The USMCA, formally known as the Agreement between the United States of America, the United Mexican States, and Canada, officially entered into force on July 1, 2020. The same day, U.S. Customs and Border Protection (CBP) published an interim final rule amending the CBP regulations to add a new Part 182 containing the framework for the new USMCA regulations. The USMCA supersedes the North American Free Trade Agreement (NAFTA). For goods entered for consumption or withdrawn from warehouse for consumption on or after July 1, 2020, the NAFTA provisions no longer apply, and the USMCA provisions must be followed. However, the NAFTA regulations found in Part 181 remain in the CBP regulations for now given they continue to apply to goods entered for consumption or withdrawn from warehouse for consumption prior to July 1, 2020.
The interim final rule, for the most part, provides the outline of USMCA regulations to be published in the future and primarily consists of the Rules of Origin Regulations contained in Appendix A to the new Part 182. CBP expects to publish additional regulations on such issues as USMCA export requirements, by July 1, 2021, one year from when the USMCA enters into force.
The USMCA Rules of Origin Regulations are lengthy and include new rules on de minimis; treatment of goods classified as a set; regional value content requirements, including several examples of the calculations for the regional value content requirement; rules for the valuation of materials that go into production of finished goods; and rules by which an importer, exporter, or producer has the option to accumulate the production, by one or more producers in the territory of one or more USMCA countries, of materials that are incorporated into that good for the determination of the origin of the good. The new de minimis rules provide that a good shall be considered an originating good where the value of all non-originating materials used in the production of the good is not more than 10% of the transaction value of the good (previously 7%) or, if applicable, the total cost of the good provided the good meets any regional value content requirements and all other applicable requirements in Appendix A. The Rules of Origin Regulations also cover special rules for automotive goods, including special rules related to the percentage of steel and aluminum that must be originating in order for a passenger vehicle, light truck, or heavy truck to qualify as originating under the USMCA.
Whereas the NAFTA rules of origin are found in General Note 12 to the Harmonized Tariff Schedule of the United States (HTSUS), the USMCA rules of origin are found in General Note 11 to the HTSUS. Appendix A to the new Part 182 contains the regulations implementing the USMCA rules of origin provisions of General Note 11, and Chapters Four and Six of the USMCA.
Companies that previously issued NAFTA Certificates of Origin, Supplier’s Affidavits, or Manufacturer’s Affidavits to customers need to conduct a new origin qualification analysis (with back-up supporting documents, i.e. an “audit trail”), before issuing new certifications or affidavits under the USMCA, to be sure the goods meet the new USMCA rules of origin. Section 204 of the United States-Mexico-Canada Agreement Implementation Act makes it “unlawful for any person to certify falsely, by fraud, gross negligence, or negligence, in a USMCA certification of origin…that a good exported from the United States qualifies as an originating good under the rules of origin provided for in section 202 of the [USMCA Implementation Act].” Companies issuing certifications are subject to audits known as origin verifications and, therefore, it is important to ensure proper qualification analyses have been conducted and that any back-up documentation from materials suppliers are in place.
Companies that are importing goods into the U.S. must ensure they have new USMCA certifications of origin if they are claiming duty-free or preferential treatment of the imported merchandise under the USMCA.
With the implementation of the USMCA replacing NAFTA, now is an opportune time for exporters, importers, and producers to review their procedures for issuing certifications of origin and supplier’s or manufacturer’s affidavits, and for claiming preferential treatment of imports under the USMCA, to ensure that they are in compliance with the new provisions.
For more information on how these could impact your business, contact:
- Martin Lutz, Partner (firstname.lastname@example.org, 512-495-6024),
- Jamie Joiner, Special Counsel (email@example.com, 713-615-8530),
- Lindsey Roskopf, Attorney (firstname.lastname@example.org, 713-615-8534),
- Justin Cawley, Senior Counsel (email@example.com, 202-812-2644), or
- Another member of the McGinnis Lochridge International Trade and Transactions Practice Group