The USMCA: Sealed, Delivered and Now In Play
We know what we know and we know what we don’t know.
Many of you have been following our alerts over past months. Many have joined our recent USMCA webinars. The automotive industry especially has tuned in to hear the significant changes for them in the new agreement.
We won’t replay these here other than to remind you that your 2020 NAFTA Certificates are no longer valid. However, we thought it might be helpful to offer a checklist of recommendations to guide readers through these early first weeks and months of the USMCA.
USMCA Checklist
- Seek to be informed on the USMCA certifications issued and the USMCA claims made by your company.
- Even during these first transitional months, US Customs and Border Protection (CBP) can be expected to issue requests for data and other origin information (CF-28s) during the purported informed compliance period. The transition period is not a “safe harbor” period to issue USMCA certificates without consequence, but simply more time to gather needed data.
- Conduct a comparison of the USMCA origin rules to the legacy NAFTA origin rules on your priority products.
- Analyze how these products have qualified under NAFTA and how they will be treated under the new USMCA rules. Some key NAFTA automotive origin rules, such as “deemed originating” no longer apply under the USMCA.
- Engage in an “enterprise risk” or “whole of company” approach to the USMCA.
- Assemble a team from key corporate divisions within the company – from the sales department to logistics personnel to the finance group – to provide important considerations when issuing USMCA certifications and making USMCA claims.
- Ensure that any communications from CBP to the company is properly handled by senior managers within the organization to ensure timely and accurate responses.
- Even with a six-month “informed compliance” period, CBP will be expecting companies to demonstrate “reasonable care” and “due diligence” when issuing USMCA certifications and making USMCA claims.
- Understand and prepare company policies governing the issuance of USMCA certifications, particularly if you are issuing a USMCA certification as an importer.
- Under the USMCA, an importer may issue its own certifications that can be relied on when making USMCA preference claims. Understand the legal risks this choice presents and seek advice on how best to mitigate them.
- Speak to your company’s suppliers to gauge their USMCA understanding and needs.
- This is especially important if you are a Tier 1 automotive supplier and your Tier 2 suppliers previously provided you only “traced value” for your NAFTA qualification analysis.
- If your company is in the automotive sector, understand how the Labor Value Content (LVC) requirements of the USMCA work.
- The LVC certification requirements apply only to vehicle manufacturers, but vehicle parts suppliers will need to know how these provisions also impact them.
- Track and retain records of entries filed without a USMCA preference claim (due to lack of available data at the time of entry).
- The USMCA exempts the Merchandise Processing Fee (MPF) when USMCA claims are made at entry but the current law does not provide MPF refunds when post-entry USMCA claims are made. Legislative efforts to remediate this difference from the NAFTA, if passed, could provide retroactive refunds.
- Keep your NAFTA documents and records.
- While NAFTA certifications and claims are no longer valid, the NAFTA has not entirely disappeared. US CBP retains the authority to conduct NAFTA verifications (audits) retroactively going back to 2015.
- Get the best advice.
- The best and most effective approach in the long term is getting it right from the beginning. Use this advice to “connect the dots” for your company’s exposure to non-USMCA risks, such as continuing 232 and 301 tariff exposure.
It may take a while to completely transition to the USMCA, but following these suggestions during this process will greatly assist in reducing the risk of making costly mistakes during the early months – and will serve as a foundation for compliance actions in the years ahead.
Contacts
- Related Practices