USMCA Panel Q&A

Kansas Global hosted the general consuls of Canada and Mexico and trade experts to update and advise companies on how to move forward  and grow with USMCA. The primary use of time was answering questions submitted by our attendees. We were not able to answer all the questions in our allotted time, so we have compiled the answers to all the questions submitted.

USMCA preserves the key elements of NAFTA while also modernizing the text to address 21st century challenges, reducing red tape at the border and better providing certainty and stability for workers, businesses and investors across the North American market.  

Importantly, this agreement added chapters which provide new opportunities for SME’s, women entrepreneurship, minority groups and indigenous peoples to have their voice represented in trade. USMCA also made significant strides in strengthening labor laws, environmental regulations and the rules of origin, especially for automaking—designed to help reshore jobs back to North America.  

This will give North American businesses a better chance to do what they do best: manufacture world-class products, provide industry-leading services and invest in global growth opportunities.  

As our collective attention turns to post-pandemic economic recovery, USMCA will provide a platform for the North American continent to expedite its recovery. Moreover, this agreement allows North American businesses to de-risk their supply chains and strengthen their competitiveness, ensuring they out-compete the rest of the world.  

Wichita will continue to leverage its trading expertise in agricultural commodities, auto parts and aerospace while being able to expand to industries like agricultural biotech and other advanced technologies and services. 

Although unrelated to USMCA specifically, a larger customs facility at Wichita Eisenhower National Airport would facilitate timely and efficient processing of goods destined for and received from international destinations. Adding an immigration point would allow passengers arriving from international destinations to clear immigration in Wichita. 

The USMCA is a more modern agreement reflecting the 21st century economy. It strengthens NAFTA’s dispute resolution mechanism, giving greater flexibility in filing and resolving disputes. Moreover, opening markets between all three countries allows for the greater free flow of goods and services—meaning consumers and businesses get better value. 

Above all ensures continued duty-free access for NAFTA goods and provides businesses and investors in all three countries the certainty and flexibility required to expand trade, create jobs and ensure prosperity for our workers and communities. 

Like most US free trade agreements, there is a clause which allows any of the three countries to leave the agreement with six months’ notice. Unique to USMCA, the agreement expires in 16 years but allows the parties to renew.  

 USMCA also contains a “Sunset” clause, which means the three countries assemble every six years to evaluate the agreement, note non-compliance and adjust before continuing. The text of the agreement gives countries the opportunity to address any grievance without having to rip up the agreement. As such, USMCA is designed to provide the foundations for the North American marketplace while giving the flexibility needed to address future challenges. 

In 2019, the highest exports to Canada included transportation equipment ($69 billion), machinery ($30 billion), chemicals ($29 billion) and electronics ($25 billion)—making up 52.2% of all exports to Canada.  

The biggest exports to Mexico in 2019 included electronics ($44 billion), transportation equipment ($33 billion), petroleum & coal products ($29 billion), and chemicals ($24 billion)—making up 50.5% of all exports to Mexico.  

American businesses gain access to the Canadian dairy, poultry and egg market in the form of increased tariff rate quotas. Canada also made changes to the way that grains entering the country will be graded and the prices that will be paid. 

While the Mexican agricultural market was already relatively open, American businesses can benefit from the change in rules of origin requirements for manufactured parts. This will ensure that domestic businesses will have more opportunities to integrate into a global and regional supply chain for industries like the auto industry.

There are three main ways to ensure the commitments in terms of wages:   

1. Utilizing the dispute resolution mechanism via the panels for labor matters. 

2. Empowerment of workers, as foreseen in Annex 23-A in terms of labor rights protection, union and representation rights, and collective bargaining through national legislation—a provision already enacted by the Mexican Congress and in full process of implementation.  

3. Provision of Labor Value Content (LVC), as stated in Chapter 4, Rules of Origin, Appendix I, “Provisions Related to the Product-Specific Rules of Origin for Automotive Goods”, by which each party provides that a passenger vehicle is originating in North America only if the vehicle producer certifies that its production meets a LVC requirement. LVC requirement starts at 30% and will increase to 40% in 2023. This provision also ensures compliance with minimum wage rules.  

USMCA does not have a prescribed format (NAFTA Certificate of Origin). Instead, there nine elements that must be included to present a valid declaration of origin. The elements can be included within shipping documents such as a commercial invoice or provided in addition to shipping documents.  

  1. Importer, Export or Producer Certificate of Origin 
  2. Certifier 
  3. Exporter 
  4. Producer 
  5. Importer 
  6. Description and HS Tariff Classification 
  7. Origin Criteria 
  8. Blanket Period 
  9. Authorized Signature and Date 
  10. And accompanied by the following statement: I certify that the goods described in this document qualify as originating and the information contained in this document is 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. 

 Also differing from NAFTA, an importer may make a preferential claim based on certification of origin completed by the exporter, producer, or importer. 

No. The certificate of origin pertains to when goods are released, not when they are produced. 

NAFTA certificates of origin will not be grandfathered into USMCA. To utilize preferential trade terms under USMCA, you will need to present the nine elements to declare origin.  

The trade term for this is “De minimis,” which allows certain products of lower value to be imported duty and tax free. For Canada, products under $150 CAD will not be subject to duties and products under $40 will not be subject to taxes. For Mexico, products under $117 USD will not be subject to duties and products under $50 USD will not be subject to taxes. 

USMCA also creates a new informal shipment level of $2,500 (US and Mexico) and CAD$3,300 for express shipments which benefit from fewer customs formalities (paperwork).

Yes. Goods imported under NAFTA may still be subject to a verification. Certificates of Origin and all other relevant documents related to the exportation of goods must be retained by the exporter for five years.  Moreover, any certificate of origin completed and signed by a producer must also be retained by that producer for five years from the date of export.

No. Importers, exporters or producers of USMCA-eligible goods may complete the certification of origin. Importers are required to have the certification of origin in their possession at the time that the importer makes a claim for preferential tariff treatment.  

Chapter 8 contains information regarding the energy sector. While USMCA doesn’t guarantee return on investment for new deals moving forward, the agreement provides a legal framework under which businesses and investors can operate under. This will allow greater certainty as well as a clearer path for legal recourse if need be.  

The trucking sector has a significant lead over any other method of transportation in the North American freight industry. The Bureau of Transportation Statistics reported in April of 2020 that truck freight consisted of 66.3% of all freight in North America.  

Ready to Level Up?

Are you confident in your NAFTA to USMCA conversion process? Have you changed your procedures to match all the new requirements? Do you have the necessary visibility and clarity to bring comfort to your transition?

 

If not, a personalized check is just what you need. It all starts with a 30 minute discovery meeting. Click below to schedule your 30 minute call with Karyn directly.

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