Leibowitz on Trade: USMCA to Take Effect July 1

Trade attorney and Steel Market Update contributor Lewis Leibowitz offers the following update on events in Washington:

The USMCA will take effect on July 1 of this year, despite calls to push out its implementation due to the economic crisis from the coronavirus. USMCA repeals and replaces the North American Free Trade Agreement, which took effect in 1994. USMCA continues duty-free trade between Canada, Mexico and the United States. It is similar to NAFTA in many ways. Among the more significant changes are the inclusion of e-commerce and digital trade, which did not really exist in 1994, and the automotive rules of origin, requiring a higher “regional value content” for vehicles to get duty-free entry into the three countries. The old requirement was 62.5 percent of value, and the new standard is 75 percent. The products that count toward the regional value content changed, and the new standard will be phased in over four years. In addition, labor value will be counted toward regional value content. By the fifth year of the agreement, 40 percent of the labor value of passenger cars and 45 percent of trucks must use labor earning at least $16 per hour.