Q&A SESSION A NEW NAFTA, USMCA ... NAFTA ¢â‚¬¢ The U.S.-Mexico-Canada Agreement (USMCA) ¢â‚¬¢ Signed on

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  • Q&A SESSION A NEW NAFTA, USMCA

    www.scarbrough-intl.com

    THE UNITED STATES - MEXICO - CANADA AGREEMENT

  • THE SCARBROUGH GROUP

    Freight Forwarding & U.S. Customs Brokerage

    Regional Asset-Based Trucks

    NVOCC Operations & Consolidation Services

    North American Truck Brokerage

    www.scarbrough-intl.com

    1984

    1988

    2003

    2014

    2015

    2018

    Freight Forwarding & Mexico Customs Brokerage

    Customs & Supply Chain Consulting

  • www.scarbrough-intl.com

    ADAM HILL– LCB, CCS, CES PRESIDENT, COO

    SCARBROUGH GROUP OF COMPANIES AHILL@SCARBROUGH-INTL.COM

    T: 816.584.2409

    TIFFANY MELVIN PRESIDENT

    NORTH AMERICAN STRATEGY FOR COMPETITIVENESS TIFFANY@NASCONETWORK.COM

    DANIEL UJCZO INTERNATIONAL TRADE & CUSTOMS ATTORNEY

    DICKINSON WRIGHT DUJCZO@DICKINSONWRIGHT.COM

    PHONE: 614.744.2579

    SPEAKERS

    mailto:ahill@Scarbrough-intl.com mailto:tiffany@nasconetwork.com mailto:Dujczo@DickinsonWright.com

  • Source: Business Insider http://www.businessinsider.com/state-trading-partners-map-2016-10

    Biggest Import Trading Partners

    www.scarbrough-intl.com

    http://www.businessinsider.com/state-trading-partners-map-2016-10

  • Source: Business Insider http://www.businessinsider.com/state-trading-partners-map-2016-10

    Biggest Export Trading Partners

    www.scarbrough-intl.com

    http://www.businessinsider.com/state-trading-partners-map-2016-10

  • North American Trade Agreements Work

    DID YOU KNOW?

    Auto parts travel across the border 8 times before completing a single vehicle

    THINK ABOUT IT THIS WAY

    Cars are “Citizens” from North America. There are no Mexican cars, there are no American cars,

    and there are no Canadian cars.

    There are “North American” cars.

    www.scarbrough-intl.com

  • Improves the North American supply chain, logistics systems and transportation network to be the most competitive on earth;

    Eliminates unnecessary non-tariff trade barriers and reduce cross-border transaction costs;

    Strengthens the quality of the North American workforce to become the best in the global marketplace; and

    Promotes North American energy independence, security and opportunity.

    www.nasconetwork.com

    Who is NASCO?

  • NAFTA

    www.scarbrough-intl.com

    • The U.S.-Mexico-Canada Agreement (USMCA) • Signed on November 30, 2018 • Trump considers pulling out of NAFTA to speed things up • All countries will review USMCA in 6 years to see if they agree to renew

    “[The USMCA] will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion

    people who call North America home,”

    ~ US Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland in a joint statement.

  • USMCA ENFORCEMENT TIMELINE

    www.scarbrough-intl.com • Timeline Source: https://fas.org/sgp/crs/misc/RL33743.pdf

    USMCA was Signed on November 30, 2018.

    TRADE PROMOTION AUTHORITY (TPA) PROCEDURES

  • POLITICS IN THE USMCA

    www.scarbrough-intl.com

    • April 19, 2019 International Trade Commission Report Due

    – Mexico labor reforms passage will also be a starting gate.

    • Labor • Pharmaceuticals • Environment • Dispute Resolution • Democrats running for Congress • Conventional wisdom is need to get 40-50 Dems to “yes”. Likely higher. • Needs to be done by August 2019 or lost in 2020 politics.

