The United States-Mexico-Canada Agreement is the North American trade framework that succeeded NAFTA on July 1, 2020. USMCA allows qualifying goods to move duty-free between the three countries, but the qualification rules are stricter than NAFTA, especially for automotive, textiles, and certain electronics. Goods that don’t qualify still cross the border, they just pay the standard MFN duty rate plus any surcharges in effect.
How it works in practice
To claim USMCA preferential treatment, the importer needs a USMCA Certificate of Origin from the producer or exporter, the goods must meet a rule of origin specific to their HS code, and either the producer, exporter, or importer must be willing to attest to that origin. The two main qualification paths are the tariff-shift rule (the inputs underwent a substantial transformation in North America) and the Regional Value Content rule, where typically 60% of the transaction value or 50% of the net cost must originate within USMCA territory. Apparel has yarn-forward rules that are stricter still.
Why it matters
USMCA qualification is the difference between a 0% duty and a 6.5%-25% duty on most goods. For a brand importing $5M of finished goods from a USMCA partner annually, that’s the difference between $0 and roughly $325,000 in duty payments. The certificate of origin is a small piece of paperwork that pays for itself many times over.
Common misconceptions
- A product “made in Mexico” does not automatically qualify. The bill of materials and where each component was sourced determines qualification.
- USMCA does not replace HS classification work. You still need the right HS code to apply the right rule of origin.
- The certificate of origin is not optional. CBP will deny the preferential rate on audit if it’s missing.