USMCA Scheduled to Replace NAFTA July 1, 2020 – Trade and Trading Partners Express Concern
The United States-Mexico-Canada Trade Agreement has been ratified by all three countries, and despite concerns raised by Congress, industry, and Canada and Mexico, is scheduled to go into force on July 1, 2020. The concerns that have been raised relate to the range of actions that must be taken by all parties despite limited resources due to the COVID-19 pandemic.
Each of the three countries is required to develop and complete implementing regulations. The new, complex General Note to the tariff must be published. Neither has occurred as of May 8. Other actions regarding labor certifications, intellectual property and environmental rules, and e-commerce rules must be taken. Importers and exporters must conduct analyses and prepare preference certifications.
There are many changes between NAFTA and the USMCA that will require exporters and importers to modify procedures, recognize new requirements, learn new Rules of Origin, and understand what changes may affect them. U. S. Customs and Border Protection (CBP) has published Interim Implementation Instructions, specifically stated to be a “Guidance Document” and not the official final rules. https://www.cbp.gov/sites/default/files/assets/documents/2020-Apr/Implementation%20Instructions.pdf. These Instructions do provide some insight into how the changes will be implemented.
One significant change is in the legal responsibility for certifying that a product meets the criteria for preference treatment. Under USMCA it is the importer that bears the liability, although the actual certification can be made by the manufacturer, suppler, or importer. There is also no longer any formal Certificate. (Because the USMCA completely replaces NAFTA, all documents and materials developed under NAFTA, including NAFTA Certificates, are of no force or effect in the USMCA.) The importer must have in its possession at the time of entry information meeting the requirements in order to claim preference status. As stated in the Interim Instructions: “The certification need not be in a prescribed format; it may be provided on an invoice or any other document, except a commercial document issued in a non-Party, may be submitted electronically, and may cover a single importation or multiple importations of identical goods within a maximum 12-month period. The certification must contain a set of minimum data elements as set out in Annex 5-A of the Agreement (Appendix III of these Instructions) that indicate that the good is both originating and meets other applicable requirements.”
If the importer does not have the required information in its possession at the time of entry, a preference claim can be filed at a later time when the information is available. However, the exemption covering the Merchandise Processing Fee (MPF) applies only at the time of entry. Duties, but not the fee, can be refunded based on a subsequent claim.
Many companies, and particularly the automotive and auto parts companies, are quite concerned due to the large number of products that require certification, the limited time available before implementation, and workforce restrictions due to COVID-19. So far, at least, requests to allow the use of existing NAFTA certificates until the end of the year have not been granted.
Steel traders should be aware of the special certification requirements for steel content in automotive products. See Appendix I to the Interim Instructions for a list of products. Automobile producers will require more specific origin information in order to complete the necessary certifications. There are also changes to the Rules of Origin for many steel products in Chapter 73 of the Tariff, although most of these changes will be phased in during the years after initial implementation.
CBP is expected to use flexibility as the new rules go into effect, but the responsibility to comply with the requirements of USMCA will start on the implementation date.
Please take care of yourselves and everyone in the trade community at this trying time.
Steven W. Baker
AIIS Customs Committee Chair