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The New NAFTA - CUSMA/USMCA/T-MEC

The New NAFTA - CUSMA/USMCA/T-MEC

On November 30, 2018, Canada, the United States, and Mexico signed the new Canada-United States-Mexico Agreement (CUSMA) / United States-Mexico-Canada Agreement (USMCA) / Tratado entre México, Estados Unidos y Canadá (T-MEC). This agreement will modernize the North American Free Trade Agreement (NAFTA) by addressing current trade challenges in key industries, such as agriculture and automotive, and making improvements to better facilitate the free flow of goods between all three countries. Tariff-free access to markets will continue and provisions have been included for important issues like intellectual property, labour standards, gender equality, and indigenous peoples’ rights. 

All three countries have now submitted formal notification of their ratification and the new agreement will replace the current NAFTA and come into force on July 1, 2020.

 

New Proof of Origin Requirements

In order to claim the preferential tariff treatment for each country under CUSMA/USMCA/T-MEC, a set of data elements referred to as a ‘certification origin’ must be provided by the exporter, producer or importer of the goods by adding the information to any document (e.g., Commercial Invoice) accompanying the shipment, or if preferred, by providing it on a separate document. In addition, the imported goods must originate* and be exported from a CUSMA/USMCA/T-MEC country. 

The Certification of Origin can be completed in English, French, or Spanish and will not follow a prescribed format, however, the following minimum data elements must be included:

1. Indicate the Certifier (Importer, Exporter or Producer)

2. Name, Address (including country) and Contact Information of the Certifier

3. Name, Address and Contact Information of the Exporter (if different from the certifier) 

4. Name, Address and Contact Information of the Producer (if different from the certifier, or exporter)

5. Name, Address and Contact Information of the Importer

6. Description and HS Tariff Classification (6 digit level) for the Goods (include invoice# if known)

7. Origin Criterion for the Goods, as set out in Article 4.2: Originating Goods of the CUSMA Rules of Origin

8. Blanket Period (date range up to 1 calendar year)

9. Authorized Signature and Date

The certification** will need to be signed and dated by the certifier and accompanied by the following statement:

“I certify that the goods described in this document qualify as originating and the information contained in this document is true and accurate. I assume responsibility for proving such representations and agree to maintain and present upon request or to make available during a verification visit, documentation necessary to support this certification."

Highlights of the Changes CA Imports US Imports
CUSMA/USMCA/T-MEC Certification of Origin Will replace the current NAFTA ‘Certificate of Origin’ proof of origin requirement.
NAFTA Preferential Tariff Treatments (TT 10,11, and 12) Will remain the same for the United States Tariff (UST – TT code 10) and the Mexico Tariff (MXT – TT code 11) but the Mexico-United States Tariff (MUST – TT code 12) will be repealed. U.S. Customs and Border Protection (CBP) is in the process of updating its regulations to support the new USMCA requirements and the current preferential tariff treatments are not expected to change.
**Proof of Origin - Commercial Goods

Shipments with a value less than CAD$3300 will be exempt from providing a certification of origin, however, a statement certifying that the imported goods originate from a CUSMA/USMCA/T-MEC country, will be required.

The certification of origin for shipments valued at less than USD$1000 will not be required, however, a low value CUSMA/USMCA/T-MEC statement could still be required.
Proof of Origin - Casual goods (other than for sale or for commercial use) A certification of origin is not required, however, the country of origin for these imports must be from a CUSMA/USMCA/T-MEC country and clearly marked on any accompanying supporting documents (e.g., Commercial Invoice and/or Air waybill) to benefit from the preferential tariff treatment. Same as ‘Commercial Goods’. Proof of Origin requirements will be based on value thresholds and not the ‘end-use’/purpose of the imported goods.
Courier Low Value Shipment (CLVS) Value Threshold Shipments imported with a value below the CLVS threshold (containing goods that are not regulated, controlled or prohibited) do not require formal entries to be submitted for customs clearance. The CLVS threshold will increase from CAD$2,500 to CAD$3,300 for all imports, regardless of origin. The current USD$2,500 formal value threshold will remain the same and shipments (containing goods that are not regulated, controlled or prohibited) valued below the threshold, will not require formal entries to be submitted for customs clearance.
New Tariff Rate Quotas (TRQs) Will be phased in over an agreed upon period of years to increase market access to specified agricultural products such as dairy, poultry and eggs. The U.S. will provide reciprocal access on a tonne-for-tonne basis for imports of specified Canadian dairy products through first-come, first-served TRQs.
*Increased De Minimis (the monetary value below which qualifying shipments are free from duties, taxes, or formal customs import procedures)

Shipments with a value below the de minimis threshold are exempt from providing a certification of origin. The current value threshold of CAD$20 will increase for express courier shipments (postal shipments not included) imported directly from a CUSMA/USMCA/T-MEC country, regardless of the country of origin, as follows;

- Goods valued at CAD$40 or less will not be charged duties and taxes

- Goods valued from CAD$40 to CAD$150 will not be charged duty but are subject to applicable Federal and Provincial taxes

The U.S. de minimis threshold remains the same at USD$800
Automotive Industry – New country of origin rules and labour provisions for manufacturing
These include, but are not limited to, the following;
  • Introduction of a Labor Value Content (LVC) requirement where a certain percentage of a car producer’s activities must be carried out by workers earning an average wage of at least US$16/hour.
  • At least 70% of steel and aluminum purchases made by vehicle producers must originate from North America.
  • 70% of all steel manufacturing processes must take place in a CUSMA/USMCA/T-MEC county, with the exception of metallurgical processes.
  • Higher Regional Value Content (RVC) required for certain automobiles and automobile components; 75% must be from a CUSMA/USMCA/T-MEC country (up from 62.5%).
Textile and Apparel Goods - Tariff Preference Levels (TPL) Commitments previously established under NAFTA have been largely maintained with CUSMA/USMCA/T-MEC. The quota will decrease for wool apparels from the US and will increase for cotton/man-made fiber apparels from the US. U.S. commitments previously established under NAFTA have been largely maintained with USMCA. There are decreases to quota levels for cotton/man-made apparels and wool from CA, while the quota levels for such imports from MX have stayed the same.

Please note that this information is subject to change and will be updated as required.

 

Next Steps for Importing into Canada

1. FedEx strongly recommends that importers/exporters/producers re-evaluate and re-certify their goods  to ensure they qualify for preferential treatment under the new agreement (e.g., Rules of Origin).

2. Current NAFTA certificates should be replaced with the equivalent ‘ Certification of Origin’ required under the new CUSMA/USMCA/T-MEC.

3. Current processes will need to be updated to ensure that the new ‘Certification of Origin’ is either referenced on, and/or is provided with, the accompanying shipment documentation.

4. Advanced rulings for origin under the new CUSMA/USMCA/T-MEC must be obtained. NAFTA origin advance rulings will not be valid once the new agreement comes into force.

 

Additional Resources

CUSMA – Full Text of the Agreement

Tariff Schedule of Canada (Tariff Rate Quotas)

CUSMA – Chapter 6: Textile and Apparel Goods

USMCA Issue-Specific Fact Sheets

CUSMA – Summary of revised outcomes

Customs Notice 20– 14: Implementation of CUSMA

Customs Notice 20-13: ‘Specially Defined Mixtures’

Customs Notice 20-18: De minimis under CUSMA