Navigating Origin requirements in the 'New NAFTA' Era
By Brian Smith, Managing Director, essCert
NAFTA, the North American Free Trade Agreement between the USA, Mexico and Canada, has now been renegotiated. The new agreement will be replaced by the USMCA, or United States-Mexico-Canada Agreement. While many of you have already read about this in recent news, what has not yet been discussed are the details relating to origin of goods; or more specifically, documenting origin via certificates such as the current NAFTA Certificate of Origin.
A ‘final’ draft of the USMCA is now in place but still requires ratification by lawmakers in all three countries, meaning that there is a small possibility of further amendments (although most analysts argue that due to political pressures to finalize the agreement no major changes are expected). Depending on the speed with which lawmakers approve USMCA, the Agreement is expected to come into force in late 2019 or early 2020.
While this timeline gives companies approximately one year to adapt, the time to start planning is now. For many companies, the US, Mexico and Canada trade bloc represents their largest marketplace, and maintaining tariff-free trade is critical.
Here’s what exporters need to start reviewing now, and how essCert can help with the transition:
Most of the attention in the press has focused on changes to automotive origin requirements, whereby cars must have 75% of their components manufactured in Mexico, the US, or Canada to qualify for preferential duty-free treatment within the bloc (previously at 62.5% percent under NAFTA). Numerous smaller changes for both manufactured goods and agricultural products will also apply under USMCA. Canada, for example, agreed to impose export taxes if its global exports of specific dairy-derived products (including milk protein concentrates, skim milk powder and infant formula) reach a certain size.
If you’re exporting between the US, Canada and/or Mexico, now is the time for you or your legal experts to begin reviewing the Agreement for potential impact on your products. If you currently enjoy duty free access within the bloc, you want to be sure you are not surprised by tariffs in 2020 if your product no longer complies with origin requirements.
The full text of the final draft is available on the United States Trade Representative’s website.
Now, to gain access to tariff-free trade within NAFTA, exporters currently need to complete a NAFTA Certificate of Origin. Under USMCA, there is no specific Certificate of Origin requirement, but rather an extensive list of requirements that must be documented in your origin declaration.
In some ways, this becomes more difficult to comply with when compared to the NAFTA Certificate, which provided relatively simple guidance to its completion. The new agreement does, however, recognize electronic and digital signature for origin documentation.
essCert is developing a web-based tool to help exporters comply with the new origin documentation requirements and will be fully USMCA-ready when the agreement officially comes into force.
Contact Us to find out how we can assist you in ensuring Origin compliance with current and upcoming USMCA requirements