Legal changes required to implement USMCA
Date: Friday, February 1, 2019
Source: American Shipper
The Office of the USTR submitted a description of changes to existing U.S. laws required to bring the U.S. into compliance.
USMCA provides preferential tariff treatment for certain textile and apparel goods not originating in North America, up to quantity thresholds outlined in the TPLs.
For example, the agreement provides for the U.S. to annually import 40 million square meters equivalent (SME) cotton or manmade fiber from Canada, and 45 million SME cotton or manmade fiber from Mexico, tariff-free.
USMCA continued the MPF waiver on originating goods, but the Consolidated Omnibus Reconciliation Act of 1985 would need to be amended to provide for a new MPF waiver on TPL goods.
In addition to waiving the MPF on TPL goods, USMCA would allow importers to certify North American origin to receive tariff preferences, whereas NAFTA generally requires that exporters file documentation to validate production location for tariff treatment purposes.
Implementing the new provision would require changes to the Tariff Act of 1930, as amended, to allow importers at least one year from the date of importation to claim preferential tariff treatment under the USMCA and to exempt importers from penalties for an invalid origination claim as long as the importer voluntarily corrects the claim and pays and customs duty owed upon becoming aware of the issue and before the government’s discovery of the error.
Other required changes to the Tariff Act include an imposition of penalties on U.S. producers and exporters making false origination certifications, as well as a requirement for anyone issuing certifications to keep copies of such certifications and supporting documents for at least five years and to provide them to customs officials upon request.
Further, USMCA implementing legislation must provide for specific verification procedures for textiles and apparel trade and actions to address textile-related customs offenses, as well as changes requiring inputs such as sewing thread, pocketing, narrow elastic bands and coated fabric be made in North America, according to the Office of the U.S. Trade Representative’s description of necessary legal changes.
The USTR document also states that after consultation with the Senate Finance and House Ways and Means committees, the Trump administration may include changes to amend section 901 of the Trade Facilitation and Trade Enforcement Act to implement USMCA express shipment provisions.
USMCA Article 7.8 includes language for expedited customs procedures related to express shipments, including a provision providing for information required to release an express shipment to be submitted and processed before arrival; a provision to allow a single electronic submission of information, such as a manifest, covering all goods contained in an express shipment; and a provision to provide for shipments to be released immediately after arrival under normal circumstances.
“The implementing bill will provide for processes to allow appropriate flexibilities to support a smooth transition from NAFTA to the USMCA and ensure enforcement with the assistance of relevant U.S. agencies,” reads the description of necessary legal changes.
The description also states that the Trump administration, in consultation with congressional trade committees, could consider other potential changes to U.S. law that may be “strictly necessary or appropriate to provide for the fullest implementation and enforcement of the USMCA.”
A few more TPA timelines must be completed before the administration can submit USMCA implementing legislation to Congress.
The administration must submit a copy of the pact’s final legal text and a draft statement of administrative action describing the administration’s interpretation and application of USMCA for purposes of domestic law and international obligations at least 30 days before submission of a draft implementation bill and other final documentation required by TPA.
Then submissions of the draft implementing bill, final statement of administrative action and other supporting information would allow Congress to consider final implementation legislation.
The International Trade Commission alsois expected to submit a report on USMCA’s likely economic impacts before Congress considers any legislation, though the administration is not required to wait for submission of the report before delivering implementing legislation.
Prior to the 35-day government shutdown, the deadline for the ITC’s submission had been March 15.
But an ITC spokesperson told American Shipper in an email this week that all ITC investigations that were active during the shutdown are being tolled by 35 calendar days, which would put the new deadline at April 19.
Outside of all these statutory timelines, USMCA implementing legislation will face a Democrat-controlled House whose leader, Speaker Nancy Pelosi, D-Calif., has indicated that her caucus will scrutinize the implementing legislation to ensure the enforceability of provisions such as labor before a vote is held.
Reopening USMCA negotiations to address any lingering concern would be complicated and could risk the unraveling of other aspects of the agreement, said Kenneth Smith Ramos, who led Mexico’s USMCA negotiations for the administration of former President Enrique Pena Nieto, whose term expired Nov. 30.
Canada and Mexico pushed alongside the U.S. for USMCA’s labor chapter, which reflects reforms of Mexico’s labor laws over the last 25 years, Ramos said during a Washington International Trade Association (WITA) conference Tuesday.
“We had heard … the Democrats would be concerned perhaps with the labor chapter and trying to strengthen provisions there,” Ramos said. “This is the most advanced labor chapter there is in any FTA. If the Democrats had pushed for the exact same text a few years back, some people would’ve said, ‘Wow, it’s in your wildest dreams that you’re going to get something like that.’”
Pelosi's office didn't respond to a request for comment.