NAFTA is no more….. Long Live the USMCA

The United States, Mexico and Canada reached a compromise agreement regarding changes to NAFTA, the 25-year old North American Free Trade Agreement. To separate the old from the new, NAFTA has been renamed the “United States-Mexico-Canada Agreement (USMCA).

The Whitehouse has published a “fact sheet” about the revised agreement, which has been described as “a mashup between the old NAFTA and the new TPP” (the Trans-Pacific Partnership, a 12-country multilateral trade deal from which Trump withdrew the United States).

Few actual details are known at this time, particularly about changes in the way the program will be administered and product eligibility. Early comments are focused on dairy, autos and IPR. A big change from NAFTA is the introduction of a “sunset clause.” Under the sunset provisions, the USMCA will expire in 16 years. Mexico, Canada and the United States will conduct a joint review six years after the enactment of USMCA, with an option to extend the deal beyond the 16-year term.

Additional information on the new agreement can be found on the US Trade Representative’s (USTR) webpage: United States – Mexico- Canada Agreement, and on the Canadian Website: “United States-Mexico-Canada Agreement (USMCA).” There are 34 separate sections to the Agreement, including:

A significant change in the USMCA is the possible elimination of the need for a NAFTA Certificate of Origin (CBP-434). Under the new agreement, the origin declaration will follow procedures that are more closely aligned with more recent FTAs, such as Chile, Singapore, Australia, etc., which place more burden and responsibility on the importer to ensure that the goods qualify. A certification of origin may be completed by the importer of the goods on the basis of the importer having information, including documents, that demonstrate that the origin of the goods. Under the new agreement, each party may:

  1. require that an importer who completes a certification of origin provide documents or other information to support the certification;
  2. establish in its law conditions that an importer shall meet to complete a certification of origin;
  3. if an importer fails to meet or no longer meets the conditions established under subparagraph (b), prohibit that importer from providing its own certification as the basis of a claim for preferential tariff treatment; or
  4. if a claim for preferential tariff treatment is based on a certification of origin completed by an importer, prohibit that importer from:
  5. a) issuing a certification, based on a certification of origin or a written representation completed by the exporter or producer; and
  6. b) making a subsequent claim for preferential tariff treatment for the same importation, based on a certification of origin completed by the exporter or producer.

Mexico, Canada, and the U.S. are expected to sign the deal before the end of November, before outgoing Mexican President Enrique Pena Nieto leaves office. Then the legislatures of each country must ratify the agreement before it can enter into force and write legislation to implement it. If ratified, most of the new agreement’s provisions are expected to go into effect in 2020.

For further information or questions about this or other customs issues, contact Adrienne Braumiller, Partner & Founder of Braumiller Law Group