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On July 1, the United States-Mexico-Canada Agreement (USMCA) goes into effect. It will have a significant impact on manufacturers across North America as they reanalyze their products to determine whether they qualify for duty-free treatment.

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On June 3, the U.S. Trade Representative published Uniform Regulations regarding rules of origin (ROO) contained in Chapter 4 of USMCA and related provisions for textile and apparel goods contained in Chapter 6. ROO are used to determine whether imported goods receive preferential tariff treatment under USMCA. Specific tariff provision rules for preferential tariff treatment will be identified in the Harmonized Systems of the United States, Mexico and Canada. There are significant changes from the North American Free Trade Agreement regarding ROO, including an increase in the de minimis standard to 10% of the transaction value or the total cost of the good (or for textiles, generally, 10% of the weight); new rules for the chemical industry; changes to originating analyses regarding sets; elimination of government-formatted certificates of origin; and the inclusion of importers as certifiers for certificates of origin. The most significant changes concern the automotive industry. For example, USMCA:

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Questions and concerns have already been raised about the Uniform Regulations, including:

Other questions will undoubtedly arise and be clarified over the next several months.

A significant but welcome change is that USMCA eliminates provisions relating to the country of origin marking rules, which are currently found in 19 C.F.R. § 102.20 of the customs regulations. This means that there will no longer be two sets of rules to be analyzed (as was the case under NAFTA) – one for qualifying the good and the other to determine which country of origin should be used for marking purposes. On June 16, U.S. Customs and Border Protection issued Updated Interim Implementing Instructions for USMCA, further clarifying that “[t]he rules of origin contained in 19 CFR Part 102 determine the country of origin for marking purposes of a good imported from Canada or Mexico in accordance with the requirements of 19 CFR Part 134.” This means that the rules of origin contained 19 C.F.R. § 102.20 will be reconciled with or replaced by nonpreferential marking rules contained in Part 134 of the customs regulations. Further, after USMCA takes effect on July 1, a good does not need to first qualify to be marked as a good of Canada or Mexico to receive preferential tariff treatment under USMCA; the product-specific rules of origin contained in GN 11 determines whether a good originates under USMCA.

Francesca M.S. Guerrero Partner, International Trade 202.973.2774 <a href="mailto:Francesca.Guerrero@ThompsonHine.com">Francesca.Guerrero@ThompsonHine.com</a>

Michelle Li Associate, International Trade 202.263.4162 <a href="mailto:Michelle.Li@ThompsonHine.com">Michelle.Li@ThompsonHine.com</a>

William L. Matthews Senior Manager of International Trade Not licensed to practice law 202.263.4137 <a href="mailto:William.Matthews@ThompsonHine.com">William.Matthews@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel. This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhinedev.contentpilot.net/wp-content/uploads/2022/04/International_Trade_Update_-_Beyond_NAFTA_-_USMCA_Goes_into_Effect_July_1.pdf

Beyond NAFTA: USMCA Goes into Effect July 1

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