USMCA: A New Era for North American Trade

Introduction: The Dawn of a New Trade Agreement

The United States-Mexico-Canada Agreement (USMCA) has officially replaced the North American Free Trade Agreement (NAFTA), ushering in a new era for trade in North America. While many aspects of NAFTA have been carried over, the USMCA introduces several significant changes that will impact businesses engaged in cross-border trade. As a Digital Logistics Platform, we at FreightAmigo are here to help you navigate these changes and optimize your supply chain operations.

Let's delve into the key modifications brought about by the USMCA and explore how they might affect your business:

1. Certification of Origin: Greater Flexibility for Importers

One of the most notable changes in the USMCA is the new approach to certification of origin. Under NAFTA, only exporters or producers could provide this certification. The USMCA, however, allows importers to make claims for preferential tariff treatment based on their own certification of origin. This change offers greater flexibility but also comes with increased responsibility.

Key points to note:

• Importers can now certify the origin of goods, but must have supporting documentation ready at the time of filing.
• There's no longer a requirement for an official form. Instead, nine specific data elements must be present on the invoice or a separate document.
• A standardized statement must be included with the certification.
• Customs officials are allowing a 12-month transition period for post-importation claims as companies adjust to the new system.

As a Digital Logistics Platform, FreightAmigo can help streamline this process by providing tools to manage and store necessary documentation, ensuring you're always prepared for customs checks.

2. De Minimis: New Thresholds for Duty-Free Imports

The USMCA introduces changes to de minimis thresholds - the value below which goods can be imported duty-free. These changes vary by country:

United States

The de minimis threshold remains unchanged at $800 USD or less for US imports.

Mexico

Mexico has introduced a two-tier system:

• Imports valued at $50 USD or less: No tax and no duty
• Imports valued between $50 USD and $117 USD: Taxed but duty-free

Canada

Canada has raised its de minimis threshold for the first time in decades:

• Imports valued under $40 CAD: Tax-free and duty-free
• Imports valued between $40 CAD and $150 CAD: Duty-free but taxed

These changes in de minimis thresholds can significantly impact eCommerce businesses and companies dealing with low-value shipments. FreightAmigo's Digital Logistics Solution can help you navigate these new rules, ensuring compliance while maximizing cost-efficiency.

3. Apparel and Textile Requirements: New Rules of Origin

The USMCA introduces new rules for the apparel and textile industry, particularly regarding the origin of certain components. These changes will be phased in over the next few years:

Elastic Fabrics

From January 1, 2022, apparel items containing elastic (fabrics of subheading 5806.20 or heading 6002) must originate within a USMCA country.

Sewing Thread

As of July 1, 2021, sewing thread (classified in headings 5204, 5401, or 5508—or yarn of heading 5402 used as sewing thread) must be USMCA-originating.

Pocket Bag Fabric

For apparel with pockets, the pocket bag fabric must be USMCA-originating from January 1, 2022. For apparel made of blue denim fabric (classified in subheadings 5209.42, 5211.42, 5212.24, and 5514.30), this requirement takes effect from January 1, 2023.

These new rules add complexity to sourcing and production processes for apparel and textile companies. FreightAmigo's Digital Logistics Platform can assist in tracking the origin of materials and ensuring compliance with these new regulations.

4. Automobile Requirements: Higher Standards for North American Content

The automotive industry sees some of the most significant changes under the USMCA. These new requirements aim to boost North American automotive production and support higher-wage jobs in the sector:

Labor Value Content

40-45% of an automobile's content must now be made by workers earning at least $16 USD per hour. This requirement is designed to level the playing field and support higher-wage jobs across North America.

Regional Value Content

The North American origin content requirement for new motor vehicles has increased from 62.5% under NAFTA to 75% under USMCA. For all other vehicles and parts, the requirement is 60%.

Steel and Aluminum Content

For passenger vehicles, light trucks, or heavy trucks to be considered originating in the United States, Mexico, or Canada, at least 70% of the steel and/or aluminum used must be of North American origin.

These changes present both challenges and opportunities for automotive manufacturers and suppliers. FreightAmigo's Digital Logistics Solution can help companies adapt to these new requirements by providing visibility into supply chains and facilitating compliance with origin rules.

5. Duration of Agreement: A Long-Term Commitment with Regular Reviews

Unlike NAFTA, which had no expiration date, the USMCA is set to remain in effect for 16 years. However, it includes a provision for a "check-in" review beginning in the sixth year of the term. This structure allows for periodic assessment and potential adjustments to keep the agreement relevant and beneficial for all parties involved.

This long-term commitment provides stability for businesses planning their North American trade strategies. At the same time, the review process ensures the agreement can evolve with changing economic conditions and technological advancements.

How FreightAmigo Can Help Navigate USMCA Changes

As businesses adjust to the new rules and requirements under the USMCA, having a reliable Digital Logistics Platform becomes more crucial than ever. FreightAmigo offers a comprehensive suite of tools and services to help you navigate these changes:

• Document Management: Our platform helps you organize and store all necessary documentation for certification of origin, ensuring you're always prepared for customs checks.
• Compliance Tracking: We help you stay on top of changing regulations, including new rules for apparel and textiles, automotive requirements, and de minimis thresholds.
• Supply Chain Visibility: Our Digital Logistics Solution provides end-to-end visibility of your supply chain, helping you track the origin of materials and components to ensure compliance with new rules of origin.
• Customs Clearance: We offer streamlined customs clearance services, helping you navigate the complexities of cross-border trade under the new agreement.
• Cost Optimization: Our platform helps you identify the most cost-effective shipping solutions, taking into account new de minimis thresholds and other USMCA provisions.
• Expert Support: Our team of logistics experts is available 24/7 to help you understand and adapt to the new USMCA requirements.

Conclusion: Embracing the Future of North American Trade

The transition from NAFTA to USMCA marks a significant shift in North American trade relations. While it presents challenges, it also offers opportunities for businesses to optimize their supply chains and strengthen their competitive position in the North American market.

At FreightAmigo, we're committed to helping our clients navigate these changes and make the most of the new trade landscape. Our Digital Logistics Platform is designed to provide the tools, information, and support you need to thrive under the USMCA.

As we move forward into this new era of North American trade, stay informed, be proactive, and don't hesitate to leverage digital solutions like FreightAmigo to streamline your logistics operations. Together, we can turn the challenges of change into opportunities for growth and success.