USMCA vs NAFTA

Updated: Jul 9, 2020

Major differences between USMCA and NAFTA in key chapters


Tariffs


All products that have zero tariffs under NAFTA will remain at zero under USMCA. 

Canada will provide new and expanded access (via Tariff Rate Quotas) for U.S. exports of several dairy categories, including:

  • Milk

  • Cheese

  • Cream

  • Skim milk powder

  • Condensed milk

  • Yogurt

Canada will also eliminate its tariffs on whey and margarine.


Certification of Origin


The USMCA no longer requires a certificate of origin. Rather, a minimum set of data elements must be submitted to prove origin. These elements may be on an invoice or any other document, except a commercial document issued in a non-Party, in accordance with the Uniform Regulations.


The importer may make a claim for preferential tariff treatment based on a certification of origin completed by the importer*, exporter or producer for the purpose of certifying that a good qualifies as an originating good. Certification of origin can be completed and submitted electronically with an electronic or digital signature and may cover a single importation or multiple importations of identical goods within a maximum 12-month period. The importer is responsible for exercising reasonable care concerning the accuracy of all documentation submitted to CBP.


The nine elements required at a minimum to claim origin under USMCA are:

  • Importer, Exporter or Producer (indicate which is certifier) 

  • Name and Address of Certifier

  • Name and Address of Exporter

  • Name and Address of Producer

  • Name and Address of Importer (if known) 

  • Description and Harmonized System Tariff Classification of the good to the 6-digit level

  • Specific Criteria under which the good meets USMCA originating requirements 

  • Blanket Period (certification is valid up to 12 months in the case of multiple shipments of identical goods) 

  • Authorized Signature and Date

A certification is not required for importations valued at $2,500 or less, provided that the importation does not form part of a series of importations that may reasonably be considered to have been undertaken or arranged for the purpose of evading U.S. laws, regulations, or procedures governing claims for preferential tariff treatment.

Record-keeping requirements still need to be met.


*A Mexican Importer can't complete a USMCA certification of origin. For Mexico, implementation with respect to a certification of origin by the importer shall be no later than three years and six months after the date of entry into force of USMCA. Meaning a Mexican Importer could complete a certification of origin by January, 2024.


Customs De Minimis for Duty-Free and Tax-Free Treatment


The De Minimis Threshold sets the value of goods below which no duties or taxes are collected by customs.


To help make trade easier, faster, and cheaper, the following de minimis levels shipment values will be followed. Shipments up to these de minimis values will generally enter with minimal formal entry procedures.

  • Canada will raise its de minimis level for North American express shipments from C$20 to C$40 for taxes. It will also provide for duty-free treatment for express shipments up to C$150.

  • Mexico will continue to provide tax-free treatment for express shipments up to US$50 and will provide duty-free treatment for express shipments up to US$117.

The United States will maintain its de minimis level at US$800.


Rules of Origin


USMCA also includes strong rules of origin for industrial products that will increase regional content and help preserve North American manufacturing, including new rules for autos and auto parts, chemicals, and steel-intensive products. These rules will help ensure that only producers who use sufficient amounts of U.S. or North American parts or materials receive preferential tariff benefits.


Product Specific Rules of Origin


Each 6-digit product Harmonized System (HS) number has a specific rule of origin.  Product-specific rules (PSRs) are the test that non-originating content must meet in order to be considered originating. Also, certain products have additional requirements and exclusions. 

  • NAFTA and USMCA product-specific rules of origin (PSR) are similar, with both using net cost and transaction value to calculate regional value content.  

  • USMCA also maintains and expands on the higher regional value content requirements used in NAFTA.

  • There are selected sectors where the USMCA PSRs are significantly different, including autos and auto parts, selected steel products and chemicals.  

  • There are also specific products where the PSRs were changed to reflect changes in the market since NAFTA. Please see the FTA Tariff Tool to see the PSR for your product and to ensure compliance with the USMCA rules of origin.

Chemicals

  • Allowing chemical processes to confer origin is new for the North American region as these rules were not in NAFTA. For chemical products in HS chapters 28 to 39, USMCA has added eight chemical reaction rules to confer origin in place of product specific rules of origin. The eight chemical processes are: chemical reaction; purification; mixtures and blends; changes in particle size; standards material; isomer separation; separation prohibition; and biotechnological processes.

