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USMCA Implementation Would Require Numerous Changes to U.S. Law, USTR Says

Thursday, January 31, 2019
Sandler, Travis & Rosenberg Trade Report

Changes to existing law are necessary to bring the U.S. into compliance with a number of obligations under the U.S.-Mexico-Canada Trade Agreement, according to a recent document from the Office of the U.S. Trade Representative. Legislation to implement the USMCA could be introduced and considered by Congress within the next few months, although the recent federal government shutdown and the prospect of another shutdown beginning in February could further delay such action. (Click here for more information on prospects for congressional approval.)

Among the USMCA provisions USTR identifies as requiring statutory changes are the following.

Agriculture – (1) eliminating tariffs on some goods and creating tariff-rate quotas on others, including dairy, sugar, sugar-containing products, peanuts and peanut products, and cotton; (2) exempting goods that qualify for preferential treatment under the USMCA from any duty imposed under the special agricultural safeguard authority; and (3) clarifying that Mexican and Canadian goods subject to most-favored-nation tariff treatment can be subject to the special agricultural safeguard

Drawback – (1) revising the exception for sugar to reflect new tariff nomenclature and the expansion of this exception to include sugar-containing products, and (2) maintaining exceptions to the limitation on drawback for certain goods traded between the parties

MPF – maintaining the waiver of the merchandise processing fee with respect to originating goods and extending that waiver to trade preference level goods

Rules of Origin – (1) making significant changes to the rules of origin for automotive goods, including ending NAFTA’s tracing and deemed originating requirements, increasing the regional value content, requiring that certain core vehicle parts be originating for a vehicle to be originating, and creating a new labor value content rule; (2) updating rules of origin for optical fiber and certain steel, glass, titanium, and chemical products; (3) introducing new customs procedures such as allowing importers as well as exporters and producers to make certifications of origin; (4) revising penalty provisions; and (5) providing one year after importation to claim preferential tariff treatment

Textiles – (1) changing rules of origin to require that inputs such as sewing thread, pocketing, narrow elastic bands, and coated fabric be made in the region; (2) reflecting the restructuring of the rules and quantitative limits governing TPLs to promote greater use of regional fibers, yarns, and fabrics; and (3) providing for specific verification procedures for textiles and apparel trade and actions to address customs offenses

Government Procurement – permitting the president to designate products from Mexico as eligible for purposes of waiving discriminatory purchasing requirements under U.S. government procurement law

Safeguards – maintaining the exclusion of imports from Canada and Mexico from global safeguard actions (subject to certain conditions)

Trade Remedies – (1) maintaining NAFTA provisions providing for binational review and dispute settlement in antidumping and countervailing duty matters and (2) providing that Canada and Mexico are deemed countries signatory to a bilateral agreement for purposes of trade enforcement and compliance assessment activities of U.S. Customs and Border Protection that concern duty evasion of trade remedy laws

Energy – maintaining obligations with respect to energy regulatory measures

Express Shipments – after consultation with the Senate Finance and House Ways and Means committees, the administration may include changes to the Trade Facilitation and Trade Enforcement Act to implement USMCA provisions on express shipments

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