In October, the Manufacturers Alliance held a popular webinar, USMCA vs. NAFTA: What U.S. Manufacturers Need to Know. The United-States-Mexico-Canada Agreement (USMCA) went into effect on July 1, 2020, which ended the 26-year-long reign of NAFTA. While much of the agreement is similar to NAFTA, it is critical for manufacturers, importers, and exporters to understand the key differences, and how these changes may affect current operations. Leading experts, Adrienne Braumiller, founder of Braumiller Law Group PLLC, and Jennifer Horvath, partner at Braumiller Law Group PLLC, led the webinar and discussed new certification requirements, changes to rules of origin, and guidance for recordkeeping and supporting documents for claims.
Due to a large number of attendees, we were unable to get to all of the questions. Adrienne and Jennifer took the time to address the additional attendee questions that follow.
What can you do when a customer in Canada or Mexico wants to buy a good that was produced in the United States in 2019 and not pay duty upon import today? We can't qualify our 2019 good without 2019 certificates for our own materials and USMCA didn't exist in 2019. All we have are 2019 NAFTA certificates for our materials (and the 2019 good DID qualify for NAFTA). Does our customer have to pay duty on a good that qualified for NAFTA in 2019 but does not for USMCA (due to lack of supporting documentation)?
As of July 1, 2020, all goods imported in the U.S. must qualify under the USMCA rules of origin in order to receive preferential treatment. There is no exemption for goods produced prior to when USCMA came into effect that qualified under NAFTA. However, it is likely that the rules of origin did not change from those under NAFTA for the item’s classification under USMCA. But, the analysis must be performed under the USMCA rules of origin for the imported item’s classification, and the USMCA certificate properly executed and issued.
Are duties paid part of the value of the import product when calculating Regional Value Content (RVC)?
No. Duties paid are not part of the value when calculating RVC.
On the example of the wagon in the presentation, can the tariff shift for an item to qualify under the discussed rule of origin come from with 9503.00 - 9505.90?
Yes, a change from HTS Subheading 9503.00 to HTS Subheading 9505.90 would meet the tariff shift requirement for the rule of origin under the tariff classification for the wagon, thereby allowing it to qualify for USMCA treatment. The rule here is “9503.00-9505.90 A change to subheading 9503.00 through 9505.90 from any other subheading, including another subheading within that group; or….”. Within the example in the presentation, the wheels did not change subheadings, which is why it was not allowed.
If the finished good is 9503.00 and an item is 9504.20, would it make the required tariff shift?
Yes. Considering a different scenario, an item classified in 9504.20 would make the required tariff shift if it went to 9503.00 since it meets the “another subheading within that group” part of the tariff shift rule.
Is the "origin" field on the certification based on CFR 102 determination?
The origin would be based on the USMCA rules of origin found in Annex 4-B.
Our customers ask a lot of questions about USMCA and for guidance to help them make decisions about qualifying and process. What do you recommend for the appropriate role of forwarder and broker?
It is the importer’s ultimate responsibility to exercise reasonable care when importing. The forwarder and broker can provide general guidance, but we would not recommend them doing the actual qualifying.
What do we need to take into account using USMCA in a Foreign Trade Zone (FTZ)? And are there any updates to discussions of the merchandise processing fee (MPF) refunding consideration for USMCA?
The NAFTA FTZ rules did not carry over into USMCA, unlike other duty deferral mechanisms. The U.S. Trade Representative (USTR) claims this was an oversight and that goods manufactured in an FTZ should be subject to the “lesser of the two duties rule” – essentially disallowing USMCA treatment to goods manufactured in an FTZ. There is some discussion about whether this will be corrected via subsequent legislation, but currently, goods manufactured in an FTZ can qualify for USMCA. More on “the lesser of two duties rule” below.
Regarding MPF, unless (or until) there is an amendment to USMCA, MPF cannot be refunded.
What is the main concern when qualifying automotive goods?
Automotive goods are subject to special rules of origin depending on whether the good in question is a vehicle or an automotive part. If the item in question is a vehicle, then the manufacturer must meet the steel, aluminum, and labor requirements (and submit the required certifications), in addition to enhanced Regional Value Content (RVC) requirements. Meanwhile, automotive parts are subject to increased RVC requirements, depending on whether the part is a “core” part, “principal” part, or “complementary” part, as well as the kind of vehicle the parts are used in.
Does the new USMCA agreement have any impact on Mexico’s IMMEX Program currently available to manufacturers sending unfinished goods?
The USMCA continues the limitation on duty deferral programs that were initiated under the NAFTA when goods were the subject of a duty deferral program in a NAFTA country.
Under the limitation, the import of goods under the duty deferral programs that are subsequently exported to another USMCA country will be treated as if withdrawn for domestic consumption, and thus subject to the applicable customs duties for that country. The customs administration assessing such duties may then waive or reduce them by an amount that does not exceed the total custom duties paid to the USMCA country to which the goods are exported.
Such reduction or waiver will be made when the claimant presents satisfactory evidence of the customs duties paid in the USMCA country to which the article was exported. The claimant has 60 days to present this satisfactory evidence, otherwise, the customs administration of the exporting country will collect the duties. Should a claimant subsequently obtain satisfactory evidence, the duties may be refunded to the extent allowed, upon timely presentation of the evidence according to the laws and regulations of each USMCA country.
Can the required information on the Certificate of Origin be added to the commercial invoice?
Yes. The USMCA regulations and guidelines provide that the required data elements and certification statement may be provided on the commercial invoice or any other document so long as it contains all nine data elements. However, many importers are finding it a better practice for purposes of maintaining qualification records and recordkeeping to create USMCA certificates and utilize those.
Partner, Braumiller Law Group