Steel

  • For selected steel and iron products in HS chapter 73, USMCA requires that 70% of the steel by weight come from North America.

There were also minor changes to additional products such as glass and fiber optic. To ensure you are familiar with the rule of origin for your product, please visit USMCA's Rules of Origin chapter


Auto Rules of Origin

  • Increases regional value content for passenger vehicle and light trucks from 62.5% to 75% phased over three years after USMCA enters into force, thus incentivizing more auto production in North America. 

  • Increases regional value content for medium- and heavy-trucks to 70 percent over two phases, four and seven years after entry into force.

  • Includes a first-of-its-kind labor value content (LVC) rule which  requires that a certain percentage of qualifying vehicles must be produced in a North American plant or facility by workers making average wages of at least $16 per hour. 

  • Increases regional value content for core, principal, and complementary auto parts for passenger vehicles, and requires that core vehicle parts such as engines, transmissions, axles, body panels, suspensions, steering systems, and EV batteries be produced in North America, from regionally sourced steel, aluminum, and other key parts and materials. 

  • Increases regional value content requirements for principal and complementary parts for heavy trucks. Establishes a requirement that at least 70 percent of the vehicle producer’s purchases of steel and aluminum by value in the North American region be of originating goods.  This provision applies for producers of passenger vehicles, light trucks and heavy trucks.  A producer may be exempt from having to certify to this requirement under an alternative staging period.  

  • Requires more auto production in North America to qualify for duty-free treatment by eliminating the NAFTA’s “deemed originating” loophole.

  • On April 21st, USTR published a Federal Register Notice entitled “Procedures for the Submission of Petitions by North American Producers of Passenger Vehicles or Light Trucks To Use the Alternative Staging Regime for the USMCA Rules of Origin for Automotive Goods.” To be assured of consideration, a vehicle producer must submit a petition with a draft alternative staging plan no later than July 1, 2020. A vehicle producer must submit a petition with its final alternative staging plan no later than August 31, 2020.  

  • Under an alternative staging regime, importers of certain passenger vehicles and light trucks will have an additional two years – five years instead of three to meet the new rules of origin requirements.

  • For more information on the requirement to meet the product specific rules of origin for automotive goods, CBP's Interim Implementing Instructions.

De minimis to determine origin of a good


USMCA increases de minimis threshold for purposes of origin from 7 percent to 10 percent with certain exceptions for textile and apparel goods. For more information, see Article 412 of the USMCA Rules of Origin Chapter.  


To learn more about FTA rules of origin and resources, visit our Identify and Apply Rules of Origin page on the FTA Help Center.


On April 20, 2020 - U.S. Customs and Border Protection released the USMCA Interim Implementing Instructions.

  • These Interim Implementing Instructions are informational and provide early guidance on the new requirements under the USMCA, including information on claiming USMCA preferential treatment for goods. 

  • The Final Implementing Instructions will be released prior to the date the USMCA enters into force and will provide additional details on the USMCA entry, compliance, and other requirements.

FTA Tariff Tool


The FTA Tariff Tool incorporates all products (agricultural and non-agricultural goods) classified within all 97 chapters of the Harmonized System and includes information on product-specific rules of origin to determine the eligibility of the reduced tariff rates under with any US FTA Partner. The Tariff Tool not only provides information on current tariff lines but also provides transparency on future tariffs and the year in which those products become duty-free.

View the FTA Tariff Tool


Intellectual Property Rights


USMCA includes:

  • Full national treatment for copyright and related rights.

  • Copyright term of life of author +70 years or publication +75 years.

  • Establishes appropriate copyright safe harbors to deter online piracy.

  • Requires application of enforcement measures to the digital environment.

  • Minimum 15-year protection for industrial designs.

  • Mandates patent term extension for unreasonable patent office and regulatory delays.

  • Requires criminal procedures and penalties for camcording.

  • Strong civil and criminal trade secret protections, including against misappropriation by state-owned enterprises.

  • 10 years of data protection for agricultural chemicals.

  • Strongest due process and transparency requirements for geographical indications protection systems in any FTA.

  • Requires protection against circumvention of technological protection measures.

  • Requires ex officio authority for customs officials to stop suspected counterfeit goods.

  • Requires criminal penalties and civil remedies be available for both satellite and cable theft.

