New NAFTA receives royal assent

Date posted: March 16, 2020 | Author: Chad Swance, Director of Regulatory Affairs and Trade Compliance

The new NAFTA (CUSMA, USMCA, T-MEC) received Royal Assent in Canada on March 13, 2020 - a surprise move by both houses before they suspended because of COVID-19.

The next step of this process is the publishing and registering of all related regulatory changes. Typically, this takes up to two or three weeks. With the amount of uncertainty in Canada regarding COVID-19 it is unknown how long the regulatory process will take. Should the regulatory registration complete before the end of March, businesses will be require to implement on June 1, 2020.

Kuehne + Nagel will continue to monitor the passage and implementation of new NAFTA agreement. In the meantime, supply chains can take the following concrete examples.

Revisit Rules of Origin

The vast majority of the rules of origin have remained from NAFTA to CUSMA. However, many companies in North America have not revisited their qualification procedures for several years. In the lead up of the new agreement, supply chains should undertake the best practice of validating that there is not a material change in the rules of origin from NAFTA to CUSMA. Secondly, if there has not been a vigorous origin review, now would be an opportune time. There are instances where organizations go through very small changes in their sourcing and manufacturing processes that cause goods that previously qualified for preferential treatment to no longer qualify.

Statement of Origin Preparation

With the introduction of CUSMA, the NAFTA certificate will no longer be the required proof of origin. Similar to the recent CETA and CPTPP agreement, CUSMA requires a statement and several data elements to accompany the shipment in order to claim preferential treatment. Many corporations need to engage custom development teams to program the new origin statements into their software systems. Further, it is required to have an authorized signature to certify the goods meet the origin criteria. Some organizations may wish to revisit their policies on who can be authorized to sign such declarations.

Prepare for Audits

As an ever-increasing number of new free trade agreements come into force in Canada, the signatory countries will begin to focus on the compliance of the origin claims. Companies should be ready and able to defend their origin statements with the appropriate documentation. These should include audit trails proving that companies have performed due diligence prior to claiming preferential treatment under CUSMA.

Automotive Parts

Although a part of an automotive part may individually qualify for preferential treatment under CUSMA, the new rules for assembled vehicles may preclude certain individually qualified parts from inclusion in a completely assembled qualifying vehicle. It is important to read through the appendix of Chapter 4, Rules of Origin. After working through the appendix and understanding the product eligibility, the automotive supply chain community will need to plot the best path forward.