New USMCA Trade Agreement to Replace NAFTA on July 1, 2020

As confirmed by each participating country, the United States – Mexico – Canada Agreement (USMCA or CUSMA) is scheduled to become effective July 1, 2020. Replacing the North American Free Trade Agreement (NAFTA), the updated agreement allows the three countries to continue their ongoing tariff-free trade in qualifying goods and services within North America.

All three participants in the agreement have now completed their internal domestic ratification processes. Prior to the effective date, the parties must align on uniform regulations to help govern the agreement.

The US. Customs & Border Protection (CBP) recently published its USMCA Interim Implementing  Instructions. These instructions, along with the agreement itself, should be carefully reviewed by all North American importers, especially those currently utilizing NAFTA privileges, to identify any required changes to their import programs.

Built on the foundation provided by NAFTA, the new agreement represents significant updates and changes including the following areas:

  • Rules of origin and origin procedures including Regional Value Content (RVC)
  • Establishment of new de minimis thresholds for lower value imports
  • Goods market access
  • Digital trade
  • Promotion of greater use of fibers, yarns, and fabrics from within the region
  • Specific labor requirements and provisions for qualifying goods

For instance, the USMCA agreement will require 75% North American automotive content, compared with 62.5% under NAFTA, and 40%-45% content from so-called “high wage” areas. While this requirement may be phased in over three to four years, automakers must certify compliance with the initial requirements, when the agreement takes effect. In this regard, the Mexican government recently requested that the United States and Canada grant its automotive industry extra time to adapt its supply chains as the deadline to implement the new North American trade deal rapidly approaches.

Delmar continues to closely monitor all trade developments including those related to the USMCA trade agreement. For additional information and assistance concerning this notice, please contact your local Delmar Representative or our North American Advisory Services team.

Additional information:

CUSMA: Canada – United States – Mexico Agreement

USMCA: United States – Mexico – Canada Agreement

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