International Businesses

9 FAQs About the USMCA

Posted on August 3, 2020 by

Carlos Calderon

Carlos Calderon

Share This

Share on facebook
Share on twitter
Share on linkedin
Share on email

It has already been a month since one of the most competitive regions in the world, which together generated more than 25% of the world’s GDP in 2019, finally entered into the United States-Mexico-Canada Agreement (USMCA). Considering the complexity and scope of the agreement, we are still receiving a lot of questions from the business community. Here are 9 most frequently asked questions and answers related to the USMCA. Please reach out with questions or if we can help guide your plans.

  1. What is the USMCA?
    • The United States-Mexico-Canada Agreement (USMCA) is a trade agreement between the three named countries. When implemented, it will replace the North American Free Trade Agreement (NAFTA).
  2. When did the USMCA enter into force?
    • July 1, 2020. NAFTA preferential treatment cannot be claimed on July 1, 2020, or afterward.
  3. What are the main changes in the auto industry?
    • The USMCA has impacted the auto industry in several different ways.
    • One of these changes is an increase in Regional Value Content from 62.5% to 75%, which increases in stages over a period of three years.
    • Another change involves Labor Value Content where 40-45% of the value of the imported automobile must be sourced from manufacturing facilities where workers earn at least $16 USD per hour. The U.S. Department of Labor performs the assessment of manufacturing facility eligibility, and the U.S. Customs and Border Protection (CBP) determines the value of the parts, the overall automobile, and the overall Labor Value Content.
    • The third main change for the auto industry requires at least 70% of a vehicle producer’s annual steel and aluminum procurement must originate from North America.
  4. Will the USMCA impact end customers in the U.S.?
    • If the automotive OEM is not able to comply with the Regional Value Content or Labor Value Content, they may be subject to a 2.5% tariff which will most likely be a pass-through for the end customer.
  5. What have OEMs done to prepare for the USMCA?
    • OEMs have been revisiting their supply chain and asking for the net value content of each of the part numbers of their suppliers. This allows OEMs to calculate the regional value content and analyze shifting part of their supply chain in order to be compliant.
  6. Are there changes to the NAFTA Certificate of Origin?
    • Yes, the USMCA does not require a specific Certificate of Origin as does the North American Free Trade Agreement. CBP Form 434 is not mandatory under the USMCA.
  7. How long will the USMCA remain in force?
    • The USMCA will remain in force for 16 years; however, the USMCA requires a “joint review” of the agreement six years after entry-into-force. At this joint review, the parties will review the operation of this agreement, review any recommendations for action submitted by a party, and decide on any appropriate actions.
  8. Which industries will have the most impact due to changes from the NAFTA to the USMCA?
    • The auto industry will have the most impact since the USMCA contains new criteria for rules of origin along with provisions related to Regional Value Content, Labor Value Content, and Steel, and Aluminum. Other impacted industries include manufactured goods, textiles, and apparel.
  9. How can I obtain my USMCA Certificate of Origin form?
  • There is no official Certificate of Origin for the USMCA, as there was for NAFTA. USMCA requires a “Certification of Origin.” Any format is acceptable, provided it contains the following nine minimum data elements set out in USMCA, Annex 5-A:
    1. Importer, Exporter, or Producer Certification of Origin
    2. Certifier
    3. Exporter
    4. Producer
    5. Importer
    6. Description and HS Classification of the Good
    7. Origin Criteria
    8. Blanket Period (if applicable)
    9. Authorized Signature and Date

If you need help navigating the new USMCA or have any unanswered questions, click here to contact us. You can also view our recent Coffee & Conversation: Mexico video for more information about the USMCA and its impact on OEMs.

Carlos Calderon

Manager

With a passion & commitment to client growth, Carlos helps businesses expand to Mexico from the US and abroad. 

Related Insights

International Businesses

Are You Ready to Sell Your Mexican Subsidiary? 

Posted on April 19, 2022 by

Carlos Calderon
With M&A activity soaring in the U.S., we have been involved in dozens of deals involving U.S. entities with Mexican subsidiaries. These types of businesses have become more attractive to potential buyers for many reasons: China vs. U.S. commercial war, increased freight costs, shipment delays, disruption and operational limitations due to COVID-19; especially for Asian companies.

International Businesses

Russian Sanctions Complicate Banking Around the Globe

Posted on April 12, 2022 by

Sarah Russell
NATO countries have banded together to impose historic sanctions on Russia for their invasion of Ukraine in a display of strength and unity. These sanctions mean that companies currently cannot send payments to Russian banks and trying to get around this can result in significant penalties. While it may seem straightforward, these sanctions have complicated the geopolitical landscape of making international deals that extends beyond the borders of just Ukraine and Russia.  

International Businesses

US Subsidiaries: Beware of Surprise Tax

Posted on March 22, 2022 by

Rob Cheyne
Capital gains made from the sale of personal property are generally associated with the residency of the person making the sale. Foreign investors will need to understand the status of their U.S. stock to predict their tax responsibilities when making deals to avoid any surprises on their tax bills.  Capital gains made from the sale of personal property are generally associated with the residency of the person making the sale. Foreign investors will need to understand the status of their U.S. stock to predict their tax responsibilities when making deals to avoid any surprises on their tax bills.  

Sign up for our newsletters

Get general business and industry-specific news and knowledge straight from our accounting specialists.

The Sound of Automation Podcast

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Insights & Perspectives

The Sound of Automation: Looking ahead to CSIA 2022

In this episode we talk with Lisa Richter, Director of Industry Outreach and Growth at Control System Integrators Association (CSIA) . Lisa and Bryan look ahead to the CSIA Executive conference taking place in Denver, CO on June 27-30, 2022 and share with listeners what to expect, who will be there, and the discussion panel topics focusing on this years’ theme “The Future of Work”. 

Read More

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content