CUSMA: Frequently Asked Questions
Q: When will CUSMA become effective?
A: The new trade agreement will take effect on July 1, 2020
Q: There are different acronyms for the new Agreement. Why is that?
A: In Canada, the official name of the Agreement is CUSMA (Canada-United States-Mexico Agreement). In the U.S it is USMCA (United States-Mexico-Canada Agreement) and in Mexico it’s generally referred to as T-MEC (Tratado entre México, Estados Unidos y Canadá). Any other references, such as “New NAFTA” and “NAFTA 2.0” are informal.
Q: Will there be a transition period when the NAFTA Rules of Origin and the CUSMA Rules of Origin may be used?
A: Once CUSMA comes into effect, preferential tariff treatment will be based on satisfying the rules of origin requirements of the new Agreement. Importers will be able to claim preferential treatment for goods released on or after the date of entry into force of CUSMA and the CUSMA rules of origin will apply; the NAFTA rules of origin will no longer apply.
Q: Are there changes to the Rules of Origin?
A: Generally speaking, the Rules of Origin under CUSMA remain the same as under NAFTA. However, this is a new Agreement and there are some changes and it is recommended that you treat the re-qualification of goods under CUSMA as if you were qualifying them for the first time.
Q: Where can I find the link to the new Rules of Origin under CUSMA?
A: The CUSMA Specific Rules of Origin can be found within Article 4 of the Agreement.
Q: What do I have to do now to prepare for CUSMA?
A: You should work with your suppliers now to verify if your goods qualify under the CUSMA rules of origin. This should be done prior to July 1, 2020, so that you’re ready for when CUSMA officially enters into force.
Q: Do we know which HS codes will be affected by changes to the Rules of Origin?
A: Automotive, dairy, agriculture, and chemical goods are the product groups that have had major changes. There are some new requirements for textile apparel goods; see the Appendix at the end of this document for details. There is a possibility of other minor changes to specific rules of origin for other goods, however those would have to be discovered on a case-by-case basis. Unfortunately, there is no concordance table for rules of origin changes.
Q: What is the definition of textile or apparel goods under CUSMA?
A: The CUSMA defines a textile and apparel good as “textile or apparel good classified in HS subheading 4202.12, 4202.22, 4202.32, or 4202.92 (luggage, handbags and similar articles with an outer surface of textile materials), heading 50.04 through 50.07, 51.04 through 51.13, 52.04 through 52.12, 53.03 through 53.11, Chapter 54 through 63, heading 66.01 (umbrellas) or heading 70.19 (yarns and fabrics of glass fiber), subheading 9404.90 (articles of bedding and similar furnishing), or heading 96.19 (babies diapers and other sanitary textile articles).”
Q: Are there any changes that the textile industry should be aware of?
A: Revised tariff shift rules maintain the basic concepts established under NAFTA with a few modifications. These rules allow manufacturers to use textile inputs not generally available in North America (such as rayon fibers and visible lining fabric).
The CUSMA modifies the chapter rules for goods classified in HS Chapters 61 and 62.
The CUSMA increases the de minimis percentage of non-originating inputs allowed in qualifying goods from 7 to 10 percent (within the overall 10% cap, the total weight of elastomeric content may not exceed 7%).
Other changes under the CUSMA require that sewing thread, pocketing fabric, narrow elastic bands, and coated fabric used in the production of apparel be made in North America in order for those products to be treated as originating (under the current NAFTA, these items can be sourced from outside the region – CUMSA ensures these secondary components originate within the region).
The CUSMA establishes a Textiles chapter for North American trade, including textile-specific verification and customs cooperation provisions that provide new tools for strengthening customs enforcement and preventing fraud.
The CUSMA reduces some TPLs for U.S imports from Canada and Mexico while substantially increasing TPLs for U.S exports to Canada of apparel and other finished textile goods.
Q: Under NAFTA, changes to goods of not more than 7% of the total value could be disregarded when considering qualification. Is this the same under CUSMA?
A: In technical terms this is called “De Minimis” and is retained in the new Agreement. However, the percentage has been increased to 10%.
Q: We have a NAFTA Origin Determination Ruling for a product we still import. Will that ruling still be valid under CUSMA?
A: No. Advance rulings for origin issued under NAFTA, will only remain valid for goods imported under NAFTA’s preferential tariff treatment. Therefore, companies wishing to have an advance ruling for origin under CUSMA, will need to submit a new application to CBSA.
Q: Can my NAFTA Certificates still be used once CUSMA enters into force?
