The U.S.-Mexico-Canada Agreement (“the USMCA”) passed the U.S. House of Representatives on December 19, 2019, by a vote of 385 to 41. In order to be fully ratified by the United States, the USMCA must now be approved by the U.S. Senate, which has a total of up to 30 session days after the House vote to conduct a full vote on the bill. While some Senators have expressed disapproval over the deal, as Senator Patrick Toomey of Pennsylvania opined in the Wall Street Journal, it is expected to pass the Senate as well. Once approved by the Senate, the USMCA will be signed into public law by the President and implemented by presidential proclamation. Given that Congress has recessed for the holidays, it is unlikely that a vote in the Senate on the USMCA will take place before the New Year, in which case the legislation will not take effect until sometime in 2020.
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. The proposed USMCA 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 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 such, importers should not assume that NAFTA-eligible products will remain eligible under the USMCA (or vice versa) and should check the new rules of origin carefully for their products.
We are monitoring the USMCA ratification process closely and will provide future updates as additional details become available. Should you have any questions regarding the proposed USMCA, please contact Husch Blackwell’s International Trade and Supply Chain team.