01/29/2020
President Trump signed the United States-Mexico-Canada Agreement (“USMCA”) implementing legislation into law earlier today. The USMCA contains new provisions that were not in NAFTA (e.g., digital trade, data storage location requirements, etc.) and makes changes to others (e.g., agriculture; financial services; de minimis; certain rules of origin, such as for autos; investor protections; trade remedies, etc.). There are also side letters on how products of Canada and of Mexico will be treated, if the United States proceeds to impose additional duties on autos and auto parts (or other products) under Section 232 (which seems to be back on the table).
The USMCA is scheduled to take effect 90 days after the last country notifies the others that it has completed its domestic procedures for ratification. Mexico completed its process in December, and the United States did so today. Canada has just begun its domestic process and, while the prospects for ratification may be less than they once were in Canada, it is still widely-expected to be concluded sometime this spring. As result, it appears that USMCA could go into effect on or about July 1, 2020.
There is a great deal in the revised agreement that all companies with meaningful NAFTA (or now, USMCA) activity should be reviewing to determine how it impacts their operations. For example, companies should be confirming whether the applicable rules of origin have changed (particularly if you are in the auto industry), how the transition from being an “exporter-based agreement” (NAFTA) to an “importer-based agreement” (USMCA) will impact NAFTA/USMCA solicitation/certification efforts in the future, what happens if the NAFTA Marking Rules no longer apply to imports from Canada or Mexico and instead the traditional substantial transformation test applies (as we have seen under Section 301, the ST and NMR do not always produce the same result), how a possible mid-year implementation impacts regional value content calculations on imports from IMMEX/maquila companies, etc.
