On 1 July 2020 the US-Mexico-Canada Agreement (USMCA) entered into force. These are still early days and much remains to be clarified by pending rulemaking.
The automotive industry in particular has been significantly affected by the new agreement.
This article provides a checklist of recommendations to guide readers through these first weeks and months of the USMCA.
Be informed on USMCA certifications issued and USMCA claims made by your company
Even during these first transitional months, US Customs and Border Protection (CBP) is expected to issue requests for data and other origin information (CF-28s) during the purported informed compliance period. The transition period is not a safe harbour period to issue USMCA certificates without consequence, but simply provides more time for companies to gather the necessary data.
2020 North American Free Trade Agreement (NAFTA) certificates are no longer valid.
Compare USMCA origin rules with legacy NAFTA origin rules on your priority products
Companies should analyse how these products qualified under NAFTA and how they will be treated under the new USMCA rules. Some key NAFTA automotive origin rules (eg, deemed originating) no longer apply under the USMCA.
Engage in 'enterprise risk' or 'whole of company' approach to USMCA
Companies should assemble a team from key corporate divisions within the company – from the sales department and logistics personnel to the finance group – to provide important considerations when issuing USMCA certifications and making USMCA claims.
Ensure that any communications from CBP are properly handled by senior managers to ensure timely and accurate responses
Even with a six-month informed compliance period, CBP will be expecting companies to demonstrate reasonable care and due diligence when issuing USMCA certifications and making USMCA claims.
Understand and prepare company policies governing issuance of USMCA certifications (particularly if you're an importer)
Under the USMCA, importers may issue their own certifications that can be relied on when making USMCA preference claims. Importers should understand the legal risks that this choice presents and seek advice on how best to mitigate them.
Speak to suppliers to gauge their USMCA understanding and needs
This is especially important for Tier 1 automotive suppliers whose Tier 2 suppliers previously provided them with only 'traced value' for their NAFTA qualification analysis.
If in the automotive sector, understand USMCA labour value content requirements
Although the labour value content certification requirements apply only to vehicle manufacturers, vehicle parts suppliers will need to know how these provisions also affect them.
Track and retain records of entries filed without USMCA preference claim (due to lack of available data at time of entry)
The USMCA exempts the merchandise processing fee (MPF) when USMCA claims are made at entry but does not provide MPF refunds when post-entry USMCA claims are made. Legislative efforts to remediate this difference from NAFTA, if passed, could provide retroactive refunds.
Keep NAFTA documents and records
While NAFTA certifications and claims are no longer valid, NAFTA has not disappeared entirely. CBP retains the authority to conduct NAFTA verifications (audits) retroactively going back to 2015.
Get the best advice
The best and most effective approach in the long term is getting it right from the beginning. Companies should use this advice to connect the dots for their exposure to non-USMCA risks, such as continuing Section 232 and 301 tariff exposure.
It may take a while to completely transition to the USMCA. However, following these suggestions during this process will greatly assist in reducing the risk of making costly mistakes during the early months and will serve as a foundation for compliance actions in the years ahead.
