USMCA vs. NAFTA: The Essentials
Ready for USMCA?
The U.S.–Mexico–Canada Agreement went into effect July 1, 2020. This massive new pact replaces NAFTA, the 1994 free trade agreement between the U.S., Mexico, and Canada.
Fortunately for importers, the changes from USMCA to NAFTA are minimal. But as with all things involving the importing, the devil is in the details. That is why we created the following primer to provide insight into key changes.
For the latest official news and guidance on USMCA, check out the U.S. Customs and Border Control (CBP) resources. We are also happy to answer your questions about USMCA, or anything to do with importing goods into the U.S.
1. USMCA does not impose new tariffs on zero-tariff goods.
Under USMCA, products that benefited from zero-tariff status under NAFTA will continue to do so, which is great news for importers.
2. Substantive changes are rule-based, not tariff-based.
That said, some rule changes will have a significant impact on imports of dairy, agriculture and automotive industries. Changed rules include:
Increased access for U.S. dairy and poultry farmers to the Canadian market.
A requirement that automobiles have at least 75% of their components manufactured in North America.
A requirement that at least 40% of automobile parts be manufactured by workers making at least $16 an hour.
3. Increased flexibility for certificates of origin forms.
Under NAFTA, exporters were responsible for completing official certificate of origin forms, which confirm a product's eligibility to preferential treatment.
As of July 1, 2020, the NAFTA certificate of origin is no longer valid. And under USMCA, importers are responsible for making claims to customs authorities about a product's origins.
The good news is that, under USMCA, you have more flexibility in how to certify origins:
In addition to importers, exporters and producers can certify a product's origin.
There is no longer a single official form. Informal documents such as commercial invoices are now sufficient.
You must keep certification of origin documentation for at least five years.
4. Higher de minimis thresholds.
The threshold within which low-value goods can enter each country duty-free, known as de minimis, have been increased under under the USMCA, including:
Canada – $150 CAD for customs duties and $40 CAD for taxes
Mexico – $117 USD for customs duties and $50 USD for taxes
United States – $800 USD
Again, you can check out the latest guidance on USMCA from the CBP.
And feel free to contact us anytime with your questions.