USMCA technical overview. 10 main changes.

Considering the USMCA will enter into force on July 1, 2020, below you will find a general overview of the main changes:

 

1. Some rules of origin were modified in the USMCA, including those applicable to the automotive and textile industries, consequently, it is important for companies doing business in the region to analyze the rule of origin to confirm the qualification of goods to apply for preferential duty treatment under the USMCA.

 

2. For purposes of qualifying as USMCA originating goods in the automotive industry, it was created the Labor Value Content method. This rule requires that 40-45 percent of auto content be made by workers earning at least 16 USD per hour.

 

3. The USMCA increases the “de minimis” threshold percentage of non-originating inputs allowed in qualifying goods, from 7% to 10%.   Thus, it could be that certain goods with no qualification for preferential duty treatment under NAFTA may qualify under the USMCA.

 

4. Under NAFTA, the certification of goods can be by the exporter or producer.   Under the USMCA the importer can certify the origin by using the minimum parameters of information and data (no prescribed form).  This possibility will be effective in 3.5 year.

 

5. While NAFTA originally required automakers to use 62.5% of North American-made parts in their cars to be imported duty free, the USMCA progressively raises the bar to 75% by 2023.

 

6. After July 1, 2020, the NAFTA certificate of origin is no longer acceptable to certify that goods are originating and eligible for preferential duty treatment under the USMCA.   Under the USMCA all importers of records need to implement a certification by considering the criteria of minimum information and data established by the USMCA.

 

7. USMCA excludes the so called “tracing list” required for certain goods of the auto parts industry to be considered as originating regardless its country of origin.

 

8. Under the provisions of the USMCA if the claim of preferential duty treatment is applied after the importation, only duties will be refunded but not the merchandise processing fee paid by US importers.

 

9. A new mechanism to solve labor disputes has been included in the USMCA: The Rapid Response Labor Mechanism ("RRLM"). This mechanism will be implemented for alleged violations of the right of freedom of association and the right to collective bargaining.   It is highly recommended that companies review and implement actions to ensure the right of freedom of association and collective bargaining.   Otherwise, the negative effect may transcend to commercial sanctions such as: suspension of preferential duty treatment, penalties on certain goods supplied by the responsible manufacturing company and prohibition of exporting goods.

 

10. The USMCA also includes new provisions covering trade in specific manufacturing sectors, including:  Information and Communication Technology, Pharmaceuticals, Medical Devices, Cosmetic Products, and Chemical Substances.

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