made by workers who earn at least $16 an hour.
- Agriculture:
- Canada has agreed to give U.S. farmers more access to the Canadian market in the form of tariff rate quotas for dairy, poultry and egg products.
- New market access in the form of tariff rate quotas for refined sugar and sugar-containing products.
- A modernized Committee on Agriculture Trade, which will provide a forum for Parties to address issues and trade barriers.
- Obligations for agricultural biotechnology that will increase innovation, transparency and predictability.
- Dispute settlement:
- Preserving the use of binational panels to resolve disputes on countervailing and anti-dumping duty matters, which is critically important to preserving market access outcomes and defending Canada’s interests in trade remedy cases.
- Preserving the state-to-state dispute settlement process of the original agreement, and to improve elements of this process with respect to transparency and expediency.
Importers should obtain valid Certificates of Origin for both trade agreements for 2020, to ensure there is no lapse in preferential trade status prior to the new deal taking effect. Once the new trade agreement becomes effective, NAFTA Certificates of Origin will no longer be valid and must be replaced with USMCA/CUSMA Certificates of Origin.
All goods must be certified under the new Rules of Origin, which are different than the current NAFTA rules, in order to obtain benefits under the agreement.
For more information, contact Brian Rowe, Director – Customs Compliance & Regulatory Affairs.
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