The last 4th Friday Breakfast event hosted by ITC on February 28, 2020 was about the much discussed and confusing USMCA, United States-Mexico-Canada Agreement, also known as “the new NAFTA”.
If you ever wondered how “the single worst deal ever approved” turned into the “largest”, “most significant”, “modern” and “balanced” trade agreement, you are not alone. This event attracted professionals from various local businesses as well as the academic sector and government agencies. Representatives from the Department of Commerce, Economic Development Council, Hispanic Chamber of Commerce, KS Foreign Trade Zone, Consulate of Mexico, University of Kansas, Benedictine College, as well as local international lawyers, freight forwarders, manufacturers and traders gathered to learn more about this new trade deal.
Tiffany Melvin, JD. President of North American Strategy for Competitiveness (NASCO), presented a session to explain USCMA beyond borders and politics. Here are some key take-aways:
- USMCA keeps intact 90 percent of the old NAFTA, but modernizes the governance of digital trade; though one could argue USCMA is truly NAFTA 2.0 or NAFTA 0.8.
- Most people don’t realize that with NAFTA being in place for the past 15 years, 25 cents of every dollar of goods that are imported from Canada to the US is actually “Made in USA” content, and the number for Mexico is as high as 40 cents of every dollar.
- USMCA could be put into force as early as July, but there is still much work to be done, and it could be pushed back.
- Changes to NAFTA in USMCA
- Features new auto manufacturing regulation (might negatively impact economy)
- RVA was increased from 62.5% to 75% (new methodology)
- 40% labor value content to be produced by workers with minimum $16/hr pay
- 70% steel & aluminum need to originate within North America
- Core Auto parts: 75% RVC in average (value)
- 5-year transition
- Opens Canada’s dairy market to U.S. farmers
- Stronger enforcement and improved dispute resolution system
- Customs and Trade Facilitation
- Reduced need of NAFTA Certification of Origin (spreadsheets acceptable)
- Focus on Technology
- No more preferred brokers at ports of entry
- Transparency in Customs Audits
- Modernizes the governance of digital trade
- High Standard for environmental rules – clear and enforceable
- Regulates Mexico trucks crossing the U.S. boarder
- Offers more protection for patents & trademarks
The lifespan of the agreement is 16 years and its effectiveness will be reviewed after 6 years. North American companies need to comply with the agreement on day-to-day basis, yet the uniform regulations are still being developed. It is important for the companies to work with lawyers and software companies to develop tracking mechanism to prove compliance and measure the effectiveness of USMCA.
Ruiping Ramboldt, ITC Secretary
Director of Global Sourcing & Logistics
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