Understanding the USMCA Agreement
The United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA on July 1, 2020, is North America's most important trade agreement. It enables duty-free trade for qualifying goods between the three nations, covering over $1.5 trillion in annual trade.
For US importers, USMCA represents a massive opportunity to eliminate tariffs entirely on goods from Mexico and Canada—if you understand how to qualify. Unlike standard imports that may face duties ranging from 2% to 37%, USMCA-qualifying goods enter the US completely duty-free.
Key USMCA Benefits
- • Zero tariffs on qualifying goods
- • Simplified customs procedures
- • Reduced documentation for low-value shipments
- • Enhanced supply chain integration
USMCA Rules of Origin: The Key to Duty-Free Treatment
Rules of origin determine whether goods qualify for USMCA benefits. Products must be either wholly obtained or sufficiently transformed within North America to qualify.
Wholly Obtained
Products entirely sourced and produced in USMCA countries:
- • Agricultural products grown in Mexico/Canada
- • Minerals extracted from USMCA territory
- • Fish caught in territorial waters
- • Products made entirely from USMCA materials
Substantial Transformation
Products with non-USMCA inputs that undergo:
- • Tariff shift (change in HS classification)
- • Regional value content requirements
- • Specific processing operations
- • De minimis rule (up to 10% non-originating)
Critical Point
Simply shipping through Mexico or Canada doesn't qualify products for USMCA benefits. Genuine transformation or origination is required—transshipment alone won't reduce tariffs.
Regional Value Content (RVC) Calculations
Many products must meet minimum North American content thresholds. USMCA provides two methods to calculate Regional Value Content:
Transaction Value Method
RVC = (TV - VNM) / TV × 100
TV = Transaction Value | VNM = Value of Non-originating Materials
Generally requires 60% RVC. Best for products with high labor or overhead costs in North America.
Net Cost Method
RVC = (NC - VNM) / NC × 100
NC = Net Cost | VNM = Value of Non-originating Materials
Generally requires 50% RVC. Often more favorable for products with significant non-USMCA inputs.
Key Product-Specific Requirements
Automotive
- • 75% RVC for vehicles (up from 62.5%)
- • 70% steel/aluminum from North America
- • Labor value content requirements
- • Core parts must be 75% North American
Textiles & Apparel
- • Yarn-forward rule for most garments
- • Fiber-forward for certain products
- • Limited tariff preference levels
- • Sewing thread must be North American
Agriculture
- • Most products wholly obtained qualify
- • Processed foods have specific rules
- • Dairy access commitments
- • Sugar and sweetener provisions
Chemicals
- • Chemical reaction rule
- • Purification processes qualify
- • Mixtures and blends provisions
- • Specific chapter 28-38 rules
USMCA Documentation Requirements
Certificate of Origin Requirements
USMCA eliminated the formal certificate format, allowing for more flexibility:
Required Data Elements
- • Certifier information
- • Exporter details
- • Producer information (if known)
- • Importer details
- • Product description & HS code
- • Origin criteria
- • Blanket period (if applicable)
Certificate Options
- • Invoice declaration
- • Separate certificate
- • Electronic format accepted
- • Importer's knowledge provision
- • Valid for 4 years
- • Can cover multiple shipments
Supporting Documentation
Keep these records to support USMCA claims:
- • Bill of materials showing origin of inputs
- • Production records and cost calculations
- • Supplier affidavits for components
- • RVC calculation worksheets
- • Commercial invoices and shipping documents
How to Claim USMCA Benefits
Step-by-Step Process
- 1Determine Eligibility:
Verify your product meets USMCA rules of origin using the specific product rules.
- 2Obtain Certification:
Get a certificate of origin from your supplier or prepare one based on your knowledge.
- 3File Entry Summary:
Include USMCA preference code "MX" or "CA" on your customs entry (CBP Form 7501).
- 4Maintain Records:
Keep all supporting documentation for 5 years from importation date.
Post-Importation Claims
Forgot to claim USMCA? You can file for refunds up to one year after importation through post-importation claims (19 USC 1520(d)).
Common USMCA Mistakes to Avoid
Assuming All North American Goods Qualify
Products must meet specific origin rules. Simply being made in Mexico or Canada isn't enough if they contain too many non-USMCA materials.
Incorrect RVC Calculations
Using the wrong method or including/excluding incorrect costs can disqualify your goods. Always document your calculation methodology.
Inadequate Documentation
CBP audits require detailed proof. Maintain complete records including bills of materials, production records, and supplier certificates.
Strategies to Maximize USMCA Benefits
Supply Chain Optimization
Source more inputs from USMCA countries to meet RVC thresholds. Even switching a few key components can qualify your entire product.
Accumulation Principle
Materials from any USMCA country count as originating. Use this to combine US, Mexican, and Canadian inputs to meet requirements.
Intermediate Materials
Self-produced materials that qualify as originating can be counted at full value toward RVC, not just the originating inputs.
Fungible Materials
Use inventory management methods (FIFO, LIFO) to track origin when mixing originating and non-originating identical materials.
USMCA Compliance and Verification
CBP actively verifies USMCA claims through various methods:
Verification Process
- Written questionnaires to importers, exporters, or producers
- Verification visits to production facilities
- Review of accounting and production records
- Laboratory testing of materials and products
Penalties for Non-Compliance
False USMCA claims can result in:
- • Recovery of unpaid duties with interest
- • Civil penalties up to domestic value of goods
- • Loss of USMCA privileges
- • Criminal prosecution for fraud
USMCA vs. China Import Comparison
Cost Comparison Example
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