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Make sure you are ready by July 1 for changes happening under CUSMA

Out with the NAFTA, in with the CUSMA

INSIGHT ARTICLE  | 

On April 24, 2020, the United States of America became the final country to notify the trading partners of the Canada-United States-Mexico Agreement (CUSMA), Canada and Mexico, that they had completed all ratification steps and are prepared to go live with the agreement. As per the written agreement, CUSMA will go into effect on the first day of the third month from April 24, making the go live date of the agreement July 1, 2020 (Happy Canada Day!).

Businesses will have the next two months to ensure they are ready for the implementation of a new agreement and that any goods that qualified under North American Free Trade Agreement (NAFTA) continue to qualify under CUSMA.

New rules of origin

Much of the conversation surrounding the agreement has been concerning the new rules of origin on finished automobiles and automotive parts. The changes in this are significant with a phased approach to raising the regional value of content for some automobiles and automotive parts to as high as 75%, a 12.5% increase in required North American content over the previous NAFTA agreement.

It should be noted however, there are many changes throughout sections of CUSMA which impact the qualification of manufactured goods. Some of these areas include changes to the rules of origin on imports of chemicals, oil and gases, plastics and rubbers and textiles, among many others. Using the assumption there is no change in the qualification of imports under CUSMA outside of automotive classifications, could result in future risk for importers using the agreement.

Similarly to the NAFTA agreement, the rules of origin under CUSMA rely on tariff shifts and the calculation of regional value content under a manufacturing process in order to qualify goods. One of the biggest changes importers will see as a part of this agreement is an increase in the requirement for North American content, which is meant to drive a resurgence in North American manufacturing.

New certification process

One of the biggest changes that importers will experience under the CUSMA agreement is the retirement of the requirement to have a certificate of origin to claim the benefit of CUSMA. Since the implementation of NAFTA in 1994, no importer has been able to claim the benefits of the agreement unless they had in their possession at the time of import a valid B232, North American Free Trade Agreement – Certificate of Origin, or applicable equivalent form from another jurisdiction.

Under the CUSMA agreement, importers will not need to have a “Certificate of Origin” but instead will be required to place a certification of origin on an invoice or other document included in the import package when reporting goods to customs. This may also be included on a separate sheet containing only the certification of origin and an electronic signature, and be considered valid for claiming preferential treatment under CUSMA. The certification of origin has several data elements that must be present in order to make it valid, and persons certifying the origin should ensure all elements are included.

Another important change is who is able to certify origin under the new agreement. Under CUSMA, not only the producer or exporter can make the certification of origin, but an importer will be able to as well. If an importer has all of the data elements required to make a certification of origin, and maintains the backup documents to support this claim, than the importer may be the one to make the certification of origin as well. Importers who are not receiving a certification from a vendor can look to this as a possibility to maintain duty free status of imports after the implementation of CUSMA.

Rulings under NAFTA

The Canada Border Services Agency (CBSA) has released a statement that any rulings that have been issued for NAFTA will only be eligible for goods imported while the agreement remains in place. Therefore, as of July 1, 2020 any importers who are relying on a ruling issued on the eligibility of their imports under NAFTA will no longer be able to rely on the decision of the ruling for imports under CUSMA. Importers will need to request a new ruling on the eligibility of the goods under the CUSMA agreement in order to benefit from the protections provided by a ruling.

How can RSM help?

With the ever-increasing complexity of global trade, this agreement will add additional compliance obligations for importers, while also presenting an opportunity for duty minimization. RSM Trade Advisory Services is prepared to assist your organization in realizing the benefits of this agreement and other import and export measures to assist you in mitigating risk while minimizing your trade costs. If you’ve got questions we are here, ready to talk, and help you and your organization. Contact us today.

 

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