As we move along toward a July 1 Implementation date for the USMCA, we will keep you abreast of the rules as they are released to the public. Last week we sent you the interim instructions released by CBP, which contained Appendix I on the “Automotive Rules of Origin and Procedures.” Also related to auto is Appendix III, Annexes A and B, having to do with Labor Value Content calculations. A review of these materials will give one the immediate realization that companies looking for certification will have to have significant amounts of data at their disposal if they will be requesting duty-free treatment on July 1 when USMCA is implemented.

Supply chains in many industries are now “out of sync” due to restrictions on manufacturing placed not only on North American companies but those around the world supplying others due to COVID-19. In North America, the U.S. and Canada have similar definitions of what constitutes “essential” and “non-essential” activities. In order to begin syncing to a “new normal” or sets of “interim normals” in the auto industry, the “essential” activities need to be the same for all three countries. In encouraging Mexico to consider changes to its listing of “essential” and “non-essential,” several key Senators last week wrote to Secretary of State Pompeo asking him to work with the Mexican government to incorporate activities in a number of industries into “essential” in order to increase economic activity and trade in the three countries.

The law firm of Dickinson Wright has been very active in documenting the USMCA process from the beginning. Last week they conducted the first of several webinars detailing the elements of the implementation process. There is a lot of “meat” in the 62-page presentation, which all should review. In particular, the three speakers in the webinar covered syncing the supply chains, getting companies ready for implementation, addressing the new labor law requirements in Chapter 23, and reviewing the requirements of the new certificates of origin. In the end, they encouraged all companies trading within the North American bloc to see what they need to do now to meet what USMCA will require from them. Will they be “tweaking,” “transitioning,” and/or “transforming” their processes? In regard to the Rules of Origin for the auto industry, the speakers felt that, given all three countries allowing petitions from companies seeking alternate dates for implementing, there is a likelihood that those rules may be put off until January 1.

There has been activity on other trade and investment fronts:

On April 28, Mexico and the EU concluded negotiations for a new trade agreement; under the new EU-Mexico agreement, practically all trade in goods between the EU and Mexico will be duty-free; the agreement also now includes progressive rules on sustainable development, such as a commitment to effectively implementing the Paris Climate Agreement; it is also the first time that the EU agrees with a Latin American country on issues concerning investment protection; simpler customs procedures will further help boost exports; the broader Global Agreement, of which the trade agreement is an integral part, also covers the protection of human rights, as well as chapters on political and development cooperation; it will also be the very first EU trade agreement to include provisions to fight corruption, with measures to act against bribery and money laundering; details on the agreement, the principles of which were approved in April of 2018, can be found here.
On May 5, the UK and US governments will start negotiating a UK-US Free Trade Agreement; this first round of negotiations will last for approximately 2 weeks and will involve around 100 negotiators on each side; a summary of the U.S’ negotiating objectives can be found here.
Mexico will continue to be a prime location for trade and investment as the USMCA moves forward; however, COVID-19 has put a halt to activities of both existing companies there as well as those considering new investment – as seen by Tom Johnson of Business Development Partners in Mexico City, who provides us with monthly reports.

Our Chapter will be developing a number of webinars on topics of interest affecting our audience in the COVID-19 environment shortly. We will be announcing them well in advance so you can put them on your calendar.