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April 2, 2019

USMCA vs. NAFTA: What You Need to Know

The United States-Mexico-Canada Agreement (USMCA) is a signed but not yet ratified free-trade agreement meant to supersede the North American Free Trade Agreement (NAFTA). Many of the subject areas governed by NAFTA remain unchanged in what some are dubbing “NAFTA 2.0,” including temporary-entrance visa availability and requirements, steel and aluminum tariffs grounded in national security concerns, and the state-to-state dispute mechanism.

There are, however, a few significant differences between the two agreements to be aware of. The following are some of the changes that will occur under the USMCA:

  • Increased country of origin requirements: To qualify for zero tariffs, passenger vehicles will need to carry 75 percent North-American content, a substantial increase from the 62.5 percent required in NAFTA.
  • Enhanced labor protections: By 2023, 40 to 45 percent of automobile content must be made by workers who earn at least $16 an hour.
  • Canadian dairy-market access: Canada will provide access to its dairy-market equivalent to approximately 3.5 percent of the market.
  • Lengthened intellectual property protection: The terms of copyright will be extended from 50 years beyond the life of the author to 70 years.
  • Increased de minimis shipment value: Canada will raise its de minimis shipment value level from $20 to $40 CAD for taxes, providing for duty-free shipments of up to $150 CAD.
  • Review clause: The USMCA includes a 16-year expiration date and a provision that requires a review of the deal every six years.

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