NAFTA vs. USMCA, CUSMA, T-MEC: Understanding Rule Changes on Duty

USMCA stands for United States Mexico Canada Agreement and is a trade agreement between those three countries.

Effective July 1, 2020, USMCA effectively replaces NAFTA (North American Free Trade Agreement) and is known as CUSMA in Canada and T-MEC in Mexico. ​

As an exporter, you can ship your to products across North America without paying duty if you have a Certificate of Origin stating your product has been made in a USMCA, CUSMA or T-MEC country.

Under the new USMCA / CUSMA / T-MEC, certain sectors have undergone significant changes,including: agriculture, dairy and automotive 

Certificates of Origin under NAFTA don’t apply to USMCA, CUSMA or T-MEC.  

Unfortunately, Certificates of Origin that were approved under NAFTA are not accepted under USMCA, CUSMA or T-MEC. NAFTA Certification verified that goods met the rules of origin under NAFTA, but the new trade agreements have different rules of origin and therefore, different certification is required. Importers and exporters will need updated Certificates of Origin stating their products have been made in a USMCA, CUSMA or T-MEC country.  

What are your responsibilities as an importer or exporter?  

The USMCA, CUSMA or T-MEC Certification must be signed in accordance to the guidelines of Annex 4B, in order to ship your products duty free across North America. It’s important to review the updated rules to ensure your products have an updated Certificate of Origin.  

If you are audited by U.S. or Canadian Customs and a mistake is found, they can retroactively review all your documentation. They’ll want to see a paper trail of where everything was manufactured and the value of goods and if they find additional errors, they can inflict penalties, fines and additional audits. We foresee Customs doing more audits now that updated rules are in place and strongly recommend having your CUSMA Certification updated. 

USMCA, CUSMA and T-MEC Certification Basics: How to qualify  

It’s difficult to know if something is made in a USMCA, CUSMA or T-MEC country because there are often many components that go into a final product and these components can come from all over the world. There’s a common misconception that for something to be considered Made in Canada, every piece of it needs to be made on Canadian soil and by a Canadian manufacturer, but this isn’t the case. You can import parts from outside of the country and still have a product that’s considered Made in Canada.  

Let’s use a t-shirt as an example. If you import a t-shirt from Bangladesh and put your company logo on it, the t-shirt is not considered Made in Canada even though you’ve added to the final product. If you import a roll of cotton from Bangladesh and you transform the cotton into a tshirt in Canada, the tshirt will be considered made in Canada. 

JORI Logistics provides two services to ensure importers and exporters are customs compliant and aren’t paying more duty than they have to  

1. Collect and Maintain Certificates of Origin

We document and track Certificates of Origin in two ways so you have the right documentation at your fingertips.

1) Blanket Certifications – These certify all goods for one year and are best used when you’re only shipping one type of product.

2) Per Shipment Certifications – Used when companies have hundreds of products or are creating new parts all the time. Intermittent shippers who only export a couple times a year might also prefer Certifications on a per-shipment basis. in two ways

2. Audit Manufacturing Processes

We’ll comb through your manufacturing processes and work with your partners to determine if your goods meet the country of origin requirements under USMCA, CUSMA or T-MEC. Our customer service representatives (CSRs) are a single point of contact that take a hands-on approach to helping you navigate customs compliance.

We’ll comb through your manufacturing processes and work with your partners to determine if your goods meet the country of origin requirements under USMCA, CUSMA or T-MEC. Our customer service representatives (CSRs) are a single point of contact that take a hands-on approach to helping you navigate customs compliance.  

CUSMA FAQS

Common questions you should ask to determine if you should take advantage of the USMCA, CUSMA or T-MEC agreements:  

  • Am I currently being charged duty on my goods? 
  • What is the duty rate of my goods? It might be a negligible amount or it could be significant, depending on what you are shipping. 
  • Are my goods being shipped directly from the country of origin? If they’re being routed through a different country, you likely won’t qualify for duty free shipments.  
  • How easy will it be to prove the country of origin on my products? Most commonly, it’s manufacturers who pursue CUSMA Certification because they have a strong understanding of where their products are made and the labor inputs involved. If you’re shipping multiple products made by materials from many countries, acquiring Certificates of Origin can be a rigorous process.  
  • Do I have trace documents?  
  • Do I trust my vendors to accurately report on their manufacturing? 

A general rule of thumb is that 60% of your goods, including labor, must originate in the U.S. (to qualify for USMCA), Canada (to qualify for CUSMA), or Mexical (to qualify for T-MEC). There are two key rules to understand when applying for a Certificate of Origin. 

  1. Rules of Origin 

Refers to the country that your individual materials come from.  

  1. Qualifying Rules 

Refers to the labor, manufacturing and overall transformation of a product. 

This is a guideline and each product has its own set of rules on how it can be considered madein a USMCA, CUSMA or T-MEC country. We recommend reviewing Annex 4B, which establishes the guidelines to determine whether your product will qualify for a Certificate of Origin.  

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