  • Reaffirms Doha Declaration on TRIPS and Public Health.

For more information about protecting your intellectual property, visit the STOPfakes.gov site.


Agriculture


USMCA:

  • Maintains NAFTA’s existing zero-tariff treatment, significantly expands U.S. access to Canada’s dairy market, and includes a number of other important upgrades. 

  • Includes a modernized chapter on sanitary and phytosanitary (SPS) measures that establish new and enforceable rules to ensure that SPS measures are science-based and are developed and implemented in a transparent and non-discriminatory manner.

  • Includes cooperation on agricultural biotechnology which includes rules – for the first time in a U.S. trade agreement – to address all biotechnologies, including new technologies such as gene editing, to support 21st century innovations in agriculture.

  • Covers the full range of dairy products and access will not be shared with other countries. 

Canada: 

  • Will eliminate milk classes 6 and 7 and apply new export penalties. These policies allowed unfairly low-priced Canadian dairy products to undersell U.S. products in Canada and in third-country markets. Canada will also apply export penalties on shipments of skim milk powder, milk protein concentrates, and infant formula over specified quantity thresholds. 

  • Will eliminate its discriminatory grading of U.S. wheat and no country of origin statement will be required on Canada’s quality grade certificates. 

  • Commits to ensuring that British Columbia eliminates discriminatory treatment of U.S.-origin wine in grocery stores and includes new non-discrimination and transparency commitments regarding the sale and distribution of alcoholic beverages.

Mexico:

  • Will not restrict market access for U.S.-origin cheeses labeled with certain names.

To learn more about how you will benefit from USMCA agricultural provisions, visit the USDA website.


Customs and Trade Facilitation


USMCA:

  • Makes improvements in customs and trade facilitation, including agreement by Canada and Mexico to raise their de minimis value levels for taxes and duties on lower value express shipments, allowing certain shipments to enter with minimal formal entry procedures. 

  • Goes beyond any past U.S. agreement to help reduce costs and bring greater predictability to cross-border transactions, while ensuring that customs officials have the tools necessary to enforce the law.  

  • Includes forward-leaning customs rules on automation and reducing delays. Traders will be guaranteed the opportunity to submit and receive customs-related documentation and data through one website, i.e., a “single window”. Once the customs requirements are met, the goods must be released immediately.  

  • Requires that customs procedures be consistent throughout all ports of entry within each of the three countries. Customs administrations will have new obligations to ensure fairness and integrity in customs work.  

  • Canada and Mexico will be required to publish information like import, export, and transit requirements, and fees, charges, and penalties on the Internet. This will allow traders to better predict trade-related costs and requirements before they export. Small-and medium-sized enterprise (SMEs) companies will especially benefit. 

  • Express shipments valued below $2,500 U.S. dollars will benefit from reduced paperwork, making low-value shipments easier, faster, and less costly for traders. This too is especially important for SMEs, which account for many low-value export shipments. Note that the good still needs to qualify for USMCA tariff treatment and the invoice should include a statement to that effect. 

Financial Services


USMCA includes:

  • Commitments to liberalize financial services markets; facilitate a level playing field for U.S. financial institutions, investors and investments in financial institutions; and expand trade in cross-border financial services. 

  • Expanded commitments in cross-border services include portfolio management; investment advice; electronic payment services, which are subject to national treatment and market access obligations; and a prohibition on local presence requirements. 

  • Core obligations, such as national treatment, to ensure there is no discrimination against U.S. financial service suppliers. 

  • Market access provisions prohibiting certain quantitative and numerical restrictions on U.S. financial services suppliers, as well as most-favored-nation commitments ensuring a Party does not discriminate in favor of another Party or non-Party. 

  • A prohibition on local data storage requirements (for the first time in any U.S. trade agreement) when a financial regulator has access to data that it needs to fulfill its regulatory and supervisory mandate.

Textiles


USMCA includes: 

  • Revised Rules Incentivize the Use of Regional Inputs

  • New USMCA requirements to source sewing thread, narrow elastic fabrics, pocketing, and coated fabrics from within North America will expand markets for U.S. producers of these inputs. Staged implementation of these new rules will facilitate a smooth transition from NAFTA to the USMCA.


