Download pdf - Q&A SESSION A NEW NAFTA, USMCA...NAFTA • The U.S.-Mexico-Canada Agreement (USMCA) • Signed on November 30, 2018 • Trump considers pulling out of NAFTA to speed things up •

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


1984

1988

2003

2014

2015

2018

Freight Forwarding &Mexico Customs Brokerage

Customs & Supply Chain Consulting


ADAM HILL– LCB, CCS, CESPRESIDENT, COO

SCARBROUGH GROUP OF COMPANIES

[email protected]

T: 816.584.2409

TIFFANY MELVINPRESIDENT

NORTH AMERICAN STRATEGY FOR [email protected]

DANIEL UJCZO

INTERNATIONAL TRADE & CUSTOMS ATTORNEY

DICKINSON WRIGHT

[email protected]

PHONE: 614.744.2579

SPEAKERS

mailto:[email protected]



Source: Business Insiderhttp://www.businessinsider.com/state-trading-partners-map-2016-10

Biggest Import Trading Partners


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

Source: Business Insiderhttp://www.businessinsider.com/state-trading-partners-map-2016-10

Biggest Export Trading Partners


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.


Improves the North American supply chain, logisticssystems and transportation network to be the mostcompetitive on earth;

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

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

Promotes North American energy independence, securityand opportunity.

www.nasconetwork.com

Who is NASCO?

NAFTA


• 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


• 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.


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


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

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

POLICY IN THE USMCA


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

PRIORITY #2REBALANCE TRADE WITH MEXICO

THE AUTOMOTIVE SECTOR

Free trade for autos complying with the

rule of origin

1Protection for autos NOT complying with

the rule of origin

2 3

Insurance vs 232


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. Motors2. Chassis & body 3. Transmission boxes 4. Shafts 5. Suspensions 6. Gear systems7. Batteries

Core Auto Parts


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


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


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.


USMCA CHANGES


• 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


• 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


• 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


• 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


• 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 2019-2020

PREDICT– Don’t do it. – See # 1.

CONCLUSION


A NEW NAFTA, USMCA


THE UNITED STATES - MEXICO - CANADA AGREEMENT

QUESTIONS

[email protected]


ADAM HILL– LCB, CCS, CESPRESIDENT, COO

SCARBROUGH GROUP OF COMPANIES

[email protected]

T: 816.584.2409

TIFFANY MELVINPRESIDENT

NORTH AMERICAN STRATEGY FOR [email protected]

DANIEL UJCZO

INTERNATIONAL TRADE & CUSTOMS ATTORNEY

DICKINSON WRIGHT

[email protected]

PHONE: 614.744.2579

CONTACT INFORMATION


