One Step Closer to USMCA: CBP Issues Interim Implementing Instructions

U.S. Customs and Border Protection (CBP) issued Interim Implementing Instructions for the United States-Mexico-Canada Agreement (USMCA) on April 20, 2020. The Interim Instructions, which CBP explains should be considered a “Guidance Document,” were issued to “provide stakeholders with useful information” as importers and exporters begin contemplating the transition away from the North America Free Trade Agreement (NAFTA) to USMCA.

While the Interim Instructions are subject to change when the final USMCA is incorporated within the General Notes of the Harmonized Tariff Schedule of the United States (HTSUS) and the USMCA regulations are formally issued, these Interim Instructions provide a preview of the anticipated final language prior to the USMCA entering into force on or after July 1, 2020.

For importers, the Interim Instructions shed some light regarding the new rules of origin and related procedures. For example:

• The NAFTA Country of Origin Marking Rules found at 19 C.F.R. Part 102 will continue to determine the country of origin of goods imported from Canada and Mexico for country of origin marking purposes. However, a good will no longer have to first qualify to be marked as a product of Mexico or Canada in order to benefit from preferential treatment under the USMCA.
• Post-Importation USMCA claims will continue to be available, both pursuant to 19 U.S.C. § 1520(d) and via CBP’s ACE Reconciliation Prototype. Importantly, however, Merchandise Processing Fees (MPF) will no longer be refunded following a Post-Importation USMCA claim.
• To qualify as originating under the USMCA, all products imported as an HTSUS General Rule of Interpretation 3 “set” must qualify for USMCA preferential treatment independently, or the total non-originating value in the set must be less than 10% of the declared value.
• CBP confirms that although there is enhanced flexibility with respect to the format of Certificates of Origin, a USMCA certification must be complete at the time the duty preference claim is made and must be in the possession of the importer at that time. This is similar to the NAFTA and inconsistent with other free trade agreements.
• Importers will not be subject to CBP penalties for false or unsupported USMCA claims if within 30 days of discovery they make a corrected declaration and pay all duties and fees due.

The most notable departures from the NAFTA, however, are the extensive guidelines regarding the Regional Value Content (RVC) and Labor Value Content (LVC) Rules for automotive imports. These guidelines are provided in a variety of annexes and appendices that include, for example:

• Definitions and equations for how to calculate LVC for passenger vehicles, and light and heavy trucks
• Methodology for calculating high-wage material, high-wage technology expenditures and high-wage assembly
• Detailed examples of direct production work and ancillary activities to reference when calculating LVC
• Steel and aluminum purchase requirement information and applicable subheading HTS provisions
• An announcement that alternative staging requirements can be petitioned with the United States Trade Representative (USTR) to prolong the staging period for implementation of heightened USMCA rules of origin from three years to five

CBP’s publication of these clarifying guidelines, along with the USTR’s recent solicitation of petitions for alternative USMCA staging requirements from vehicle manufacturers, suggests that recent calls for delaying the USMCA’s entry into force have been heard.

Instead of delaying, however, the administration may be issuing these Interim Instructions and a petition process for alternative staging to justify moving forward with the USMCA on July 1, 2020, if possible. However, until the U.S. issues its required notification, July 1, 2020 continues to be only a target date for the USMCA.