A: The NAFTA Agreement will be superseded by CUSMA when the new Agreement comes into force. However, NAFTA will continue to be in place for all goods that were imported under that Agreement which may be subject to audit or other verification policies. Records pertaining to NAFTA must be retained for 6 years. NAFTA certificates of origin will cease to be valid for all shipments released after midnight on the day CUSMA is implemented.
Q: Can we simply change the titles of all of our NAFTA certificates to be titled CUSMA (or USMCA) instead?
A: Unfortunately, it is not that simple. You must requalify all goods under the rules of origin of the new Agreement. As well, the format of the certification has changed and the NAFTA certificate format does not satisfy the certification of origin minimum data elements set forth in Annex 5-A of the Agreement.
Q: Do I still need to keep my previous NAFTA certificates from prior years?
A: Yes. There is an obligation to maintain records for a period of at least 6 years, therefore NAFTA certificates of origin must be retained for any goods that have claimed a NAFTA preferential treatment within the past 6 years.
Q: Is there a new Certificate of Origin Form for CUSMA?
A: Contrary to NAFTA, there is no prescribed certification format under CUSMA. There is a set of minimum data elements however, which are listed in Annex 5-A of the Agreement. These data elements must be present on the shipment documents in order to claim the benefits of CUSMA. Omnitrans has developed a CUSMA certification form for the convenience of our clients that may be used as an option, but there is no legal requirement to use this specific format. If you would like to use the form that Omnitrans has prepared for this purpose, let us know and we will provide you with a blank version of that document.
Q: What are the signature requirements?
A: Certification of Origin must be signed by an authorized individual. Electronic signatures are acceptable.
Q: What is the difference between the terms “origin criteria” and “preference criteria”?
A: Preference criteria was the terminology used in the NAFTA Agreement. Origin criteria is the term used under CUSMA. The concept is the same but the criteria have been slightly modified. See Article 4.2 of the Agreement for details.
Q: Will it be necessary to provide Certification of Origin for each shipment?
A: No, that is not a requirement under NAFTA and will not be a requirement under CUSMA. Blanket certification will still be accepted, provided the required minimum data elements specified in Annex 5-A are included. One significant difference is that when Certification is provided on commercial invoices it will, by default, be provided on a shipment by shipment basis.
Q: Is there an exemption from the certification requirements?
A: Yes. Certification is not required if the value of a single importation does not exceed US$1,000 or the Canadian equivalent.
Q: What are the transit and transshipment requirements under CUSMA?
A: An originating good retains its originating status if the item has been transported within the U.S, Mexico or Canada. If the originating good is transported outside the territories of the parties, it must remain under customs control and cannot undergo an operation other than unloading, reloading, separation from a bulk shipment, storing, labeling, or marking required by the importing party; or any other operation necessary to preserve it in good condition or to transport the good to the territory of the importing party.
Q: What are the tariff treatments for CUSMA?
A: US Tariff: UST (English), TEU (French) – TT code 10
Mexico Tariff: MXT (English), TMX (French) – TT code 11
The Mexico-United States Tariff “MUST/TMEU” (TT code 12) is repealed
Q: Will there be a change to Canada’s value threshold for what is considered a Low Value Shipment (LVS)?
A: Effective on the day of coming into force of CUSMA, the CBSA will increase its Low Value Shipment (LVS) threshold for all commercial importations (in addition to those for express shipments) to an estimated value for duty not exceeding CAD$3,300
In addition, Canada agreed to apply de minimis thresholds for express courier import shipments.
- Goods valued at CAD$40 and less, shipped to Canada from the U.S or Mexico will not be subject to duty or tax
- Goods entering Canada that are valued at over CAD$40 but not more than CAD$150, only tax (GST/HST/PST) will be collected
- Duty and tax will be payable on goods valued at more than CAD$150
See this chart for details:
Goods Shipped by Courier* to Canada from** the United States or Mexico
Goods valued at $40 and less
No duty or GST/HST/PST payable.
Goods valued at more than $40 up to and including $150
No duty payable. GST/HST/PST payable.
Goods valued at more than $150 up to and including $3300
Duty and GST/HST/PST payable. Declaration of origin not required for goods valued at US $1000 or less. Simplified origin declaration for goods valued over US $1000.
* Definition of courier as defined in the Courier Imports Remission Order: https://laws-lois.justice.gc.ca/eng/regulations/SI-85-182/FullText.html. This includes all modes of transportation, excluding post.
** Non-originating goods valued at $40 and less shipped to Canada from the U.S or Mexico must have been entered into the commerce of the U.S or Mexico.
Q: Will Certificates of Eligibility be required for importing textile items (that is, clothing which does not originate under CUSMA) from the U.S. or Mexico?
