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The United States, Canada and Mexico have announced they have reached a deal modernizing the North American Free Trade Agreement (NAFTA), now called the United States-Mexico-Canada Agreement (USMCA).

In a joint statement issued on September 30, 2018 by from United States Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland, they announced:

“Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA). USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region. It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home. We look forward to further deepening our close economic ties when this new agreement enters into force. We would like to thank Mexican Economy Secretary Ildefonso Guajardo for his close collaboration over the past 13 months”

The USMCA at a Glance

The United States Trade Representative has released fact sheets on the major changes made under the new deal. Please note, this is just a brief overview. It is highly advisable that you consult the agreement text, your legal representatives, and import/export advisors (sources & links below). Here are some of the highlights of the new deal.

Auto Parts & Auto Content

  • This deal encourages United States manufacturing and regional economic growth by requiring that 75 percent of auto content be made in North America.
  • This deal uses trade rules to drive higher wages by requiring that 40-45 percent of auto content be made by workers earning at least $16 per hour.
  • The United States, Mexico, and Canada have agreed to stronger rules of origin that exceed those of both NAFTA 1.0 and the Trans-Pacific Partnership (TPP), including for autos and automobile parts and other industrial products such as chemicals, steel-intensive products, glass, and optical fiber.

Textiles

  • Promote greater use of Made-in-the-USA fibers, yarns, and fabrics by:
    • Limiting rules that allow for some use of non-NAFTA inputs in textile and apparel trade.
    • Requiring that sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in most apparel and other finished products, be made in the region for those finished products to qualify for trade benefits.
  • Establish a Textiles chapter for North American trade, including textile-specific verification and customs cooperation provisions that provide new tools for strengthening customs enforcement and preventing fraud and circumvention in this important sector.

Intellectual Property

  • Include 10 years of data protection for biologic drugs and a robust scope of products eligible for protection.
  • Include strong protection for pharmaceutical and agricultural innovators.
  • Require strong standards against the circumvention of technological protection measures that often protect works such as digital music, movies, and books.
  • In particular, the Chapter has the most robust protection for trade secrets of any prior United States trade agreement. It includes all of the following protections against misappropriation of trade secrets, including by state-owned enterprises: civil procedures and remedies, criminal procedures and penalties, prohibitions against impeding licensing of trade secrets, judicial procedures to prevent disclosure of trade secrets during the litigation process, and penalties for government officials for the unauthorized disclosure of trade secrets.

De Minimis Shipment Values

  • To facilitate greater cross-border trade, the United States has reached an agreement with Mexico and Canada to raise their de minimis shipment value levels. Canada will raise its de minimis level for the first time in decades, from C$20 to C$40 for taxes. Canada will also provide for duty free shipments up to C$150. Mexico will continue to provide USD $50 tax free de minimis and also provide duty free shipments up to the equivalent level of USD $117. Shipment values up to these levels would enter with minimal formal entry procedures, making it easier for more businesses, especially small- and medium-sized ones, to be a part of cross-border trade. Canada will also allow a period of 90 days after entry for the importer to make payment of taxes.
  • Increasing the de minimis level with key trading partners like Mexico and Canada is a significant outcome for United States small- and medium-sized enterprises (SMEs). These SMEs often lack resources to pay customs duties and taxes, and bear the increased compliance costs that low, trade-restrictive de minimis levels place on lower-value shipments, which SMEs often have due to their smaller trade volumes.

Labor

  • The Labor chapter includes an Annex on Worker Representation in Collective Bargaining in Mexico, under which Mexico commits to specific legislative actions to provide for the effective recognition of the right to collective bargaining.
  • The Labor chapter requires the Parties to adopt and maintain in law and practice labor rights as recognized by the International Labor Organization, to effectively enforce their labor laws, and not to waive or derogate from their labor laws.
  • Additionally, the chapter includes new provisions to take measures to prohibit the importation of goods produced by forced labor, to address violence against workers exercising their labor rights, and to ensure that migrant workers are protected under labor laws.

Environment

  • The Environment chapter includes the most comprehensive set of enforceable environmental obligations of any previous United States agreement, including obligations to combat trafficking in wildlife, timber, and fish; to strengthen law enforcement networks to stem such trafficking; and to address pressing environmental issues such as air quality and marine litter.

Miscellaneous

  • The United States, Mexico, and Canada have also reached agreement on new provisions covering trade in specific manufacturing sectors, including Information and Communication Technology, Pharmaceuticals, Medical Devices, Cosmetic Products, and Chemical Substances. Each of the annexes includes provisions that exceed NAFTA 1.0 and TPP that promote enhanced regulatory compatibility, best regulatory practices, and increased trade among the countries.

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