Today, the U.S.-Mexico-Canada Agreement (USMCA) passed the U.S. Senate by a vote of 89 to 10. While some Senators expressed disapproval over the deal for various reasons, passage of the USMCA enjoyed a great deal of bipartisan support after Democrats in the House of Representatives negotiated for more labor enforcement mechanisms that earned the endorsement of the AFL-CIO. Now that the USMCA has been approved by the Senate, it will be submitted to the President to be signed into public law and thereafter implemented through presidential proclamation. Mexico passed the deal in December, however, the deal will not take full effect until Canada passes the deal. The House of Commons is expected to hold a vote in the next few weeks.
While similar to the North American Free Trade Agreement (“NAFTA”) in many ways, the USMCA makes several key changes to NAFTA. Among the changes are provisions for digital trade, allowing data to flow more freely across borders. It also implements new local wage requirements and stricter local content requirements for the automotive sector, in addition to establishing a system to monitor workers’ conditions in Mexico. Depending on the product in question, the USMCA rules of origin may or may not change from those currently applied under NAFTA. For certain products, it is possible that the USMCA rules of origin could even provide for more flexibility than those under NAFTA. As a result, U.S. importers should not assume that NAFTA-eligible products will remain eligible under the USMCA (or vice versa) and should evaluate the new rules of origin carefully for their products.
We continue to monitor the USMCA implementation process closely and will provide future updates as more information becomes available. Should you have any questions regarding the USMCA or its implementation, please contact Husch Blackwell’s International Trade and Supply Chain team.