USMCA Implementation

June 18, 2020

On July 1, 2020, the United States-Mexico-Canada Agreement (USMCA in the U.S., CUSMA in Canada, T-MEC in Mexico) will enter into force, replacing the 26-year old North American Free Trade Agreement (NAFTA). USDEC has prepared the following resources to assist U.S. exporters with the implementation of this new trade agreement:

  1. Certificate of Origin: The USMCA eliminates the need for a specific form for the certificate of origin. All shipments arriving in Canada or Mexico as of July 1, 2020, will need to provide specific data elements, but the information does not need to be presented on a specific form. Volume 2 of the USDEC Export Guide includes the requirements to document origin under the USMCA. To read the full requirements for documenting origin, see Chapter 5 of the USMCA, Origin Procedures. This chapter also includes other relevant details, such as record keeping requirements.

  2. Preferential Tariffs and Quotas: USDEC's Export Guide includes information on preferential tariffs under the USMCA. Please consult the following sections:

    Volume 1: The newly revamped Volume 1 module contains the current year preferential tariffs in Canada and Mexico under the USMCA, as well as the full tariff reduction schedule for the additional access granted to U.S.-origin exports to Canada under this agreement. All qualifying U.S.-origin imports into Mexico remain duty- and quota-free under the USMCA.

    Trade Agreements: The Trade Agreements section contains a downloadable spreadsheet of Canada's full tariff reduction schedule under the USMCA for the additional access granted in Canada under this agreement. Although this information is now also incorporated into the new Volume 1 database, the spreadsheet in the Trade Agreements section will remain available until some additional upgrades to Volume 1 are implemented.

    Quotas: On June 15, Canada announced the allocation of its quotas under the CUSMA. Only importers may apply for quota access. The links to the quota announcements are below for your reference.

    Cheese, industrial (0406.10.10, 0406.20.11, 0406.20.91, 0406.30.10, 0406.40.10, 0406.90.11, 0406.90.21, 0406.90.31, 0406.90.41, 0406.90.51, 0406.90.61, 0406.90.71, 0406.90.81, 0406.90.91, 0406.90.93, 0406.90.95, and 0406.90.98)
    Cheeses of all types (0406.10.10, 0406.20.11, 0406.20.91, 0406.30.10, 0406.40.10, 0406.90.11, 0406.90.21, 0406.90.31, 0406.90.41, 0406.90.51, 0406.90.61, 0406.90.71, 0406.90.81, 0406.90.91, 0406.90.93, 0406.90.95 and 0406.90.98)
    Concentrated or condensed milk (0402.91.10 and 0402.99.10)
    Cream (0401.40.10 and 0401.50.10)
    Ice cream and ice cream mixes (1806.20.21, 1806.90.11, 1901.90.31, 1901.90.51, 2105.00.91 and 2202.99.32)
    Milk (0401.10.10 and 0401.20.10)
    Milk powders (0402.21.11 and 0402.29.11)
    Milk powder, skim (0402.10.10)
    Other dairy (1517.90.21, 1901.20.11, 1901.20.21, 1901.90.33, 1901.90.53, 2106.90.31, 2106.90.33, 2106.90.93 and 2309.90.31)
    Powdered buttermilk (0403.90.11)
    Products consisting of natural milk constituents (0404.90.10)
    Whey powder (0404.10.21)
    Yogurt and buttermilk (0403.90.91 and 0403.10.10)

    On June 17, UDEC and the National Milk Producer's Federation (NMPF) issued a news release criticizing Canada's allocation of its tariff-rate quotas (TRQ) under USMCA, stating that these TRQ allocations undermine the intent of USCMA's dairy provisions by thwarting the ability of the U.S. dairy industry to make full use of the trade agreement's market access opportunities. Click here to read the news release.

  3. Rules of Origin: In order to determine whether your product qualifies for the preferential tariff, the product must comply with the rules of origin in the USMCA. The rules of origin under USMCA are similar to those under NAFTA, though there are some minor changes to the working or processing needed to confer origin for Chapter 35 products, which apply only if non-originating ingredients are utilized.

    USDEC will be adding the rules of origin to the new Volume 1 database. In the meantime, they are listed below for your reference. The full rules of origin requirements may be accessed in Chapter 4 of the USMCA text, Rules of Origin.

