USMCA Replaces NAFTA: An Overview of Key Provisions By Carlos Vejar, Seth M.M. Stodder, Octavio Lecona, Leslie Palma, Jose Luis Villareal, Maria Teresa Quintero Godinez, Alberto Esenaro, Juan Pablo Moyano, Laura Yvonne Zielinski and Ronald A. Oleynik
HIGHLIGHTS The United States-Mexico-Canada Agreement (USMCA) went into effect on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA). Because many of NAFTA's obligations will survive identically under USMCA, maintaining existing free trade access of goods and most services in the region, this Holland & Knight alert focuses on the new and amended provisions that will require immediate or midterm attention on behalf of USMCA private sector actors (current NAFTA users). ____________________ After 26 and a half years, the North American Free Trade Agreement (NAFTA) has practically ceased to exist as of July 1, 2020,1 and has been replaced by United States-Mexico-Canada Agreement (USMCA). Because many of NAFTA's obligations will survive identically under USMCA,2 maintaining existing free trade access of goods and most services in the region, this Holland & Knight alert focuses on the new and amended provisions that will require immediate or midterm attention on behalf of USMCA private sector actors (current NAFTA users), acknowledging that many of the obligations under the USMCA are not addressed to the public but to the three USMCA government authorities.3 In addition, this alert briefly summarizes how the U.S. Customs and Border Protection (CBP) will be implementing the USMCA.
RULES OF ORIGIN AND ORIGIN PROCEDURES Chapters 4 and 5 of the USMCA contain the provisions that regulate the rules of origin and origin procedures that will apply to all goods exported within North America. USMCA relaxes rules of origin for certain sectors (i.e., chemical, Arabic gum, etc.), and tightens them for others (i.e., automotive, steel). Automotive rules of origin incorporate new requirements, such as a high percentage of regional steel and aluminum content, and a first-of-its-kind labor content rule with minimum wage requirements, which among other things constitute completely new requirements that were nonexistent in any previous free trade agreements. USMCA will also increase the de minimis percentage from 7 percent to 10 percent of all non-originating materials to consider a product as originating (Article 4.12), and new products classifications such as "recovered material" or "remanufactured good"4 that were not covered by NAFTA are now introduced and will likely facilitate trade of such goods. USMCA abandons the NAFTA certificate of origin prescribed format, allowing the use of invoices or any other type of document as long as it contains a set of minimum requirements (Article 5.2); a new special verification of origin mechanism is established for the textile sector (Articles 5.9 and 6.6); and under USMCA, importers may also complete the certification of origins of imported goods (Article 5.2).
CUSTOMS ADMINISTRATION AND TRADE FACILITATION USMCA refers to Express Shipments that require expedited customs procedures and will not be subject to customs duties or taxes if valued below fixed amounts of US$800 for the United States; US$117 for customs Copyright © 2020 Holland & Knight LLP All Rights Reserved
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