Posts Tagged ‘usmca’


 

USMCA Effective Date | Is The Deal Done?

USMCA Effective Date

In the USMCA Details blog you learned what is new in the revised North American Free Trade Agreement (NAFTA). This includes the changes to the auto industry, dairy, Chapter 19, intellectual properties and de minimis threshold. The next question on your mind is when will the United States Mexico Canada Agreement (USMCA) become live, in other words,  when is the USMCA effective date?

When Is The USMCA Effective Date?

The USMCA is not in law yet, and will not likely be until 2020. As of late October, 2018, NAFTA is still live. A few bureaucratic knots are still tied, and this blog will cover what needs to happen in each respective country until the USMCA is effective.

What Steps Do The Countries Have To Take Before USMCA Is Effective?

All three countries still have a number of steps to take before the USMCA comes into force.

  1. All three governments will take a look at the agreement and gather a better understanding of the NAFTA revisions.
  2. Each country will sign the USMCA agreement. The signing is projected to take place at the end of November. Conveniently prior to Mexico’s next President entering into office December 1st, 2018.
  3. Finally, each country must take their specific necessary steps to ratify and implement the USMCA.

How Will the U.S. Ratify And Implement USMCA?

In the U.S., the President notified Congress of the intent to sign a trade agreement with Mexico and potentially Canada, on August 31st. The notification set off the Trade Promotion Authority (TPA). The 90-day consultation period finishes at end of November where the USMCA could, in principle, be signed.

All three leaders could sign the agreement at the G20 Leaders Summit in Buenos Aires, which is scheduled for the end of November. The U.S. Midterm elections take place November 6th, 2018 and the new incoming Congress takes effect January 3rd, 2019. The U.S. Administration has 60 days from signing the agreement to submit a list of changes. The Final Agreement text is submitted to Congress at least 30 days prior to implementing it as Legislation.

Sometime in April, an Implementation Bill will be introduced in the House and the Senate where it is debated and considered before a final vote. Around the middle of July 2019, the Senate will vote on the USMCA Implementation Bill and then shortly after the President will sign the agreement into law.

How Will Canada Ratify And Implement USMCA?

For Canada, once the agreement is signed it will be tabled in the House of Commons for discussion. There is a full discussion but no vote to change the text of the agreement. The House of Commons has 21 days to consider the agreement before the Executive takes the necessary steps to ratify it. The Cabinet controls the ratification. The Governor – in Council (Cabinet) prepares an Order-in-Council authorizing the Minister of Foreign Affairs to sign an Instrument of Ratification or Accession.

After, an Implementing Bill is tabled in the House of Commons where the treaty is implemented into Canadian Law. Once the Bill is passed in the House of Commons it is sent to the Canadian Senate where it is debated. It is possible that the Senate may quash the Bill. If passed, the Bill is then provided to the Provinces and Territories, which may pass provincial legislation regarding the Bill. Regulations are then written to implement the Bill.

The date the agreement comes into force is part of the agreement itself, January 2020. The pressing timeline for Canada is to have all of the above completed before October 2019 when Canada has its next Federal Election.

How Will Mexico Ratify And Implement USMCA?

Mexico has a similar process to Canada. Most of the process is already complete and Mexico intends to ratify the agreement in December 2018 when the New President takes office.

Will The USMCA Come Into Effect?

The USMCA is far from being a reality and anything can happen in the U.S., Mexico and Canada to throw this agreement off the tracks. You will know if the USMCA is a reality by July 2019.

If the agreement fails, the original NAFTA would remain in effect until the time NAFTA 3.0 is renegotiated.

If you have questions about NAFTA or USMCA feel free to contact our Trade Advisory Specialists for NAFTA or USMCA details, and how they will affect you.

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USMCA Details | United States Mexico Canada Agreement | NAFTA 2.0

USMCA Details

The United States Mexico Canada Agreement (USMCA)

The U.S., Mexico and Canada reached a revamped NAFTA deal in the 11th hour on Sunday September 30th, 2018. NAFTA 2.0 has been renamed the United States Mexico Canada Agreement.

