The USMCA preferences will be weighed against other free-trade trade arrangements (FTAs) as manufacturers and importers model supply chain scenarios. Some will find opportunities that tilt toward sourcing or producing in North America or the US, others won’t. FTAs have a lot of variation between them in terms of coverage and ambition. When businesses look into these in detail, they’ll often find that there are already preferences that may suit. At a minimum, many more are equipped to do so after a year spent exploring the world of duty drawback, bonded warehouses, exemption processes and import substitutes to mitigate tariffs on China imports.
Be prepared to verify and validate the source of your product(s). Manufacturers rely on their suppliers to understand USMCA requirements and provide them accurate information. Depending on purchasing or sales teams who lack technical expertise to complete FTA origin certifications may not be adequate as the USMCA rules can differ from NAFTA, which in turn can differ from other trade agreements like the US-Korea pact. Eligibility verification procedures conducted by Customs authorities will be different than many suppliers are used to with NAFTA. Ultimately, meeting the rules is where the opportunities lie with USMCA and other agreements.
Manufacturers and importers
Survey your suppliers for certification under USMCA and other trade agreements. Explore your options for sourcing and understand the exposures in bill of material (BOM) costs. Indirect exposures, e.g. North American suppliers using parts from China, create additional complexity as they flow through the supply chain. Do the legwork to make sure that the content recipe you’re using is going to satisfy USMCA requirements and be eligible for benefits. Conversely, if receiving goods that qualify for NAFTA, make sure that the goods you’re currently receiving into Canada, the US or Mexico maintain their qualification. Also, pay attention to historical agreements. Part of the USMCA transition will involve updating purchase agreements that currently reference NAFTA as a part of holding vendors responsible.
Business unit and functional leaders
Approach trade as a cross-functional business issue, with an understanding of trade-offs and interdependencies. Don’t apply old trade impact analyses at a time in which costs of importing from outside the region are in a state of flux. Many imports - not just those from China - are subject to tariffs, including those whose applicable rates of assessment are not stable. Many are subject to increase, and additional ones are under consideration. Trade automation solutions and tariff impact assessment and modeling tools can help to make informed strategic sourcing decisions as you evaluate USMCA and other FTA opportunities.
Prepare for tougher enforcement ahead. Trade compliance audits tend to step up after a new trade agreement. There is reason to expect so with USMCA, as the agreement specifically creates opportunities for US border authorities to collaborate with Canadian and Mexican Customs. For example, authorities from each of the countries can audit companies within the region, meaning they can go on site and review how the product is qualifying. Increased automation at the border has made trade data more visible to traders as well as governments. As a result, trade audits and sampling methods are improving. This puts a premium on providing accurate content data. For these reasons, what may not have been expected to cause much change can be the trigger for moves that have been building up over time