USMCA Free Trade Agreement

January 29, 2020 President Trump signed the United States-Mexico-Canada Agreement (USMCA), a trilateral trade agreement with Mexico and Canada, following its approval by the U.S. House on December 19, 2019 and its approval by the U.S. Senate on January 16, 2020.

USMCA is a comprehensive agreement that largely keeps much of the original NAFTA while pulling in a number of new provisions from the proposed Trans Pacific Partnership Agreement that was negotiated among 12 parties, including the United States, but withdrawn at the beginning of the Trump Administration.  The TPP provisions in areas such as digital trade, regulatory reform and intellectual property are positive provisions that update the NAFTA, which was negotiated more than 23 years ago.

To view the full text of the agreement between the United States, Mexico and Canada signed on November 30, 2018, click here. The text is divided into more than 30 chapters (on such diverse topics as trade remedies, rules of origin, customs, government procurement, and market access) as well as about half a dozen annexes.

USMCA Impact on Trade in Natural Products

  • Whey Powder: Chapter 4 in the new USMCA included provisions on dairy ingredients like whey. Under the first year of the agreement, the quota for US whey powder will increase to 689 MT; in year two, 1,378; in year three, 2,068; the fourth 2,757; then 3,446 in the fifth year and 4,135 MT in the sixth year. Import quotas on certain US whey powders will be eliminated by year 10.
  • Dairy and Products of Natural Milk Constituents:  Under the first year of the agreement, the quota for imports of US natural milk constituents will increase to 460 MT; in year two, 920; in year three, 1,380; the fourth 1,840; then 2,300 in the fifth year and 2,760 MT in the sixth year.
  • De Minimis for customs duties purposes:  the agreement includes a provision that establishes an increased de minimis exemption from customs duties among the three countries ($100 for Mexico; $150 for Canada and $800 for US).   For example, as enforced by US customs, up to $800 per day to one customer can enter duty free (and similarly for US export to Mexico at $100 and Canada at $150) can be used for e-commerce fulfillment.
  • US food industry sees improved access: US dairy, poultry and pork industries see incremental improved access for exports to Canada with expansion of quotas and reduced tariffs.
  • US cosmetics industry pleased with regulatory annex:  The USMCA includes a high standard Cosmetics Annex, which commits all three countries to good regulatory practices for the sector. The US-Canada Appendix to the Annex uniquely recognizes the importance of regulatory alignment for OTC-like products and will have a significant commercial benefit for cosmetics trade.
  • Rules of origin:  Outside the auto sector, the USMCA includes positive changes to rules of origin making them in some cases more flexible. On the rules of origin issues for 2106.90 (supplements manufacturing), there is increased de minimis from 7% to 10% making it easier to use some imports (from outside USMCA countries) while maintaining USMCA benefits.
  • Intellectual Property:  The USMCA strengthens intellectual property protections and is viewed as positive by the US innovative sectors.  A new intellectual property chapter largely resembles the provisions in the Trans-Pacific Partnership trade agreement that the U.S. abandoned in early 2016. The new provisions strengthen key copyright and patent protections, including giving biologic drugs ten years of data exclusivity protection (Canada’s domestic law currently only protects biologics for eight years), and lengthening the protection on copyright to the term of the author’s life plus 70 years (Canada’s copyright law is currently only the life of the author plus 50 years). The Chapter also strengthens provisions for protecting trademarks, such as well-known marks.  On trade secrets, the strengthened provisions are based on the U.S.-passed Defend Trade Secrets Act on civil and criminal procedures to tackle trade secret theft. The agreement also strengthens requirements for government officials to protect confidential business information collected during regulatory practices.