After more than a year of intense negotiations, the U.S., Mexico and Canada reached an agreement to update NAFTA. NAFTA dates back to 1994 when the pact was originally signed by all three countries to govern the $1.2 trillion worth of trade between the countries.

In August, the U.S. and Mexico resolved an issue over auto manufacturing but Canada and the U.S. still had some contentious points to resolve. The U.S. wanted Canada to open its dairy market to U.S. farmers and Canada wanted to preserve a mechanism for resolving disputes. These goals were eventually achieved which resulted in the new USMCA.

Auto Industry

Starting in 2020, to qualify for zero tariffs, a car or truck must have 75% of its components manufactured in the U.S., Mexico, or Canada, a boost from the current 62.5% requirement. In addition, also starting in 2020, cars and trucks should have at least 30% of the work on the vehicle done by workers earning at least $16 an hour, which will gradually move to 40% for cars by 2023.

Supply Management Agriculture Sector

Canada agreed to set new quotas for dairy imports from the U.S. Canada will still put tariffs on dairy products that exceed quotas. The new quotas will give the U.S. access to 3.6% of Canada’s market. U.S. farmers will now be able to export 120 million eggs into Canada the first year. This will grow 1% per year for the next 10 years. The chicken concession will allow 57,000 metric tons phased in over six years and in year 7 will increase 1% per year for the next 10 years.

Chapter 19

Canada wanted to keep Chapter 19 in place and in the end Chapter 19 remained intact. Chapter 19 allows the U.S., Mexico and Canada to challenge anti-dumping and countervailing duties in front of a panel of representatives from each country. In the past, Canada has successfully used Chapter 19 to challenge the U.S. on its softwood lumber restrictions.

Intellectual Properties Protections

The USMCA has a new IP chapter, which is 63 pages long and contains stricter protections for patents and trademarks, including biotech, financial services and even domain names. Copyright terms in Canada now extend for 70 years beyond the year the creator of the work dies, bringing Canada in line with those of the U.S. and Europe. The IP chapter also includes an extension of the length of time new biological drugs will be protected from generic drug competition, up 2 years from Canada’s previously agreed upon 8 years to 10 years of exclusivity. This was necessary for all sides to update this field as the original agreement was over 25 years old.

De Minimis Threshold

The de minimis threshold or the duty-free amount Canadians can buy in the U.S. and import into Canada without having to pay a duty has increased from $20 to $150. Mexico agreed to raise their de minimis from $50 to $100.

The tax portion of the de minimis threshold has been separated. The new rules will see the tax threshold rise to $40.

For example, when someone in Canada buys something online in the U.S. for $149 they will be spared the duty but they will pay anywhere from $17 to $22 in taxes depending on the province and the tax rate for that province.

Labor & Environmental Rights

Significant upgrades to environmental and labor regulations were made, especially in Mexico. Mexican trucks crossing the border must meet higher safety regulations and Mexican workers must have the ability to organize and form unions.

Chapter 11

Chapter 11 provided companies and investors a special process to resolve disputes with one of the governments of the agreement. The premise being that if an investor put money into a project and then the government changed the rules, there is a dispute process outside the court system where the investor could get their problem resolved. Chapter 11 is essentially gone with the exception of few industries such as energy and telecommunications.

USMCA Timeline

The USMCA will not go into effect right away. Most of the key provisions will not start until 2020. The leader of each country still has to sign the agreement, and then congress in the U.S. and the legislatures in Canada and Mexico have to approve it. This process is expected to take months.

How Will The USMCA Affect You?

You have the opportunity to get an early edge on your competitors with the advantage of a trade advisor. Pacific Customs Brokers has you covered with expert trade advisors who are able to help you navigate the changes that will affect you with the new United States Mexico Canada Agreement.

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Jan Brock | Author