CUSMA to Replace NAFTA on June 1, 2020
On March 13, 2020, the Government of Canada passed Bill C-4, the Act to implement the Canada-United States-Mexico Agreement (CUSMA). With Canada being the last of the three countries to ratify the agreement, CUSMA is expected to enter into force and replace NAFTA on June 1, 2020.
What does this mean for Canadian importers and exporters? The following provides an overview of CUSMA and what you need to know as an importer or exporter to prepare for the transition from NAFTA to CUSMA.
What is CUSMA?
In 1994, Canada, the United States, and Mexico created the largest free trade region in the world with the signing of the North American Free Trade Agreement (NAFTA). In its 26 years, NAFTA significantly reduced trade barriers between the three countries by eliminating tariffs, encouraging investment, and increasing North America’s global competitiveness. It is estimated that, by the end of 2018, the NAFTA area GDP surpassed $24 trillion with a market of over 480 million people.
CUSMA maintains the key aspects of the trading relationship between Canada, United States, and Mexico while incorporating new provisions to address current trade challenges and continuing to promote opportunities for North Americans.
What CUSMA Means for Importers and Exporters
Effective June 1, 2020, CUSMA will completely replace NAFTA. This means that NAFTA rules and Certificates of Origin will no longer apply, and Canadian importers and exporters will have to begin claiming duty relief under CUSMA origin and certification rules.
Up to June 1, 2020, importers and exporters may still apply NAFTA rules and Certificates of Origin to receive preferential duty status for their goods.
Preparing for CUSMA
NAFTA Certificates of Origin become void (and non-transferable) as soon as CUSMA takes effect. We strongly recommend importers and exporters take measures to prepare for the transition, including:
1. Pre-Qualifing your Goods under CUSMA
Specific rules of origin and other requirements have changed under CUSMA, and some sectors have been affected more than others (e.g. automobiles, dairy, agriculture, etc.). You should begin reviewing your imported and exported goods under CUSMA’s Rules of Origin to ensure they still qualify for duty free status.
2. Preparing for New Certificates of Origin
Unlike NAFTA, there is no prescribed format or form template for the CUSMA Certificate of Origin. Certificates must, however, contain a set of minimum data elements used to indicate that the product qualifies as originating.
Minimum data elements are detailed in Annex 5-A of Chapter 5 – Origin Procedures of the agreement and include:
An importer, exporter, or producer may complete the Certificate of Origin if they have:
The Certificate of Origin may be provided on an invoice or other document describing the originating product with enough detail to enable clear identification, such as a product, part, model, or serial number. A general or generic description will not be accepted.
For your convenience, we have added a CUSMA Certificate of Origin template (downloadable PDF) to our Resources page. Please contact us if you need assistance in completing it.
3. Obtaining Blanket Certificates
To ensure duty-free status is uninterrupted during the transition, make sure your Customs Broker receives your Blanket CUSMA Certificates of Origin prior to June 1. You may also instruct your vendor to provide them at the time of release.
Please forward all Blanket Certificates to [email protected].
4. Maintaining Records
While NAFTA rules and regulations will no longer apply after CUSMA takes effect, you are still required under the Customs Act to maintain records related to your imported/exported goods for a period of six years. NAFTA Certificate of Origins and supporting documentation must be kept for any goods for which you have claimed NAFTA preferential treatment.
Under CUSMA, importers and exporters claiming preferential tariff treatment are required to retain Certificates of Origin and documentation related to the import/export for a period of no less than five years.
We’re Here to Help
The introduction of CUSMA will require a few changes on your part. We’re here to help answer any questions you may have and assist in preparing your documents. Please contact our Customs Consulting Department or your local PF Collins office if you have any questions or concerns regarding CUSMA or need help in preparing your documents for the transition.