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US Senate Approves the USMCA

Posted on January 20, 2020 by

Carlos Calderon

Carlos Calderon

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The United States, Mexico, Canada trade deal (aka. NAFTA 2.0), has finally been approved by the US Senate after 29 months of extensive negotiations. Republicans and Democrats came together to show support with 89 votes in favor of the new agreement.  Just 10 were against it.  While this agreement is not final, President Trump announced that he will sign the agreement next week. Once signed, the revised USMCA will be turned over to the Canadian Parliament for ratification, however, they are on winter break until January 27.

Here’s a quick refresher of some of the main changes for this new USMCA to evaluate the potential impacts on your business:

Automotive Industry

  • Changes related to rules of origin; specifically increasing the North American content
    • Over time, light vehicles will change the requirement from 62.5% – 75% of North American parts
  • Changes to the parts content, now split into core, principal and complementary parts requiring 75%, 65% and 60%, respectively
  • 40% of automobiles and 45% of light trucks to be produced with an average labor wage of $16/ hr.
  • New quotas
    • 6 million Mexican and Canadian vehicles
    • Auto parts imports:  $32.4 billion from Canada and $108 billion from Mexico

General

  • Strong labor controls for Mexico, with a greater ability for workers to unionize
  • Enhanced protections for intellectual property
    • Pharmaceutical patents now valid for a 10-year term
    • Copyright valid 70 years after the author´s death
  • The terms of the USMCA will remain in effect for 16 years (sunset provision) after which time the parties can renegotiate terms. However, after 6 years the terms of the sunset provision can be revisited.

Carlos Calderon

International Accounting & Tax Consultant – Mexico

Fluent in Spanish and dedicated to client growth, Carlos helps businesses expand to Mexico from the U.S. and abroad.

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