Are you ready for the July 1 implementation of the CANADA-UNITED STATES-MEXICO AGREEMENT (CUSMA/USMCA)?

Source: Canada US
Link: Are you ready for the July 1 implementation of the CANADA-UNITED STATES-MEXICO AGREEMENT (CUSMA/USMCA)?

The Canada-United States-Mexico Agreement (CUSMA), also referred to as the United States-Canada-Mexico Agreement (USMCA), comes into effect on July 1, 2020.  Are you ready?

The full CUSMA Agreement was signed in November of 2018, and later amended in December 2019.  In April of this year each of the three parties notified that they had completed their respective ratification processes.  This meant that the agreement could be implemented on July 1.

The CUSMA Uniform Regulations containing important clarifying details, were posted by the United States on June 3 with the qualifier that they remain subject to legal review and authentication by each of the three countries. The U.S. Customs and Border Protection posted non-binding guidance in the form of Interim Implementing Instructions that were updated on    June 16 (“CBP Implementing Instructions”). The CBP Implementing Instructions provide insight as to how the U.S. intends to implement many of the CUSMA requirements.  There were some surprising interpretations regarding the Labour Content Value requirement for the auto industry.  Similar guidance from the Canadian government, particularly on some of the more complex automotive rules has not been published.

All said, we are faced with little time to implement some complex, and in some instances, unclear, requirements to ensure that goods continue to enjoy preferential duty treatment when exported/imported across North America.

CUSMA introduces many changes to the rules for securing preferential duty treatment when your parts, material inputs and finished products cross a North American border. CUSMA is NOT NAFTA and having a NAFTA process and NAFTA certificates of origin will not be enough to secure and support duty free treatment for goods that are imported/exported in North America.  If your products or production inputs don’t meet the CUSMA origin requirements, or if you don’t secure or are not able to provide the required CUSMA certification of origin, your products may be subjected to duties.

For many industries, the rules of origin and the methods of qualifying are similar to those under NAFTA.  However, for others, such as the automotive and textile industries, the rules have changed and compliance with the new rules will require a detailed reassessment of the goods that you export to customers in the United States and/or Mexico.

For all industries, the certification process has changed, and CUSMA certifications of origin will be required to support your claim for CUSMA preferential tariff treatment.  As of July 1, 2020, NAFTA certificates of origin will no longer qualify.  Nor will NAFTA advanced rulings remain valid for imports/exports made on or after July 1.

With little time to prepare for CUSMA, many organizations are left scrambling.  With the July 1 entry date fast approaching, here are some suggestions:

1. Assign and train designated individuals, including a CUSMA Lead within your organization to organize, complete and be accountable for product assessments and CUSMA certifications of origin;
2. Complete an inventory and detailed CUSMA assessment of your current and future product programs. To effectively conduct your assessment you need to: (i) start with the correct HS tariff codes; (ii) collect complete CUSMA based information from your own suppliers to support your review; (iii) ensure that you are working with the appropriate CUSMA product rule; and (iv) ensure that your calculations comply with detailed CUSMA rules;
3. Address shortfalls where your products don’t meet the CUSMA origin requirements. If your customers demand CUSMA originating goods and your goods don’t qualify, you risk losing critical business.  If your products don’t meet the requirements, establish a process that includes coordination with your Legal and Customs teams to identify options to attain qualifying status;
4. Complete your CUSMA certifications of origin. These are not NAFTA certificates of origin and while CUSMA does not require a specific format, it does require the inclusion of certain information;
5. Ensure that your document systems and retention processes meet the CUSMA documentary support and retention requirements; and
6. When in doubt, seek an Advanced Ruling: The CUSMA rules are complex and, in some instances, unclear.  If your organization is not certain that your good meets the CUSMA origin qualifying requirements, work with your Legal team to seek an Advanced Ruling.

We continue to monitor the implementation of CUSMA and expect further clarification from both the Canadian and U.S. governments.

Should you wish further information or assistance for your organization, please don’t hesitate to reach out to Heather Innes at (416) 350-1234 or heather@lexsage.com.