What businesses need to know about USMCA management
Many traders operating in North America are now able to take advantage of the updated free trade agreement (FTA) known as USMCA. Standing for 'United States, Mexico and Canada Agreement', this has replaced the previous North American Free Trade Agreement (NAFTA) trade pact with the promise of developing an agreement between the three countries that is better suited to today's evolving trading environment.
However, while many of the provisions of NAFTA have rolled over, there are several new and changed requirements that businesses will need to be aware of. Therefore, taking the time to develop a comprehensive USMCA management plan will be vital in ensuring firms can trade freely within North America and avoid any unnecessary barriers to trade.
What you need to know about USMCA
USMCA came into force on July 1st 2020 and aims to improve on some of the shortcomings and outdated provisions of the previous deal. All products that were zero-rated under NAFTA remain so as part of USMCA, but a range of remaining tariffs have also been eliminated, such as duties on certain dairy products.
It also includes strong rules of origin for industrial products that aim to increase regional content and help preserve North American manufacturing.
How does the USMCA agreement differ from previous trade deals?
There are a range of differences between USMCA and the previous NAFTA deal, which have been implemented to address perceived imbalances in the older deal in key sectors. New provisions focus on areas such as rules of origin, intellectual property rights, access to key agricultural markets and labor requirements for Mexican producers.
Among the most notable changes include:
- Increased requirements for automakers to have 75 percent of their parts manufactured in one of the three countries.
- Protection from Section 232 tariffs - The US may not include Mexican or Canadian exports in such measures for at least 60 days after global application.
- Higher environmental and labor law standards for imported goods.
- Simplified certification requirements
- Increased De Minimis thresholds for duty-free goods
What are the key benefits of USMCA?
The goals of USMCA are to streamline the flow of goods between the three participating countries and to reduce or eliminate as many tariffs and duties as possible. This should mean fewer obstacles to doing business throughout North America, easier supply chains and greater access to markets for key sectors. While the agreement has not solved all trade disputes between the three nations, it also includes clearer resolution mechanisms that should speed up these processes.
USMCA Certificates of Origin
In order to secure preferential tariff treatment for goods imported and exported under USMCA, organizations are required to have a form detailing key data elements relating to the goods and describing where they originate.
However, under the NAFTA agreement, there is no prescribed format for importers to the US and the previous CBP Form 434 is no longer required. Although Customs and Border Protection offers a suggested template for businesses, organizations are free to format their documentation however they wish, provided they ensure they are including all the required information.
What information must certificates contain?
In order to demonstrate compliance, a certificate of origin must contain nine essential data elements. There as are follows:
- Importer, Exporter, or Producer Certification of Origin - This indicates who is providing the certification. This may be the exporter, producer, or importer.
- Certifier - Including the name, address, phone number and email address of the certifier.
- Exporter - Including name, address and contact details if different from the certifier. This information is not required if the producer is completing the certification and does not know the identity of the exporter.
- Producer - Including name, address and contact details if different from the certifier. Certifiers may mark this as 'various' if goods come from multiple sources.
- Importer - if known, the importer’s name, address, e-mail address, and telephone number. The address of the importer must be within the USMCA party's territory.
- Description and HS Tariff Classification of the Goods - This should include the six-digit classification number, while the description must be sufficiently detailed and contain the related invoice number, if relating to a single shipment.
- Origin Criteria - This must specify the origin criteria under which the good qualifies for preferential treatment.
- Blanket Period - If the certification covers multiple shipments of identical goods, it may be valid for up to 12 months.
- Authorized Signature and Date - Must include a specified statement attesting to the accuracy of the information.
USMCA should help streamline many processes for importers and exporters. However, in order to remain compliant, it is important that the new rules are followed closely, which may be a challenge with the looser guidelines for what businesses must do. Therefore, turning to comprehensive USMCA management software that can assist with everything from finding the correct HS classification codes to calculating rules of origin requirements will be vital in ensuring imports and exports are as efficient as possible.