On 10 December 2019 House Democrats appeared before cameras on Capitol Hill to announce that they had reached an agreement with the Trump administration on the final text of the US-Mexico-Canada Agreement (USMCA). US Trade Representative Robert Lighthizer will next meet with his Mexican and Canadian counterparts.
The announcement follows weeks of intense negotiations with the Office of the US Trade Representative on the agreement's final text, particularly enforcement provisions on labour and environmental rules. Details remain limited, but the action moves US ratification efforts close to the finish line. Mexico has already formally ratified the USMCA and Canada is expected to follow suit shortly.
This legislative action, once completed, will determine the all-important USMCA effective date. In the meantime, the current North American Free Trade Agreement rules will remain in place until the USMCA comes into force. Company executives should prepare their divisions for the new rules to take effect sometime in 2020 or possibly by January 2021, depending on the timing of the necessary ratification and regulatory actions.
Once Canada and the United States have completed their ratification process, all three countries will move quickly to publish the critical USMCA uniform regulations – the fine print of the agreement. These regulations will be essential for company leaders to follow carefully as they will spell out new rules regarding USMCA compliance and preferential tariff treatment. For the automotive industry, the regulations will detail new levels of regional value content requirements, as well as labour value content requirements affecting USMCA eligibility.
What is certain is that the months ahead will be filled with important announcements, clarifications and legal and policy interpretations that will shape North American trade and global supply chains for decades to come.
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