  • Restructured Tariff Preference Levels (TPLs)

  • Restructures and rebalances NAFTA TPLs to ensure that this limited exception to the rules of origin is not overused under the USMCA, at the expense of regional supply chains. Reduces some TPLs for U.S. imports from Canada and Mexico, while substantially increasing TPLs for U.S. exports to Canada of apparel and other finished textile goods, which will provide significant new export opportunities for U.S. manufacturers.


  • Updated Rules of Origin Provide Flexibility 

  • Revised rules allow manufacturers to use textile inputs not generally available in North America (e.g., rayon fibers and visible lining fabric) and increases the de minimis percentage of non-originating inputs allowed in qualifying goods from 7 to 10 percent.


  • New Robust Customs Enforcement Provisions

  • Strong, new textile-specific enforcement procedures will help to prevent circumvention and fraud.


  • Excludes TSA Uniform Procurement from Government Procurement Obligations

  • Uniforms and other textile products procured for the TSA must be U.S. made, consistent with the Kissell Amendment and similar to Berry Amendment requirements for Department of Defense procurement.


Find more information and resources on the Office of Apparel and Textiles site.


Advance Rulings


An advance ruling is a written document received from the authority from a USMCA country. It provides binding information on specific USMCA questions you may have about future imports of goods into Canada, Mexico, and the United States.


USMCA:

  • Advance rulings, complete or redacted, to be available on a free, publicly accessible website.

  • Rulings are issued as expeditiously as possible and in no case later than 120 days after obtaining all necessary information from the person requesting an advance ruling.

Databases of published rulings:

Find additional information on how to apply for an advance ruling, including Mexican and Canadian contact information.

Find additional information on U.S. Customs and Border Protection’s advance ruling procedures.


Note:

For an official determination on whether your product qualifies for USMCA tariff treatment, you will need to seek a formal ruling from the customs administration in the country to which you are shipping.


New Chapters


The Good Regulatory Practices (GRP) chapter includes commitments related to:

  • Central coordination of regulatory bodies.

  • Publication of annual plans of expected regulations.

  • Public consultations on draft texts of regulations.

  • Evidence-based analysis and explanations of the scientific or technical basis for new regulations (such as parameters for conducting regulatory impact assessments and retrospective reviews).

  • Techniques for encouraging regulatory compatibility and regulatory cooperation.

  • Private advisory committees.

  • Information quality.

  • Public suggestions for improvements to regulations.

  • Consideration of effects on small businesses.

The chapter includes extensive transparency requirements to publish: 

  • Key information online, including draft regulations (notice and comment), annual regulatory agendas, and descriptions of regulatory agencies’ functions and legal authorities.

  • Applicable forms used by regulatory agencies.

  • Fees associated with licensing, inspection, audits, etc.

  • Judicial or administrative procedures available to challenge regulations. 

The Digital Trade chapter: 

  • Prohibits the application of customs duties and other discriminatory measures on digital products distributed electronically, such as ebooks, videos, music, software, and games. 

  • Ensures that data can be transferred across borders. 

  • Promotes compatibility between different approaches to protecting personal information and recognizes the APEC Cross Border Privacy Rules system as a valid mechanism to facilitate cross-border information transfers while protecting personal information.

  • Facilitates digital transactions by permitting the use of electronic authentication and electronic signatures, while protecting consumers’ and businesses’ confidential information and guaranteeing that enforceable consumer protections are applied to the digital marketplace. 

  • Cracks down on data localization measures used to restrict where data can be stored and processed, enhancing and protecting the global digital ecosystem. 

  • Promotes collaboration in addressing cybersecurity challenges. 

  • Protects against forced disclosure of proprietary computer source code and algorithms. 

  • Promotes open access to government-generated public data.

  • Enhances the viability of internet platforms that depend on interaction between users by limiting civil liability for third-party content, except regarding intellectual property enforcement. 

  • Guarantees enforceable consumer protections apply to the digital marketplace, including those for privacy and unsolicited communication such as spam.

The  Small and Medium-Sized Enterprises (SME) chapter: 

  • Promotes cooperation to increase opportunities for SME trade and investment. 

  • Establishes information-sharing tools that will help SMEs to better understand the benefits of the agreement and provide other information useful to SMEs doing business in the region.

  • Creates a committee on SME issues comprised of government officials from each country. 

