USMCA: New Rules and Opportunities for North American Trade

Introduction: A New Era in North American Trade

The United States-Mexico-Canada Agreement (USMCA) has ushered in a new chapter for North American trade, replacing the long-standing North American Free Trade Agreement (NAFTA). As businesses adapt to this evolving landscape, it's crucial to understand the key changes and their implications. In this article, we'll explore the most significant updates in the USMCA and how they may affect your business operations.

Here are some key facts about the USMCA:

• Officially implemented after two years of negotiations
• Retains many core regulations from NAFTA
• Introduces several important changes in various sectors
• Set to remain in effect for 16 years with a review period starting in the sixth year

Certification of Origin: Expanded Opportunities

One of the most notable changes in the USMCA is the expansion of who can provide certification of origin for goods. Under the new agreement:

• Importers can now make claims for preferential tariff treatment based on certification of origin
• This is in addition to exporters and producers, who were the only parties allowed to provide certification under NAFTA
• Importers certifying origin must have supporting documents available at the time of filing

The USMCA has also simplified the certification process by eliminating the need for an official form. Instead, it requires nine specific data elements to be present on either the invoice or a separate document:

1. Certifier Name
2. Exporter Name
3. Producer Name
4. Importer Name
5. Description and HS Classification of the Good
6. Origin Criterion
7. Blanket Period (if applicable)
8. Authorized Signature and Date
9. A specific certification statement

This change offers more flexibility for businesses engaged in North American trade, potentially streamlining the certification process. However, it also places more responsibility on importers to ensure the accuracy of origin claims.

De Minimis: New Thresholds for Duty-Free Imports

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

United States

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

Mexico

Mexico has introduced a two-tier system:

• Imports valued at $50 USD or less: Tax-free and duty-free
• 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: Taxed, but duty-free

These changes in de minimis thresholds could significantly impact e-commerce businesses and companies engaged in cross-border trade, potentially reducing costs for lower-value shipments.

Apparel and Textile: New Rules of Origin

The USMCA introduces new rules of origin for the apparel and textile industry, which 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 aim to promote North American textile production and may require adjustments in supply chains for apparel companies operating in the region.

Automobile Industry: Stricter Origin and Labor Requirements

The automotive sector sees some of the most significant changes under the USMCA:

Labor Value Content

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

Regional Value Content

The North American origin content requirement for new motor vehicles has increased to 75%, up from NAFTA's 62.5% for autos, light trucks, engines, and transmissions. For all other vehicles and parts, the requirement is 60%.

Steel and Aluminum Content

Passenger vehicles, light trucks, or heavy trucks are only considered originating in the United States, Mexico, or Canada if at least 70% of the steel and/or aluminum is of North American origin.

These changes are designed to boost North American automotive production and may require significant adjustments in supply chains and manufacturing processes for automakers and their suppliers.

Implications for Businesses

The transition from NAFTA to USMCA brings both challenges and opportunities for businesses operating in North America. Here are some key considerations:

Supply Chain Adjustments

Companies may need to reassess and potentially restructure their supply chains to meet new origin requirements, particularly in the automotive and textile sectors.

Certification Processes

Businesses should review and update their certification of origin processes, taking advantage of the new flexibility while ensuring compliance with the new data element requirements.

E-commerce Opportunities

The changes in de minimis thresholds could create new opportunities for e-commerce businesses, particularly for lower-value shipments to Canada and Mexico.

Labor Practices

Companies in the automotive sector will need to ensure compliance with the new labor value content requirements, which may involve adjusting wages or shifting production locations.

Documentation and Compliance

All businesses engaged in North American trade should review their documentation and compliance procedures to ensure they align with USMCA requirements.

How FreightAmigo Can Help

As businesses navigate the complexities of the USMCA, FreightAmigo's Digital Logistics Platform offers valuable support:

Comprehensive Quote Comparison

Our platform allows you to compare door-to-door freight quotes for international courier, airfreight, sea freight, rail freight, and trucking solutions. This feature can help you optimize your shipping costs while ensuring compliance with new USMCA requirements.

Shipment Tracking

With connections to over 1000 reputable airlines and shipping lines, FreightAmigo enables you to track your shipment status anytime, anywhere. This real-time visibility is crucial for managing cross-border shipments under the new USMCA rules.

Customs Clearance and Documentation

Our platform simplifies customs clearance processes and automates shipment documents. This can be particularly helpful as businesses adapt to the new certification of origin requirements under USMCA.

Expert Support

FreightAmigo offers 24/7 logistics expert support, providing guidance on USMCA compliance and helping you navigate the new trade landscape.

Conclusion: Embracing the New North American Trade Reality

The transition from NAFTA to USMCA marks a significant shift in North American trade dynamics. While it presents challenges, it also offers opportunities for businesses to optimize their operations and potentially reduce costs. By understanding these changes and leveraging Digital Logistics Solutions like FreightAmigo, companies can position themselves for success in this new era of North American trade.

As the USMCA continues to evolve, with its first review scheduled for the sixth year, businesses must stay informed and agile. FreightAmigo is committed to supporting our clients through these changes, providing the tools and expertise needed to thrive in the dynamic world of international trade.