RGCI-United States-Mexico-Canada Agreement – The New NAFTA

Are you Ready for the July 1st Implementation Date?

The new United States-Mexico-Canada Agreement (USMCA) goes into effect on July 1, 2020. Are you ready? When implemented, the agreement should help create more balanced, reciprocal trade that supports high-paying jobs for Americans and grows the North American economy.

The agreement highlights include:

  • Creating a more level playing field for American workers, including improved rules of origin for automobiles, trucks, textiles and other products, and disciplines on currency manipulation.
  • Benefiting American farmers, ranchers, and agribusinesses by modernizing and strengthening food and agriculture trade in North America.
  • Supporting a 21st Century economy through new protections for U.S. intellectual property and ensuring opportunities for trade in U.S. services.
  • New chapters covering Digital Trade, Anticorruption, and Good Regulatory Practices, as well as a chapter devoted to ensuring that Small and Medium Sized Enterprises benefit from the Agreement.

Preparing for USMCA: 6 Steps for Importers and Exporters

1. Review Your Old NAFTA Certificates of Origin and your current HTS and Schedule B Classifications

Just because one or more of your products may have qualified under NAFTA does not automatically mean they qualify under USMCA. And vice versa, products that did not qualify for NAFTA may be able to qualify for the USMCA. Review your HTS and Schedule B Classifications and analyze your rules of origin.

2. Determine Who Will Provide the Certificate of Origin

Under USMCA, importers, exporters, or producers are now able to certify that the goods qualify. However, it's usually the exporter or the producer of the goods who has enough information to make that certification.

Also, the USMCA has no official template that must be used. Instead, the Annex 5-A of the USMCA outlines the minimum data requirements that must be included with certification. The NAFTA Certificate of Origin will NOT be allowed to be used.

The required data elements are:

  1. Importer, Exporter, or Producer Certification of Origin
  2. Certifier
  3. Exporter
  4. Producer
  5. Importer
  6. Description and HS Tariff Classification of the Good
  7. Origin Criteria
  8. Blanket Period
  9. Authorized Signature and Date

3. Assess the Impact of the USMCA Changes

Certain parts of the USMCA include more significant changes from NAFTA than others, so not all companies and industries will be impacted the same. If you determine your goods no longer qualify, are there changes in how you source materials for your goods that will help them qualify? And there may be cases that goods did not qualify under NAFTA but may now qualify under USMCA.

Also - keep in mind that USMCA, just like NAFTA, is a voluntary program.

4. Identify Strategies That Lessen the Impact of the Changes

In addition to addressing specific types of products, USMCA includes other new or revised provisions that may make qualifying your goods easier to do. For example, the agreement increases the de minimus amount from 7% to 10% when determining origin. That means that if non-originating parts of a good represent no more than 10% of the total value of the goods, they may now qualify as long as they satisfy all the other terms of the agreement.

5. Update Manuals and Procedures

You will need to maintain a record of where all the goods originate and a detailed description of your sourcing, production and determination process that would allow an auditor to clearly see that the goods qualify.

6. Review Your Contract Terms

Your company has agreements in place with your vendors and customers that outline the duties and responsibilities when doing business with them. Now is the time to review those agreements and make any necessary adjustments to comply with USMCA.

The USMCA Rules of Origin

Section 202 of the USMCA Implementation Act specifies the Rules of Origin used to determine whether a good qualifies as an originating good under the Agreement. There are specific Rules of Origin for the automotive and certain other industries. But in general, under the USMCA a good is originating when:

  1. The good is wholly obtained or produced entirely in the territory of one or more of the Parties, as defined in Article 4.3 of the Agreement;
  2. The good is produced entirely in the territory of one or more of the Parties using non-originating materials provided the good satisfies all applicable requirements of product-specific rules of origin;
  3. The good is produced entirely in the territory of one or more of the Parties exclusively from originating materials; or
  4. Except for a good provided for in Chapter 61 to 63, HTSUS: the good is produced entirely in the territory of one or more of the Parties, is classified with its materials or satisfies the “unassembled goods” requirement, and meets a regional value content threshold of not less than 60% if the transaction value method is used or not less than 50% if the net cost method is used (not including RVC for autos); and
  5. The good satisfies all other applicable origin requirements.

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Written by Carolyn Quinn Turner

Carolyn Quinn Turner Carolyn assists Redstone Government Consulting, Inc. in the area of International Trade and Import/Export Compliance, specifically the International Traffic in Arms Regulations (ITAR) the Export Administration Regulations (EAR). Carolyn assists a wide variety of contractors with compliance in international trade and ITAR/EAR regulations as well as implementing policies and procedures that assist companies in those areas. Professional Experience Starting in 2002, Carolyn was an International Research Analyst at the Alabama International Trade Center. While here, she conducted country and market analyses and translated trade documents. She then worked at Page & Jones, Inc., handling freight coordination for the NVO imports and exports, gathered freight rates for all customers, both import and export, and acted as the NVO controller by handling training, coordinating shipping rates, and record keeping. Starting in 2008, Carolyn held the position of International Trade Specialist at the Alabama International Trade Center. She assisted small and medium sized companies with international trade, expanded company’s sales via international opportunities, problem solved wide ranging international topics such as ITAR and EAR, classification, regulations, contracts, finance options, risk mitigation, and more. She also conducted country/market analyses for international market research, provided international business training and presented educational industry seminars and oversaw research staff on international trade projects and assignments. During the period of 2011-2016, Carolyn was also an Adjunct Professor at the University of Alabama, developing and teaching online International Business classes. In addition to her international experience, Carolyn has studied in Spain, Chile, and Cuba and has work experience in trade missions in Thailand, Norway, Sweden, and Chile. She can read, write, and speak Spanish proficiently. Certifications In 2005, Carolyn became a Licensed US Customs Broker during her time with Page & Jones, Inc., and focused on HTS and Schedule B Classification as well as Entry Filing. In 2009, Carolyn earned the NASBITE Certified Global Business Professional Certification. She has training on these topics: Incoterms, International Distributor Agreements, How to Prepare for an Import & Export Audit, ITAR and EAR, NAFTA, and other FTA’s, Developing an Import/Export Compliance Program, Import and Export Documentation, Customs Brokers License Training Course with Logistics Training Systems, Hazardous Materials, SBA and EXIM Trade Financing, Trade Promotion Coordination Committee (TPCC) Training, SBIR Grants, International Intellectual Property Rights, and global e-commerce. Education Carolyn has earned her Bachelor of Science degree in Commerce and Business Administration from the University of Alabama in Tuscaloosa. She has also earned her Masters in Management with a Global Business Concentration from the University of Alabama in Tuscaloosa. Affiliations She has been a board member of the Japan America Society of Alabama since 2009 and a board member of Destination Hoover International since 2018. Carolyn is also a member of the Export Alabama Alliance.

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle.

Topics: Export & Import