USMCA Origin Criteria: Key Changes and Implications for Importers

Introduction

The United States-Mexico-Canada Agreement (USMCA) has officially replaced the North American Free Trade Agreement (NAFTA), bringing about significant changes in trade regulations among these three countries. As a digital logistics platform, we at FreightAmigo understand the importance of staying informed about these new rules and their impact on importers. In this article, we'll explore the key changes in USMCA origin criteria and how they affect businesses engaged in North American trade.

Major Changes in USMCA Origin Criteria

The USMCA introduces several important modifications to origin criteria that importers need to be aware of. Let's delve into the most significant changes:

1. Certification of Origin

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

Key points to note about the new certification process:

• No official form is required, unlike NAFTA
• Nine specific data elements must be present on either the invoice or a separate document
• A statement certifying the goods' originating status must be included
• Importers must have supporting documents on hand at the time of filing

This change empowers importers but also requires them to be more diligent in maintaining accurate records and understanding the origin of their goods.

2. De Minimis Changes

The USMCA brings updates to de minimis thresholds, which determine the value at which goods are free of duties or taxes:

• United States: Remains at $800 USD or less for imports
• Mexico: $50 USD tax-free, with new duty-free treatment up to $117 USD
• Canada: Increased from $20 CAD to $40 CAD for tax-free imports, with duty-free treatment up to $150 CAD

These changes can significantly impact e-commerce and small-value shipments between the three countries.

3. Apparel and Textile Requirements

The USMCA introduces new rules for the apparel and textile industry, focusing on the origin of specific components:

• Sewing thread must be USMCA-originating from July 1, 2021
• Elastic fabrics must originate within a USMCA country from January 1, 2022
• Pocket bag fabric must be USMCA-originating from January 1, 2022 (with some exceptions)

These new requirements aim to strengthen the North American textile and apparel supply chain.

4. Automobile Requirements

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

• 40-45% of an automobile's content must be made by workers earning at least $16 USD per hour
• New motor vehicles must have 75% North American-origin content, up from 62.5% under NAFTA
• 70% of steel and aluminum used in passenger vehicles, light trucks, or heavy trucks must be of North American origin

These changes aim to boost North American auto production and support higher-wage jobs in the sector.

Implications for Importers

The new USMCA origin criteria have several implications for importers:

1. Increased Responsibility

With importers now able to certify origin, they must be more vigilant about understanding and documenting the origin of their goods. This change requires importers to have robust systems in place for tracking and verifying origin information.

2. Supply Chain Adjustments

The new rules, particularly in the automotive and textile sectors, may require companies to adjust their supply chains to meet the stricter origin requirements. This could involve sourcing more components from North America or restructuring production processes.

3. Potential for Cost Increases

The higher origin content requirements, especially in the automotive sector, may lead to increased production costs. Importers should assess the potential impact on their bottom line and consider strategies to mitigate these costs.

4. Opportunities in E-commerce

The changes in de minimis thresholds could create new opportunities for e-commerce businesses, particularly for small-value shipments between the three countries.

How FreightAmigo Can Help

As a digital logistics platform, FreightAmigo is well-positioned to support importers navigating these new USMCA origin criteria:

• Our digital platform provides easy access to up-to-date information on trade regulations and requirements
• We offer tools to help manage and track origin information for your shipments
• Our network of logistics experts can provide guidance on compliance with the new rules
• Our automated document management system can help ensure all necessary origin certification information is included in your shipping documents

Conclusion

The transition from NAFTA to USMCA brings significant changes to origin criteria that importers must understand and adapt to. While these changes present challenges, they also offer opportunities for businesses to optimize their supply chains and potentially benefit from new trade provisions.

At FreightAmigo, we're committed to helping our clients navigate these changes smoothly. Our digital logistics platform provides the tools and expertise needed to ensure compliance with the new USMCA origin criteria while maximizing the benefits of this new trade agreement.

As the USMCA continues to evolve, with its first review scheduled for the sixth year of the agreement, staying informed and adaptable will be key to success in North American trade. FreightAmigo will continue to provide updates and support to help businesses thrive in this new trade landscape.