On July 1, 2020 the 26-year old North American Free Trade Agreement (NAFTA) was replaced by the Canada-United States-Mexico Agreement (CUSMA), the United States-Mexico-Canada Agreement (USMCA), and Tratado entre México, Estados Unidos y Canadá (T-MEC).
Under discussion for several years, this new trade deal introduces new regulations and regulatory amendments for qualifying imports, and a few new acronyms for the trade community to learn. Essentially, the CUSMA, USMCA and T-MEC are the same agreement with a different name based on the importing country. There are certain rules that are specific and different for each country.
Six Things to Know
Here are six things all companies should know about NAFTA’s replacement:
- The clock has run out. As of July 1, any company exporting goods to Canada that previously qualified under NAFTA with duty free benefits using the old rules of origin, may no longer qualify under CUSMA. As NAFTAs are no longer valid, a CUSMA Certification of Origin will now be required for qualifying products. The same applies for companies importing to the U.S. (for which they will need a USMCA Certificate) and Mexico (T-MEC Certificate). “This transition is a major concern for some companies that are not prepared for the shift,” said Eleonora Delibaltov, Schenker of Canada’s Senior Manager, Regulatory Affairs & Consulting. To overcome the problem, she advises importers to do the necessary due diligence and work with their vendors to obtain new CUSMA/USMCA/T-MEC Certificates, by requalifying the goods under the new Rules of Origin, and provide them with the commercial documents or preferably in advance to their customs broker.
- It’s not going to happen automatically. It’s going to take more than a simple transfer of information from a NAFTA certificate to comply with the new rules. “Exporters and importers may assume that it is sufficient to just transfer over their previous NAFTA qualified goods onto a CUSMA Certificate, but it is not that simple,” said Delibaltov. “They will have to go through the proper re-qualification processes ( ie. Bill of Material analysis against the rules of origin) and have the proper documentation and recordkeeping in place to be able to prove to CBSA that the goods still qualify under CUSMA.”
- The standard form has been eliminated. Schenker Canada has been doing a lot of outreach with importers and their vendors, particularly with those that have a regular flow of high-volume imports from Canada, Mexico, and the U.S. “We’ve been working on the regulatory guidance document and the certificate templates for the CUSMA/USMCA agreement, for both sides of the border,” said Delibaltov. Schenker Canada has created its own versions of the form, which has no prescribed format (unlike the official NAFTA form). “The CUSMA/USMCA Certification of Origin has nine mandatory data elements that must be provided on the documents with each shipment or on a blanket certificate in order to import the goods duty free. Whether that’s on a Schenker form, or one that the producer, exporter or importer creates,” said Delibaltov, “those specific minimum data elements must be provided upon importation.”
- Certification can either be for one shipment or for a 12-month period. For an individual import, single use certification is only valid for that particular shipment. However, if a company makes repeated shipments to a specific country for the same products, then it can opt to use a 12-month blanket certification and list the qualifying goods to cover all of its shipments during that timeframe. Companies can use the same form for either option. Schenker Canada has developed a CUSMA and USMCA Certification Form templates that include a continuation sheet and instructions for both single and blanket certificate of origin use.
- Check your open purchase orders now. Because there’s no transition period between NAFTA and CUSMA, companies should check with their vendors to ensure that they’re following the new rules of origin for each country. This could translate into financial benefits for shipments that qualify for duty free benefits under the new agreement. “Even if the importers are not fully prepared to qualify all of their goods to cover imports for the rest of the year, at least prioritize the goods that they’re shipping out in the next month or two based on their open POs,” Delibaltov advised. “See if they can qualify and provide Certificates for those goods under the CUSMA Agreement.”
- The CUSMA Duty refund recovery time is longer than NAFTA’s. Even if the CUSMA, USMCA, or T-MEC certificate is not provided when a shipment clears through customs, companies can still recoup some or all of the duties that were paid on those shipments. Under CUSMA, that recovery time has been extended to four years from the date of final accounting with customs (up from one year under NAFTA). The US is maintaining the one-year timeline for duty recovery of qualifying imports under the USMCA.
As the shipping world adjusts to this new agreement, Delibaltov said now is the time to put the processes and procedures in place to ensure that 1) you’re following the rules and 2) you’re getting the full benefit of the new trade deal. She sees due diligence as the best way to minimize duties while also avoiding fines associated with non-compliance.
When in doubt, call on your experienced Consultants to help sort through the new rules and figure out where your company stands in relation to CUSMA, USMCA, and/or T-MEC preparedness. “Here at Schenker, we are assisting importers with the transition of obtaining new CUSMA/USMCA certificates, and filing for revised NAFTA Advance Rulings with CBSA under CUSMA,” Delibaltov added.