The United States Mexico Canada Free Trade Agreement (USMCA) presents opportunities for importers to reduce duties on eligible goods, which can amount to significant savings.
The USMCA between the United States, Canada, and Mexico began as NAFTA in 1994, and was renegotiated and ratified as the USMCA in 2020. Its aim is to reduce trading costs and increase business investment. USMCA/NAFTA has tripled trade between the three countries since 1994, growing from $297 billion to over $1.6 trillion. The Free Trade Agreement is known as USMCA in the U.S. In Canada, it is often referred to as CUSMA (an acronym for Canada U.S. Mexico), and in Mexico, it is referred to as T-MEC.
However, in order to reap the benefits of the agreement, you will need to avoid these common mistakes:
#1: Determining if your goods are USMCA Eligible
You must verify that your goods are indeed eligible for USMCA! This can be an immense challenge for importers who rely on foreign vendors to determine how their products qualify. You will need to find out where the good was produced, and if your vendors use any amount of raw materials sourced from outside North America.
#2: Not Understanding USMCA Rules of Origin and Exceptions
You need to have a general understanding of how all of USMCA’s rules and exceptions work, to take full advantage of them. Under USMCA, the Rules of Origin are product specific rules that outline what has transpired with products from non-USMCA countries, in order for the final exported product to qualify for benefits. If your products are not meeting these rules, you could face penalties.
#3: Incorrectly filling out USMCA Certification of Origin (or not having a valid Certification of Origin)
Goods valued greater than $3,000 must be certified and declared on a USMCA Certification of Origin, which must be correctly filled out, and signed and dated by the certifier, and accompanied by the following statement:
I certify that the goods described in this document qualify as originating and the information contained in this document is true and accurate. I assume responsibility for proving such representations and agree to maintain and present upon request or to make available during a verification visit, documentation necessary to support this certification.
If you claim USMCA for a good, you must have a valid Certification of Origin to support it. The certification is a legal document, with legal consequences, so you must ensure that the certifications are not missing required details, nor have any inaccurate information.
#4: Not Having a USMCA Management Program
If you are audited by customs, you will need to produce your Certifications of Origin and any supporting documents. The U.S. requires Certifications be retained for 5 years, and Canada requires Certifications be retained for 6 years. Proper electronic filing of Certifications and making them readily available can save you headaches, and ensure a smooth process should you ever face an audit.
The worst situation for your company to find itself in would be after having imported a product for many years, assuming that it qualifies under USMCA, you then discover through a customs audit that the good does not qualify.
If you are unsure whether your goods are eligible for USMCA, or if you have reservations or concerns regarding any of the above issues, enlist the help of a trusted customs broker to review and help you implement a compliance program to take full advantage of USMCA.
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