USMCA REPLACES NAFTA: OVERVIEW

The U.S. – Mexico – Canada Trade Agreement (USMCA) will replace NAFTA entering into force on July 01, 2020.  Rules of Origin:  The following are USMCA origin criteria used to qualify product

The U.S. – Mexico – Canada Trade Agreement (USMCA) will replace NAFTA entering into force on July 01, 2020.

Rules of Origin:

The following are USMCA origin criteria used to qualify the product:  

  1. The good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries.
  2. The good is produced entirely in the territory of one or more USMCA countries using non-originating materials if the goods satisfy all applicable requirements.
  3. The good is produced entirely in the territory of one or more USMCA countries, exclusively from originating materials.
  4. The good is produced entirely…. But does not satisfy the requirements (B) because both the good and its materials are under the same subheading or under the same heading not further subdivided into subheadings….
  5. The good itself, as imported, is listed in table 2.10.1 of the USMCA and is imported into the territory of the US from the territory of a USMCA country.

HTS product classifications must be reviewed for products going to other USMCA Countries to assure proper origin.

Some rules of origin for products that are not wholly obtained or produced or “exclusively made of originating materials” have been modified.

New criteria for the Automotive and Auto Parts Imports are contained, including increases in RVC (Regional Value Content) and Labor Value Content.

Regional Value Content Rules:

RVC only applies when Product Specific Rules provide for it.  There are two optional methods: The Transaction Value Method and The Net Cost Method.

The Transaction Value Method:

RVC = (TV-VNM)/TV x 100

RVC is the regional value content, expressed as a (%) percentage

TV is the transaction value of the good, adjusted to exclude costs incurred in the international shipment of the good.

VNM is the value of non-originating materials including materials of undetermined origin used by the producer in the production of the good.

The Net Cost Method:

RVC = (NC-VNM)/NC x 100

RVC is the regional value content, expressed as a percentage.

NC is the net cost of the good.

VNM is the value of non-originating materials including materials of undetermined origin used by the producer in the production of the good.

 

Certification for USMCA:

Under this agreement, the Certificate of Origin has been eliminated, and instead of claiming duty-free, the entry must be supported by containing a certification signed by the producer, exporter, or importer, at the time the claim is made, usually at entry.

The Certification must contain (ANNEX 5-A) a minimum of data elements, they are:

  • Name, address, and contact info of entity submitting (producer, exporter, or importer) the claim.
  • Claim certifier’s name, title, address (including country) company, and contact info (telephone & e-mail address)
  • Exporter’s name, address (including country), and contact info if different from the certifier.  Note: This info is not required if the producer is completing the certification and does not know the identity of the exporter.
  • Producer’s name, address (including country), contact info (if different from certifier or exporter). In the case of multiple producers, state “Various” or provide a list of producers. Note: The address of a producer shall be the place of production of the good in a party’s territory.
  • Provide, if known, the importers' names, addresses, and contact info.
  • Description of product(s) and HTS classification to at least 6 digits. The description should be sufficient to relate it to the covered good.
  • Origin criteria under which product qualifies.
  • If a single shipment, include the invoice #. If blanket certification, include the blanket period.
  • Signature, date, and certification statement.

Certification 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.” (Name, title, signature, date) THEREFORE: IOR better served in obtaining Exporter or Producer’s Certificate.

USMCA Enforcement:

Customs authorities in the country of import may send a questionnaire to the importer or producer, request a visit to the producer, or other procedures to verify the correctness of the certification.

Each country may take criminal, civil, or administrative actions for making false statements on certifications or related violations.

Exporters may also be eligible for penalties for making false statements on certifications.

The new agreement contains new provisions to combat AD/CVD evasion and prohibitions on the importation of goods sourced from forced labor.

Changes Under USMCA:

Customs has a deadline to issue a determination.

Customs are required to notify the importer about the verification procedures implemented against the exporter or producer (except textiles).

Customs is authorized to schedule an audit to the importer, exporter, or producer. However, the audited entity can negotiate (not recommended) a date postponement of the scheduled visit.

Importance of Regulatory Compliance:

Now, more than ever, strong compliance efforts are essential. You need to not just attend USMCA training, but you should also read the treaty and the law and regulations.

Update your manual, desktop procedures, and audit your entries to ensure compliance with the new agreement.

Scrutiny of foreign suppliers, their products, documents, and declarations are essential.

Compliance Guidance:

CBP urges the trade community to monitor CBP.gov/Trade, the Cargo System Messaging Service, and @CBPTradeGov on Twitter for updates on USMCA implementation dates; regulatory drafting; Frequently Asked Questions, and other compliance resources.

The USMCA contains provisions relating to the prohibition of the importation of goods sourced from forced labor. For additional information on CBP’s enforcement against this prohibition, please visit the Forced Labor webpage.

USMCA Agreement, Final Text:

https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between

USMCA Implementation Act (Public Law 116-113) https://www.congress.gov/bill/116th-congress/house-bill/5430/text

Interim Implementation Instructions https://www.cbp.gov/document/guidance/usmca-interim-implementation-instructions

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