The Trump Administration has struck a trade deal and has announced the framework for a new, revised NAFTA – now known as the United States-Mexico-Canada Agreement, or USMCA. The following provides a high level overview of several of the provisions included in the new agreement.
RULES OF ORIGIN
The United States, Mexico, and Canada concluded substantive discussions on new rules of origin and origin procedures, including product-specific rules for passenger vehicles, light trucks, and auto parts.
This deal encourages United States manufacturing and regional economic growth by requiring that 75 percent of auto content be made in North America. The rule not only impacts the manufacturing of the automobile, but the supply chain as well. The intent of this provision is to transform supply chains to use more United States content, especially content that is key to future automobile production and high-paying jobs.
The United States, Mexico, and Canada have agreed to stronger rules of origin that exceed those of both NAFTA 1.0 and the Trans-Pacific Partnership (TPP), including for autos and automobile parts and other industrial products such as chemicals, steel-intensive products, glass, and optical fiber. Procedures that streamline certification and verification of rules of origin to promote strong enforcement have been established, including provisions to help prevent duty evasion before it happens. The new rules will help ensure that only producers using sufficient and significant North American parts and materials receive preferential tariff benefits.
The new provisions on textiles incentivize greater North American production in textiles and apparel trade, strengthen customs enforcement, and facilitate broader consultation and cooperation among the Parties on issues related to textiles and apparel trade.
The provisions will promote greater use of Made-in-the-USA fibers, yarns, and fabrics by:
- Limiting rules that allow for some use of non-NAFTA inputs in textile and apparel trade.
- Requiring that sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in most apparel and other finished products, be made in the region for those finished products to qualify for trade benefits.
- Establish a Textiles chapter for North American trade, including textile-specific verification and customs cooperation provisions that provide new tools for strengthening customs enforcement and preventing fraud and circumvention in this important sector.
President Trump, Prime Minister Trudeau, and President of Mexico Peña Nieto must sign the agreement, which they plan to do before Peña Nieto leaves office at the end of November. Once signed, the agreement needs to be ratified by all three governments. In the United States, but the treaty must be advised and consented to by a two-thirds vote in the U.S. Senate.