News & Insights

Canada-United States-Mexico Agreement Begins July 1

Tax Development Jun 24, 2020

On March 13, 2020, the Canada-United States-Mexico Agreement (CUSMA) received Royal Assent and, despite the ongoing economic impact of the COVID-19 pandemic, this agreement will take effect on July 1, 2020, without a transition period. This pact, also known as the USMCA (in the United States) and T-MEC (in Mexico), replaces the North American Free Trade Agreement (NAFTA).

Once the CUSMA comes into effect, qualifying goods imported into Canada from a CUSMA country will enter free of customs duty. However, certain agricultural goods (e.g., dairy, chicken, and eggs) are an exception to this general rule. To qualify for this duty-free status or preferential tariff treatment, the imported goods must meet the CUSMA rules of origin requirements. Furthermore, effective July 1, 2020, a NAFTA certificate of origin cannot be used to claim preferential tariff treatment for goods imported into Canada.

Certification of Origin

There is no prescribed form for the certification of origin that is required to obtain preferential tariff treatment under the CUSMA. However, for this certification to be valid, certain information must be disclosed to indicate the origin of the goods. The minimum requirements include:

  • Certifier identification (including address);
  • Information on the exporter;
  • Information on the producer;
  • Importer information;
  • Description of the goods; and
  • The rule of origin.

In order to claim preferential tariff treatment on imported goods for CUSMA purposes, the importer must have a valid CUSMA certificate of origin on hand at the time of import. This certificate may be prepared by either the exporter, producer, or importer of the goods and it is possible for this certification to be issued, signed, and filed electronically. Importers should note that a certificate of origin is not required for imported goods where the value for duty is not in excess of $3,300.

Submission of Certification

Under the CUSMA, a certificate of origin can be issued via any document, including an invoice, and it may be communicated and stored electronically. An importer must submit this certification to the Canada Border Services Agency (CBSA), when requested, where a claim for preferential tariff treatment has been made.

Refunds

Where goods are imported into Canada prior to the CUSMA taking effect and NAFTA preferential tariff treatment has been claimed, the goods may be subject to compliance verification and may qualify for a duty refund, provided the NAFTA provisions have been met.  In addition, the one-year submission claim period for overpaid duties will be extended to allow importers up to four years from the date the goods were accounted for to claim preferential tariff treatment under the CUSMA.

Other Considerations

Imported goods can qualify for preferential tariff treatment if they are shipped directly to Canada from a CUSMA country or if they are shipped through a third country other than Mexico or the United States. However, where the goods are shipped through a third country, the imported goods will only retain their origin status where the other country retains customs control over the goods and they are not further processed (other than a few specified activities, such as breaking bulk, storage, labeling, reloading, and unloading).

The CUSMA also provides for rule changes in other customs areas, including:

  • Textiles and apparel;
  • Self-assessment for preferential tariff treatment;
  • Advance rulings;
  • Trade facilitation (i.e., a de minimis threshold);
  • Low-value shipment thresholds; and
  • Trade incentives and remedies.

More Information

Further information on how the CUSMA will impact importers can be found in the following links to the CBSA website:
Customs Notice 20-14 Implementation of the Canada-United States-Mexico Agreement (CUSMA)
The Canada-United States-Mexico Agreement: What importers need to know
Overview of key changes affecting imports

If you have any questions about how these changes might impact your organization, please do not hesitate to contact the Ryan TaxDirect® line at info@ryanco.ca or 1.800.667.1600.