  • Launches a new framework for an ongoing SME Dialogue with stakeholders to help ensure that SMEs continue to benefit from the agreement.

Additional Cross-Cutting USMCA Provisions That Will Benefit SMEs:

  • The Customs and Trade Facilitation Chapter will help reduce costs and bring greater ease and predictability to cross-border transactions, including thorough provisions requiring online publication of laws, regulations, contact information, tariffs, taxes, and other fees. The chapter includes an expanded scope of advanced rulings by customs authorities, provisions requiring an online searchable database for customs information, and expedited release of express shipments.

  • The Digital Trade Chapter contains the strongest provisions of any international agreement and prohibits customs duties on products distributed electronically, supporting internet-enabled small businesses and e-commerce exports.

  • The Intellectual Property Chapter provides strong and effective protection and enforcement of IP rights critical to driving innovation, creating economic growth, and supporting American jobs. The chapter requires Parties to cut red tape in obtaining protection of IP rights, including by streamlining application procedures that impose disproportionate burdens on SMEs.

  • The Cross-Border Trade in Services Chapter benefits SMEs by eliminating the unnecessary requirement to open a foreign office as a condition of doing business. It also includes a new provision encouraging Parties to consider the effects of regulatory actions on SME service suppliers and to avoid authorization procedures that impose disproportionate burdens on SMEs.

  • The Good Regulatory Practices Chapter sets forth good governance procedures to promote transparency and accountability in the development and implementation of regulations. It includes provisions encouraging Parties to take into consideration the effect of new regulations on SMEs in order to reduce or eliminate unnecessarily burdensome, duplicative, or divergent regulatory requirements.

The Environment chapter:

  • Incorporates USMCA’s environment provisions into the core text of the agreement and are fully enforceable, subject to dispute resolution. 

  • Requires the Parties to effectively enforce their environmental laws. 

  • Protects coastal and marine environments   

  • Prohibits certain harmful fish subsidies, including those that benefit vessels or operators involved in illegal, unreported, and unregulated (IUU) fishing.

  • Improves fisheries management to prevent illegal fishing, overfishing, and overcapacity.

  • Includes provisions designed to address and reduce – for the first time in any trade agreement – marine litter.

  • Prohibits shark finning and commercial whaling, as well as the use of poisons and explosives in commercial fishing operations, also for the first time in any trade agreement.


  • Includes commitments on air quality

  • Commits the Parties to additional trilateral cooperation and to more transparency concerning certain data and information.


  • Includes commitments on conservation and trafficking in wildlife, timber, and fish

  • Sets minimum penalties for these environmental crimes and enhances the effectiveness of customs and border inspections of shipments.


  • Contains provisions about multilateral environment agreements

  • Parties must adopt and implement measures to fulfill obligations under certain environmental agreements, including the Convention on International Trade in Endangered Species of Wild Flora and Fauna (CITES).


  • Includes opportunities for public participation in implementation through a time-bound public submission process. 

The Labor chapter: 

  • Incorporates USMCA labor provisions into the core text of the agreement and are fully enforceable, subject to dispute resolution. 

  • Requires Parties to adopt and maintain in law and practice core labor standards as recognized by the International Labor Organization, including freedom of association and the right to strike, to effectively enforce their labor laws, and not to waive or derogate from their labor laws.

  • Prohibits the importation of goods produced by forced labor, including forced child labor.

  • Requires the Parties to ensure migrant workers are protected under labor laws.

  • Includes first-of-its-kind language requiring parties to address violence against workers for exercising their labor rights.

  • Provides expanded guarantees for the enforcement of labor laws.

  • Provides due process through independent and impartial judicial and administrative tribunals backed by dispute settlement. 

  • Makes obligations more easily enforceable by clarifying the meaning of “manner affecting trade” and “sustained or recurring.”

Annex on worker representation and collective bargaining in Mexico:

  • Requires Mexico to overhaul its system of labor justice.

  • Includes specific legislative actions that Mexico must take to reform its system of labor justice and provide for the effective recognition of the right to collectively bargain and guarantees secret ballot votes by workers on collective bargaining agreements.

  • Requires Mexico to create the conditions for real union democracy, including personal, free, and secret ballot votes on electing and challenging union leadership and to demonstrate worker support for collective bargaining agreements which creates conditions for fairer competition between U.S. and Mexican workers.


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