U.S., Canada, Mexico Reach Agreement to Update NAFTA
The U.S., Canada, and Mexico announced Sept. 28 an agreement to modernize the 25-year-old North American Free Trade Agreement. The U.S.-Mexico-Canada Agreement is expected to be signed by Dec. 1, which could bring it up for congressional consideration in early 2019.
According to fact sheets from the Office of the U.S. Trade Representative, the USMCA includes the following provisions.
- Canada will provide new-tariff rate quotas exclusively for U.S. fluid milk, cheese, cream, skim milk powder, butter and cream powder, concentrated and condensed milk, yogurt and buttermilk, powdered buttermilk, products of natural milk constituents, ice cream and ice cream mixes, whey, margarine, and other dairy.
- The U.S. will provide reciprocal access on a ton-for-ton basis for imports of Canadian dairy products as well as new market access for Canadian peanuts, processed peanut products, and a limited amount of sugar and sugar-containing products.
- Canada will eliminate milk price classes 6 and 7, which USTR states allow “low-priced dairy ingredients to undersell United States dairy sales in Canada and in third country markets.”
- Canada will apply export charges to its exports of skim milk powder, milk protein concentrates, and infant formula at volumes over an agreed threshold.
- Canada will provide new TRQs for U.S. chicken, eggs, and egg products and increase its access for turkey.
- To qualify for preferential treatment 75 percent of auto content must be made in North America and 40-45 percent must be made by workers earning at least $16 per hour.
- Rules of origin for chemicals, steel-intensive products, glass, and optical fiber have been strengthened.
- New procedures streamline certification and verification of rules of origin and promote strong enforcement, including new cooperation and enforcement provisions that help prevent duty evasion before it happens.
- New provisions are added for transparency in import licensing and export licensing procedures.
- Parties are prohibited from applying (a) requirements to use local distributors for importation, (b) restrictions on the importation of commercial goods that contain cryptography, (c) import restrictions on used goods to remanufactured goods, and (d) requirements for consular transactions and their associated fees and charges.
- Provisions for duty-free temporary admission of goods are updated to cover shipping containers or other substantial holders used in the shipment of goods.
- Rules that allow for some use of non-NAFTA inputs in textile and apparel trade are limited.
- Sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in most apparel and other finished products, must be made in the region for those finished products to qualify for trade benefits.
- A textiles chapter for North American trade is established, including textile-specific verification and customs cooperation provisions that provide new tools for strengthening customs enforcement and preventing fraud and circumvention in this sector.
- New provisions covering trade in information and communication technology, pharmaceuticals, medical devices, cosmetic products, and chemical substances exceed NAFTA and TPP rules and promote enhanced regulatory compatibility, best regulatory practices, and increased trade among the countries.
- Data for biologic drugs will be protected for ten years and a robust scope of products will be eligible for protection.
- Full national treatment will be required for copyright and related rights.
- A minimum copyright term of life of the author plus 70 years, or 75 years after first authorized publication for works with a copyright term not based on the life of a person, will be required.
- Provisions for protecting trademarks, including well-known marks, are enhanced.
- For the first time, a U.S. trade agreement will require ex officio authority for law enforcement officials to stop suspected counterfeit or pirated goods at every phase of entering, exiting, and transiting through the territory of any party.
- Protections against the misappropriation of trade secrets include civil procedures and remedies, criminal procedures and penalties, prohibitions against impeding trade secret licensing, judicial procedures to prevent disclosure of trade secrets during the litigation process, and penalties for government officials for the unauthorized disclosure of trade secrets.
- A new digital trade chapter contains the strongest disciplines of any international agreement, including a prohibition on customs duties and other discriminatory measures being applied to digital products distributed electronically (e-books, videos, music, software, games, etc.) and measures to ensure that data can be transferred cross-border and minimize limits on where data can be stored and processed.
- Canada will raise its de minimis level from C$20 to C$40 for taxes and will provide for duty-free shipments up to C$150. Mexico will continue to provide USD $50 tax-free de minimis and provide duty-free shipments up to the equivalent level of US$117. Canada will also allow 90 days after entry for the importer to make payment of taxes.
- A new chapter on macroeconomic policies and exchange rate matters includes high-standard commitments to refrain from competitive devaluations and targeting exchange rates.
- Labor and environment obligations are brought into the core of the agreement and made fully enforceable.
- Parties are required to take measures to prohibit the importation of goods produced by forced labor.
- Parties are obligated to enhance the effectiveness of customs inspections of shipments containing wild fauna and flora at ports of entry and ensure strong enforcement to combat illegal, unregulated, and unreported fishing.
- Non-discrimination and transparency commitments were agreed regarding sale and distribution and labeling and certification provisions to avoid technical barriers to trade in wine and distilled spirits.
- According to press sources, the Chapter 19 provisions allowing parties to challenge each other’s antidumping and countervailing duty cases is retained.
- The U.S. has reportedly agreed to essentially exempt Canada and Mexico from any potential Section 232 tariff increases on automobiles or auto parts.
For more information, please contact Nicole Bivens Collinson at (202) 730-4956.