A: Import permits, issued by Global Affairs Canada, will be required for imports of clothing and textile goods that are eligible for tariff preference level treatment under CUSMA upon entry into Canada from the U.S. or Mexico, similar to the process under NAFTA. Information regarding Certificates of Eligibility can be found in the Tariff Preference Levels Departmental Memorandum (D11-4-22).
Q: Will Certificates of Eligibility be required for exporting textile items (that is, clothing which does not originate under the CUSMA) to the U.S. or Mexico?
A: Certificates of Eligibility will be required for exports of clothing and textile goods that are eligible for tariff preference level treatment under CUSMA upon entry into the U.S. or Mexico.
Q: What is the time limit for submitting duty refund applications to CBSA to claim the duty free tariff treatment under CUSMA?
A: Refund applications are to be made under paragraph 74(1)(c.11) of the Customs Act within four years from the date the goods were accounted for, in respect of goods that were imported on or after the entry into force date of CUSMA.
Text of the Canada-United States-Mexico Agreement (CUSMA):
APPENDIX – TEXTILE APPAREL GOODS
- Fiber – fiber forward
- Yarn – fiber forward
- Knit fabric – fiber forward
- Woven fabric – yarn forward
- Apparel – yarn forward
- Textile Articles – yarn forward
VISIBLE LINING RULE – ELIMINATED
Under NAFTA the visible lining for certain coats, jackets, suits and skirts have to be knit or woven within the NAFTA region. This will no longer be a requirement under CUSMA.
SEWING THREAD – NEW REQUIREMENT
HS headings 52.04, 54.01, 54.02, 55.08
- Must be formed and finished within the CUSMA region
- Comes into effect 12 months after entry into force
POCKET BAG FABRIC – NEW REQUIREMENT
‘Yarn forward’ requirement. i.e. The yarn and fabric must be formed in the CUSMA region
- Effective 18 months after entry into force for all other apparel
- Effective 30 months after entry into force for blue denim apparel
NARROW ELASTIC – NEW REQUIREMENT
Woven fabrics containing elastomeric yarns (HS 5806.20) or knit fabrics containing elastomeric yarns (heading 60.02) used in apparel must be knit or woven within the CUSMA territory.
- The yarn itself can be of any origin
- Comes into effect 18 months after entry into force
VISIBLY COATED FABRIC IN TEXTILE ARTICLES– NEW REQUIREMENT
Goods of Chapter 63, except HS 63.05, 6306.12, 6306.22 and 6307.90 (except surgical drapes and national flags)
- Goods in this rule containing any amount of visibly coated fabrics of heading 59.03
- Fabrics must be formed and finished within the Parties (all layers)
- Comes into effect 18 months (January 1, 2022) after entry into force
RAYON FIBRE & FILAMENT – NEW FLEXIBILITY
- Rayon filament other than lyocell or acetate, of headings 54.03 or 54.05 can be of any origin
- Rayon fiber other than lyocell or acetate, of headings 55.02, 55.04, 55.07 can be of any origin
- Effective immediately upon entry into force
DE MINIMIS – CH 61-63
- 7% by weight for elastomeric yarn in the component that determines tariff classification (% is relative to the total weight of good)
- 10% by weight of other fiber/yarn in the component that determines tariff classification (% is relative to the total weight of the component that determines classification)
SETS – GRI 3
New limitation on foreign content contained in goods imported as sets put up for retail sale
- No more than 10% of the value of the set can be from foreign content
There were no changes made to the list and there are no expedited procedures to add or remove items
TARIFF PREFERENCE LEVELS (TPL)
TPLs are maintained under CUSMA, however the quota levels have changed according to the following charts:
Preferential Tariff Treatment for Non-Originating Apparel
1. Imports into Canada :
From United States
2. Imports into Mexico :
From United States
3. Imports into United States :
Tariff Preference Levels for Non-Originating Cotton or
Man-Made Fiber Fabrics and Made-Up Goods
Imports into Canada
7 000 000 SME
From United States
15 000 000 SME
Imports into Mexico
7 000 000 SME
From United States
1 400 000 SME
Imports into United States
71 765 252 SME
22 800 000 SME
Under the CUSMA, if an originating good contains non-originating material found in the chapter rules (sewing thread, pocket bag fabric, narrow elastic), it would qualify under TPL. Under the NAFTA rules, the same originating good would have been NAFTA eligible, not TPL.
MERCHANDISE PROCESSING FEES (US IMPORTS ONLY)
CUSMA eliminates the MPF on all TPL goods entering the US
The information provided in this FAQ document and its appendices are considered to be true and correct at time of publication. Changes to Canada’s administrative policies after the time of publication may occur.