After years of discussion and negotiation, usmca officially replaced NAFTA on July 1, 2020. This new free trade agreement has brought a series of changes, which will have a profound impact on manufacturers in many industries. These include manufacturers already operating in Mexico, as well as companies that are considering building plants in Mexico.
A series of changes brought about by usmca include the significant adjustment of the whole supply chain, and the improvement of the requirements for the required documents and materials. To some extent, these changes will affect every relevant manufacturing enterprise. If you do not understand the content of the agreement and violate the rules, you will be severely punished. Therefore, it is very important for every export-oriented manufacturer in the United States, Mexico or Canada to examine its current manufacturing process. To ensure that enterprises will not pay high fines due to process omissions, a wise way is to hire an expert to provide you with import and export management and customized consulting and support services.
90 day grace period
The most significant change brought by usmca is the change of rules of origin. According to NAFTA, 62.5% of the parts used by automobile manufacturers are from North America; according to usmca, the proportion is increased to 75%. Among them, 40-45% of the parts must be made by manufacturers whose workers earn at least $16 an hour. The US government published the latter's calculation method in the Federal Register, which also indicates that the US government is still discussing the details of implementing the new agreement.
The conditions of the rules of origin have become more stringent, and perhaps the biggest hit is the car manufacturers. Although they have three to four years to adapt and adjust before they fully meet the requirements of the new rules, some of the first new rules that come into effect have been officially launched on July 1, 2020. However, as long as the manufacturer shows a "sincere willingness to work hard to comply with the new regulations", it can enjoy a 90 day grace period.
Equally important, the auto industry is not the only one affected. For the textile industry and garment manufacturers, the corresponding new rules of origin have also been introduced. Industry insiders in the electronics manufacturing industry pointed out that the new terms of the agreement will strengthen trade between the three countries. For the medical device industry, some unnecessary regulations will be removed in the future. In Mexico, the medical device industry is booming, and the red tape faced by its manufacturers will gradually decrease. In fact, this will have a profound impact on every Mexican manufacturer that exports its products to the United States.
Fortunately, the U.S. Customs and Border Protection (CBP) issued "Interim Guidance" to help manufacturers familiarize themselves with the implementation of the new rules in the first six months. The Department said it would explain how to comply with usmca regulations for enterprises through webinars and other means. This help policy will continue until December 31, 2020. The Department also pointed out that during the transition period, a "restrained" approach will be adopted to promote the implementation of the new rules.
In order to ensure the compliance of business behavior, enterprises need to take immediate measures
Considering that the interval between the release date and the implementation date of the final version of usmca is very short, it is necessary to review all processes of the enterprise to ensure their compliance.
It is suggested that the following measures should be taken at present:
Don't think that your products were not subject to tariff in the past and will not be subject to tariff in the future. In fact, usmca covers a much larger range of products than NAFTA, so please review the agreement documents carefully. Understand the steps and processes required to comply with the new rules. The U.S. Customs and Border Protection (CBP) provides a series of product centric webinars that will ensure that you comply with the rules of your industry. Ensure that the raw materials of products meet the requirements of rules of origin. You can contact downstream suppliers to confirm that they are also ready to meet usmca requirements.
Establish a process for providing certificate of origin. There is no prescribed format for this certificate, but it must include all the data mentioned in Annex 5-a of usmca.
In order to keep the records and documents of raw materials and finished products and comply with the shipping terms, you need to establish a complete process. The U.S. Customs and Border Protection (CBP) said that some of the materials need to contain materials with material data
Material list, or certificate or written certification provided by the manufacturer of self-produced raw materials, indicating the country where the manufacturer is located. These materials shall be kept for at least five years and shall be submitted immediately upon receipt of spot check notice.
Work with the legal team or relevant consulting team to evaluate the new requirements related to you and make a complete response plan for the implementation of the new rules.
Avoid fines by working with professional compliance consultants
The influence of usmca will be huge. It will increase the total trade volume among Mexico, the United States and Canada. However, it will take some time for all parties to adapt to the new requirements.
The strict punishment system of usmca will come into effect on October 1. Experts pointed out that the punishment measures of this Agreement are much stricter than those of NAFTA, and will affect many smaller suppliers. Penalties may include retrospective and additional tariffs. In order to reduce the probability of unfortunate "winning" in the future, it is extremely worthwhile and necessary to start making a complete response plan immediately.
Fortunately, you are not alone. Many manufacturers operating under the umbrella of the shell service provided by tetakawi are able to obtain a series of supporting practical resources, so that when they face the challenge of compliance with the new rules, they will see the five words "that's nothing". In order to deal with usmca with more confidence, contact tetakawi immediately!