On April 24, 2020, the Office of the United States Trade Representative (USTR) sent written notice to the Mexican and Canadian governments that the United States has completed the requisite internal procedures under the United States Mexico and Canada Agreement (USMCA), triggering an entry into force date of July 1, 2020.
The U.S. was the last country to issue the required notice after several automotive industry groups and a bipartisan group of congressional representatives pleaded with the administration to delay the USMCA’s entry into force. These groups cited the complexity of the proposed automotive rules of origin, as well as the uncertainty caused by the COVID-19 pandemic, as reasons to delay what otherwise could be a difficult transition for many companies.
As we reported recently, the administration showed signs of its intent to move forward with a July 1 implementation date by releasing Interim Implementing Instructions with guidance regarding the rules of origin and establishing a petition process to request an alternative staging regime for the rules of origin for automotive goods.
Upon the USMCA’s entry into force on July 1, 2020, the rules established under the North American Free Trade Agreement (NAFTA) will no longer be applicable and will be replaced with the USMCA. While several rules of origin and some procedural rules are similar under both agreements, there are significant changes that will impact all companies that currently benefit from NAFTA preferential treatment for their imported products, or that sell NAFTA eligible products to Mexico and Canada.
If not already under way, companies should review their imported and exported products to determine what impact the transition to the USMCA will have on their business. Faegre Drinker has been working closely with clients to implement USMCA transition plans and facilitate compliance with all of the new requirements of USMCA and is available to answer any questions or provide support in applying the new rules of origin.