With the new USMCA implementation date right around the corner, understanding how to prepare quickly and effectively before the July 1, 2020 start date is critical. On May 6, E2open’s E2talk Series: Are You Ready for USMCA? with Sung Choi, senior trade consultant, and Phani Reddy, senior products manager for Trade Agreements tackled some of the most pressing issues to ensure a smooth transition from NAFTA to USMCA. We want to thank our audience and appreciate the enthusiasm and participation, including numerous questions surrounding USMCA which will be addressed in this blog.
Before we dive in, you can find some more rich and extensive information on USMCA by watching the on-demand recording and reading our latest white paper, The New USMCA: Get Ready on Day One to Reap Significant Duty Savings. I will also be presenting on the next Global Trade Academy (GTA) webinar on June 18 titled, Master the Art of Saving Money: USMCA and Made in America Opportunities – you won’t want to miss that one! We will be providing a deeper dive into the USMCA qualification process, including a review of the new certification process and how you can manage NAFTA audits after USMCA is effective.
Now, let’s get to some of your USMCA questions and areas of concern.
1. Transitioning from NAFTA to USMCA certificates
Beginning July 1, 2020, companies must meet the USMCA certification requirements in order to qualify for the trade agreement’s preferential treatment. That means your existing NAFTA certificates must be replaced by the USMCA certification requirements. Now is the time to work with suppliers to confirm what products you are planning to import under USMCA and securing the written requirements to confirm their eligibility.
Equally as important is understanding that the NAFTA certificate is no longer a formality under USMCA, which instead uses a certification statement and has no prescribed format. Rather, it requires a series of data elements to be provided in support of a USMCA claim. NAFTA certificates are valid through June 30, 2020, and on July 1, 2020, companies must transition to the USMCA free trade agreement (FTA). NAFTA officially ends on June 30, 2020.
2. What are the key differences between NAFTA preference criteria characteristics and USMCA?
The preference criteria outlined on the NAFTA certificate are different from the language to make a claim for preferential treatment under USMCA. While a NAFTA certificate was required to be signed by the exporter of record, USMCA claims can be made by an exporter, producer or importer acting as the certifier, as long as they have the appropriate documents and statements qualifying the good as originating. The required USMCA data elements do not include NAFTA preferential criteria.
3. Will the USMCA certificate of origin be valid for up to one year?
Yes! USMCA allows for a blanket period of up to 12 months, as set out in article 5.2 (claims for preferential tariff treatment) for the certification statements, and must be dated by the certifier and accompanied by a specific statement of qualification. This statement is covered in chapter 5 annex 5-A, number 9.
4. What are the minimum-data elements for USMCA qualification?
Annex 5-A covers in detail the minimum-data elements, with specific statements and certifier requirements that must be met. Many of these data elements are similar to data points covered on the NAFTA certificate, such as the inclusion of the HS tariff classification to 6-digits, and the name and address of the person certifying the good (i.e. exporter, producer or importer). It must also reflect the appropriate qualifying statements as well. It is highly recommended that the USMCA qualifier of the good be trained on the required data elements and their responsibilities for verifying the product under the agreement.
5. How does de minimis work?
The rule of de minimis has changed under USMCA with the threshold raised for many products, from 7% to 10%. Naturally, there are exceptions to the de minimis rule, as in NAFTA, and it is important to verify your product is eligible for the de minimis rule prior to qualifying the good.
6. Will all previously issued NAFTA certificates have to be reissued? Can the customers use the previously issued certificates to prepare their own certification under USMCA?
After 26 years, NAFTA officially comes to an end on June 30, 2020, and the new agreement comes into force on July 1, 2020. The qualification process under the USMCA differs from NAFTA and requires importers to secure new qualifying statements from their suppliers or producers for any preferential treatment claim made from July 1, 2020.
Since the qualifying criteria under USMCA require the certifier to sign and date their origin criteria information, a NAFTA certificate will not be considered valid as a supporting document to any USMCA claim. Why? Because the new USMCA rules are new and innovative, meaning some products that qualified under NAFTA may not qualify under USMCA. Therefore, an importer cannot assume all goods qualified under NAFTA through June 30, 2020, will still qualify once the new agreement goes into force.
7. Where can I receive training on the new USMCA rules?
The E2open Global Trade Academy is your one-stop-shop for all global trade management training, including the new USMCA rules. You can check out some of our resources by visiting our dedicated webpage here. Don’t forget to sign up for our June 18 webinar either. I look forward to virtually seeing you there!