On April 20, Customs posted Interim Implementing Instructions for the U.S.-Mexico-Canada Agreement (USMCA) providing draft technical language for preferential tariff claims under the USMCA. The document is not final and is subject to further revision as many details must be addressed and aligned with Canada and Mexico as part of the Uniform Regulations process.
The timing of USMCA implementation is unclear as it does not appear that the June 1, 2020 date targeted by the Trump Administration will occur. Mexico and others have requested a later date. However, these Interim Implementing Instructions offer initial draft guidance on changes from NAFTA that will likely be incorporated into these Uniform Regulations. The topics covered include:
- USMCA Rules of Origin (generally maintaining the NAFTA Rules of Origin, but providing substantial changes to qualify automotive goods).
- Regional Value Content (RVC) Calculation Methods (maintaining the NAFTA RVC calculation methods)
- De Minimis Content (increasing the de minimis content from 7% to 10% for most non-textile goods)
- Treatment of Sets (permitting USMCA qualification if each good in the set originates or if non-originating goods in set do not exceed 10% of the value of the sets)
- Rules of Origin for Automotive Goods (providing detailed instructions in Appendix I on the new USMCA rules of origin for automotive goods)
- Textiles and Apparel (providing detailed instructions in Appendix II on the USMCA rules of origin for textiles and apparel)
- Merchandise Processing Fees (MPF) (maintaining the MPF exemption for USMCA goods)
- Marking Rules for Goods Imported from Canada and Mexico (indicating the NAFTA Marking Rules will apply to determine origin marking of goods from Canada or Mexico but not for USMCA qualification purposes)
- USMCA Preference Claims (creating new Special Program Indicator “S” for USMCA goods)
- Post-Importation Claims (maintaining post-importation claims under 19 U.S.C. § 1520(d) for duty refunds, but excluding MPF refunds)
- USMCA Certification Requirements (ending the NAFTA Certificate of Origin requirement and offering greater flexibility on the format and submission of certification by importer, exporter, or producer)
- Recordkeeping Requirements (maintaining the five-year recordkeeping requirement under NAFTA)
- CBP Verification and Determination (revising some NAFTA requirements for verifying USMCA claims)
Appendix I to the Interim Implementing Instructions provides detailed guidance on the complicated new USMCA Rules of Origin for Automotive Goods, including the methodology for calculating labor value content (LVC) and the identification of “core” automotive parts and components. The instructions indicate the U.S. Department of Labor will issue regulations related to the high-wage components of the LVC requirements.
Clients are encouraged to carefully review each of the topics for changes to current NAFTA management.
In a separate notice, the U.S. Trade Representative (USTR) published the procedures for requesting alternative staging of the USMCA requirements for North American producers of passenger vehicles and light trucks. Petitions with draft alternative staging plans must be submitted by July 1, 2020 and would permit those producers an additional two (2) years (5 instead of 3 years) to phase-in the new USMCA requirements for passenger vehicles and light trucks. Final petitions are due by August 31, 2020.
Please contact Marshall Miller, Brian Murphy, Sean Murray, or Ryan Thornton with questions or for assistance.