    In order to qualify for the preferential tariff, the goods must either be:

    Wholly obtained or produced entirely in the territory of one or more of the Parties (USDEC interpretation: made from U.S. milk and includes all originating ingredients); or

    Produced entirely in the territory of one or more of the Parties using non-originating materials provided the good satisfies the product-specific rule of origin listed below:

    04.01-04.04: A change to heading 04.01 through 04.04 from any other chapter, except from tariff item 1901.90.aa. (USDEC note: 1901.90.aa refers to goods containing over 10% by weight of milk solids)

    04.05: A change to heading 04.05 from any other chapter, except from tariff item 1901.90.aa or 2106.90.dd. (USDEC note: 1901.90.aa and 2106.90.dd refers to goods containing over 10% by weight of milk solids)

    04.06-04.10: A change to heading 04.06 through 04.10 from any other chapter, except from tariff item 1901.90.aa. (USDEC note: 1901.90.aa refers to goods containing over 10% by weight of milk solids)

    17.01-17.03: A change to heading 17.01 through 17.03 from any other chapter.

    1806.20: A change to subheading 1806.20 from any other heading.

    1806.31-1806.90: A change to subheading 1806.31 through 1806.90 from any other subheading, including another subheading within that group.

    1901.10.aa: A change to tariff item 1901.10.aa from any other chapter, except from Chapter 4. (USDEC note: 1901.90.aa refers to goods containing over 10% by weight of milk solids)

    1901.90.aa: A change to tariff item 1901.90.aa from any other chapter, except from Chapter 4. (USDEC note: 1901.90.aa refers to goods containing over 10% by weight of milk solids)

    2103.90: A change to subheading 2103.90 from any other subheading.

    21.05: A change to heading 21.05 from any other heading, except from Chapter 4 or tariff item 1901.90.aa. (USDEC note: 1901.90.aa refers to goods containing over 10% by weight of milk solids)

    21.06: A change to heading 21.06 from any other chapter. (USDEC note: Applies to 2106.10)

    2106.90.dd: A change to tariff items 2106.90.dd from any other chapter, except from Chapter 4 or tariff item 1901.90.aa. (USDEC note: 1901.90.aa refers to goods containing over 10% by weight of milk solids)

    2202.90.cc: A change to tariff item 2202.90.cc from any other chapter, except from Chapter 4 or tariff item 1901.90.aa. (USDEC note: Applies to 2202.99. 1901.90.aa refers to goods containing over 10% by weight of milk solids)

    35.01: A change to heading 35.01 from any other heading; or No required change in tariff classification to heading 35.01, provided there is a regional value content of not less than: (a) 65 percent where the transaction value method is used; or (b) 50 percent where the net cost method is used.

    3502.20-3502.90: A change to subheading 3502.20 through 3502.90 from any other heading; or No required change in tariff classification to subheading 3502.20 through 3502.90, provided there is a regional value content of not less than: (a) 65 percent where the transaction value method is used; or (b) 50 percent where the net cost method is used.

    3503.00-3507.90: A change to subheading 3503.00 through 3507.90 from any other subheading, including another subheading within that group; or No required change in tariff classification to subheading 3503.00 through 3507.90, provided there is a regional value content of not less than: (a) 40 percent where the transaction value method is used; or (b) 30 percent where the net cost method is used.

    De Minimis Note: The USMCA raises the de minimis threshold from 7% under NAFTA to 10% in the USMCA. This de minimis provision allows up to 10% non-originating materials without the good undergoing the applicable change in tariff classification described above. However, the 10% de minimis provision does NOT apply to most dairy products, including:

    A non-originating material of heading 04.01 through 04.06, or a non-originating dairy preparation containing over 10 percent by dry weight of milk solids of subheading 1901.90 or 2106.90, used in the production of a good of heading 04.01 through 04.06;

    A non-originating material of heading 04.01 through 04.06, or non-originating dairy preparations containing over 10 percent by dry weight of milk solids of subheading 1901.90 or 2106.90, used in the production of: (i) infant preparations containing over 10 percent by dry weight of milk solids of subheading 1901.10, (iii) dairy preparations containing over 10 percent by dry weight of milk solids of subheading 1901.90 or 2106.90, (iv) goods of heading 21.05, (v) beverages containing milk of subheading 2202.90, or

    A non-originating material used in the production of a good of Chapters 1 through 27 of the Harmonized System, unless the non-originating materials are provided for in a different subheading than the good for which origin is being determined under this Agreement. 

    Therefore, all non-originating ingredients in these classifications must undergo the required tariff shift listed above.


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