U.S. and Mexico Announce Broad Agreement on NAFTA Changes

Both the U.S. and Mexican governments recently announced agreement on broad changes to the existing North American Free Trade Agreement (NAFTA) framework. Specific areas of agreement between the two countries include:

Mexican De Minimis Threshold Increases:

  • Mexico will increase its De Minimis value to US$100 from US$50 allowing these shipments to enter without duties or taxes and ensuring minimal entry requirements.

Automotive Regional Value Content Increases:

  • Overall increase in regional automotive value content to 75% from the current 62.5%;
  • 70% of all steel, aluminum, and glass used in production to originate in North America;
  • Up to 7 key components, including much of the powertrain assembly, to originate in North America.

New Labor Value Content:

  • 40-45% of auto content must be produced by workers earning at least US$16 per hour.

Agricultural Products Duty Free:

  • Tariffs on agricultural products traded between the United States and Mexico will remain at zero.

Includes a Sunset Clause:

  • There is a 16 year sunset clause that requires the parties to review the agreement every six years and, upon approval, renew the agreement for 10 years. Should the parties not renew the agreement, differences may be addressed during the remainder of the term.

Existing Section 232 duties covering steel and aluminum imports to the U.S. are not specifically addressed under the agreement and would remain in effect.

The U.S. administration is expected to issue a formal notice to Congress by August 31st, 2018 starting a 90-day consultation period before it can sign the agreement. Mexico is hoping to sign the deal prior to December 1st, 2018 when its new president will take office. The U.S. will then require Congressional ratification and implementation which is not expected to occur until 2019. Canada’s participation in the agreement remains unknown as it formally rejoined negotiations only recently.

Please contact your local Delmar International representative or our North American Customs Advisory Services Group for additional information.

Additional References:

USTR Fact Sheet (1)

USTR Fact Sheet (2)

USTR Fact Sheet (3)

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