  • www.scarbrough-intl.com

    CANADA • will be ready to table legislation in mid

    March for May passage • Month of “wiggle room in Canada” • Problem is Canada’s election in October. • Parliament rises is June 2019

    MEXICO • no concerns, but who knows

    POLITICS IN THE USMCA

  • POLICY IN THE USMCA

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    • Auto ROO with metals and components • Dispute Resolution (Chapters 20 & 19) • Sunset Clause • Government Procurement • Non-market economies, SOEs, currency

    PRIORITY #1 CLOSE THE BACK DOOR TO CHINA THROUGH MEXICO AND CANADA

  • POLICY IN THE USMCA

    www.scarbrough-intl.com

    • Auto ROO with labor value content • Investment (Chapter 11) • Labor • Agriculture • Textiles

    PRIORITY #2 REBALANCE TRADE WITH MEXICO

  • THE AUTOMOTIVE SECTOR

    Free trade for autos complying with the

    rule of origin

    1 Protection for autos NOT complying with

    the rule of origin

    2 3

    Insurance vs 232

    www.scarbrough-intl.com

  • AUTOMOTIVE SECTOR: RULES OF ORIGIN

    • RVC was increased from 62.5% to 75% (new methodology)

    • 40% labor value content ($16/hr) – 10%: credits for R&D , IT – 5%: credits for assembly capacity:

    » motors (100 thousand units) » transmissions (100 thousand units) » batteries (25 thousand units)

    – 25%: labor force • 70% steel & aluminum from North America. • Core Auto parts: 75% RVC in average (value) • 5 year transition

    1. Motors 2. Chassis & body 3. Transmission boxes 4. Shafts 5. Suspensions 6. Gear systems 7. Batteries

    Core Auto Parts

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  • RULES OF ORIGIN FOR AUTO PARTS

    • NAFTA – largely 60%-62.5%

    • USMCA: – Core parts (75%) – Principal parts (70%)

    • Tires, tires, glass, compressors, brakes, radiators, mufflers, and seats

    – Complementary parts (65%) • pipes, valves, windshield wipers, and lamps

    www.scarbrough-intl.com

  • TREATMENT FOR NON-ORIGINATING CARS

    • For cars that don't comply with the new rule of origin, NAFTA 2018: - Consolidates MFN duty the U.S. currently applies: 2.5% - Avoids impact from U.S. tariff strategy shifts vs. rest of the world

    www.scarbrough-intl.com

  • AUTOMOTIVE SECTOR: INSURANCE VS. 232

    Exception for Mexican & Canadian autos & auto parts in case the U.S. decides to implement 232 measures vs. cars.

    – Takes into account current export capacity and plants to launch production.

    – Room for growth • Autos: 2.4 million units. • Auto parts: 108 billion dollars.

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  • USMCA CHANGES

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    • Dairy Farmers – U.S. dairy farmers gain better access to Canada’s market share – Places restrictions on amount of dairy products Canada can export – Eliminates Canada’s pricing “strategy” for Class 7 dairy products (powders, proteins,

    formulas) – helps improve U.S. sales of these products into U.S. largest trading partner

    • Drug Companies – U.S. drug companies can sell in Canada for 10 years before facing generic competition

    (original NAFTA = 8 years)

    • 25% Tariff on Canadian Steel – Stays put – Negotiations to lift the tariff are ongoing

  • USMCA CHANGES

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    • Chapter 19 Stays – Allows one country to challenge another country in USMCA’s dumping regulations

    • Intellectual Property Rights Protection

    • Modernization – Innovative Customs & Trade Facilitation – Adds currency manipulation & state-owned enterprise chapters

    • Immigration – Original NAFTA’s temporary entry system is largely preserved

  • USMCA CHANGES

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    • Sunset Clause – Set the grounds for a review mechanism with a reasonable planning timeframe – 16 years agreement lifespan, systematically extendable: After six years of the entry into force, each party must express its intention to renew the agreement

    • In such case, the agreement will be renewed for an additional 16 years period • If a party does not express intention to renew, a joint-review every year until

    agreement is renewed. • If no satisfaction after 10-years, NAFTA would be terminated

    • Currency Manipulation & Monetary Policy

  • USMCA CHANGES

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    • Digital Trade – Similar to TPP – Better than TPP: blanket ban on data localization requirements that does not provide an

    exception for financial services firms.

    • De Minimis – USMCA will raise the threshold at which imports from Canada and Mexico will be subject

    to customs duties, a priority for many in the U.S. business community. – For Canada, the de minimis level will be raised from C$20 to C$40 for taxes and allow

    duty-free shipments of up to C$150, from C$20. – Mexico will allow duty-free shipments of up to $117, from $50. The U.S. de minimis

    threshold is $800. – This may change.

  • USMCA CHANGES

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    • Chemicals – New ROO focus on where the chemical mixed/produced.

    • Customs and Trade Facilitation – Reduced need for Certificates of Origin – Focus on Technology – No preferred brokers at ports of entry – Transparency in Customs audits

  • PREPARE – New USMCA has opportunities and

    challenges – Uniform Regulations Process

    PRACTICAL – Avoid the noise – NAFTA or USMCA will be in place

    throughout 2