06/24/2020

USMCA – It’s Like Déjà vu All Over Again

For those of you that might have been around in 1994 for the implementation of the North American Free Trade Agreement (NAFTA), Yogi Berra’s (NY Yankees catcher) famous déjà vu line may come to mind when you consider its replacement, the US-Mexico-Canada Agreement (USMCA). The implementation of the USMCA is upon us, and it will replace NAFTA on July 1, 2020. Now is the time to prepare for the change, and there are plenty of resources out there to help you. Note that while in the U.S. we refer to the agreement as USMCA, the agreement in Mexico is referred to as T-MEC, and in Canada it is referred to as CUSMA.

U.S. Customs and Border Protection (CBP) has launched a USMCA Center to coordinate CBP’s implementation of the USMCA Agreement, ensuring a smooth transition with consistent and comprehensive guidance to internal and external stakeholders. To help coordinate implementation of the United States-Mexico-Canada Agreement, which enters into force on July 1, CBP recently opened the USMCA Center.

Staffed with CBP experts from operational, legal, and audit disciplines, as well as in collaboration with Canadian and Mexican customs authorities, the USMCA Center is a cornerstone of CBP’s USMCA implementation plan and will serve as a central communication hub for CBP and the private sector community, including traders, brokers, freight forwarders and producers, ensuring a smooth and efficient transition from the North American Free Trade Agreement to USMCA.

“The Center is integral to successful implementation of USMCA, as it will focus on outreach, training, and developing new regulations and procedures, while providing consistency and transparency to the trade community,” said Brenda Smith, Executive Assistant Commissioner of CBP’s Office of Trade. “This all comes down to making sure that American consumers get their goods safely, securely and predictably, while protecting the economic security of the United States.” Additional information about the agreement, compliance guidance, and implementation efforts may be found on CBP’s USMCA webpage. Inquiries for the USMCA Center can be directed to USMCA@cbp.dhs.gov.

CBP has stated that final implementation instructions will be issued on or before July 1, 2020, but for now, importers and exporters should read the USMCA agreement and familiarize themselves with the new rules. There have been some rumors in the trade that CBP initially will take an “Informed Compliance”, relaxed enforcement approach to the USMCA implementation, but this has not been confirmed by CBP. CBP vows to communicate throughout the implementation process via training and outreach.
There are several important links to keep in front of you and you can find those below:

> US-Mexico-Canada Agreement Final Text
> Updated Interim Implementation Instructions (published June 16, 2020)
> Uniform Regulations for the USMCA’s Rules of Origin (Chapter 4) and Origin Procedures (Chapter 5) (published June 3, 2020)

So, what are some of the major changes?

NAFTA Form 434 (Certificate of Origin) will not be accepted by U.S. Customs effective July 1. As of now, CBP has not announced plans for a transition period from Form 434 to a new form. Instead, the new agreement requires nine specific data elements, which can be presented in any format. That said, most importers/exporters are familiar with the use of the NAFTA Certificate of Origin form and still plan to use a similar form for securing and providing origin certifications. Here are the 9 minimum data elements for USMCA certification:

1. Importer, Exporter, or Producer Certificate of Origin
2. Certifier
• Name, title, address (including country), phone & email
3. Exporter
• Name, address (including country), phone & email
• Only provide if different than the Certifier
• Not required if completed by the producer & the exporter is unknown
• Address shall be the place of export of the good in a Party’s territory
4. Producer
• Name, address (including country), phone & email
• Only provide if different from certifier or exporter
• If multiple producers state “Various” or provide a list
• May maintain confidentiality with “Available upon request by the importing authorities”
• Address shall be the place of production of the good in a Party’s territory
5. Importer
• Name, address (including country), phone & email
• Address shall be in a Party’s territory
6. Description & HS Tariff Classification of the Good
• 6-digit level (XXXX.XX)
• Description should be sufficient to relate it to the good covered by certification
7. Origin Criteria
• Specify the origin criteria set out in Article 4.2
8. Blanket Period
• Include the period if the certificate covers multiple shipments
9. Authorized Signature & Date
• Must be signed and dated by the certifier & must be accompanied by the following statement:

“I certify that the goods described in this document qualify as originating and the information contained in this document are true and accurate. I assume responsibility for proving
such representations and agree to maintain and present upon request or to make available during a verification visit, documentation necessary to support this certification.”

Automotive Goods have their own special rules under Appendix 1. The automotive sector has changed substantially under USMCA and will require companies to take a very close look at their processes.

Textiles and Apparel items have their own special rules under Chapter 6 of the USMCA. These specifically cover a textile or apparel good classified in Chapters 50 through 60 or heading 9619, and textile or apparel goods of Chapters 61 through 63.

De Minimis Provision for Non-Textiles has been increased from 7% to 10%. The USMCA has a 10% de minimis provision for most goods, including goods subject to RVC requirements, as well as some textile and apparel goods. This increase can have a very beneficial impact to the trade

Importers can now certify their imported goods. A word of caution, though… Under NAFTA only the exporter could issue a Certificate of Origin, whereas under the USMCA, the importer, exporter, or producer can issue a Certification of Origin. The importer should only certify the import if they have supporting documentation from the producer that demonstrates the good is originating or even better, the producer’s certification. So essentially, the importer would need to conduct its own rules of origin analysis if it wants to claim USMCA.

There is a new Special Program Indicator (SPI) for USMCA – “S” or S+”

So, these are some of the highpoints. One of the questions we get often is “Can I just assume that if my goods qualified for NAFTA that they will also qualify for USMCA? We would not recommend this. While the USMCA rules of origin are similar to the NAFTA rules, and many of the specific rules of origin did not change, there are some major differences where the rules are much more complex, such as automotive, whereas other rules have been broadened, including Regional Value Requirements (RVC).
At this moment in time, we would encourage you to review the agreement and conduct reviews of your current NAFTA qualified goods to see if any of the changes within USMCA will affect you.

Please contact your V. Alexander account team with any questions and follow us on our website www.valexander.com for updates on this and other topics.