December 18, 2019
USMCA: Amendment and Key Changes
Overview
secretariat for the agreement, as an intermediate step to
On December 10, 2019, the United States, Canada, and
resolve disputes.
Mexico agreed to a protocol of amendment to the proposed
U.S.-Mexico-Canada Agreement (USMCA). The
Labor
amendments include modifications to key elements of the
USMCA revised NAFTA by adding more enforceable labor
original text in regard to dispute settlement, labor and
provisions and an annex with Mexican commitments to
environmental provisions, intellectual property rights (IPR),
reform its labor laws and practices. Numerous policymakers
and steel and aluminum requirements in the rules of origin
remained concerned about enforcement and the full
for autos. On December 13, the Trump Administration
implementation of Mexican labor reforms. Amendments to
submitted to Congress the proposed USMCA implementing
USMCA include the following:
legislation, which also reflects the recent amendments. On
the same day, the United States-Mexico-Canada
“In a Manner Affecting Trade and Investment.”
Implementation Act (H.R. 5430) was introduced in the
Original provisions required a party to prove a violation
House of Representatives. On December 16, the bill was
regarding worker rights occurred “in a manner affecting
introduced in the Senate (S. 3052).
trade and investment.” The amendment shifts the burden
of proof by stating that a panel shall presume a violation
U.S. Trade Representative and some Members of Congress
affects trade and investment unless otherwise
negotiated proposed changes to the USMCA. USTR then
demonstrated.
negotiated the amendments with USMCA parties. Mexico
was the first country to ratify the agreement in June 2019
Forced Labor. Text on forced labor commitments was
and approve the amendments by a 107-1 vote in the
changed by removing language that a party could adopt
Mexican Senate on December 12. Canada has not ratified
measures it “considered appropriate” to stop the
the agreement.
importation of goods produced by forced labor. The
Congress is expected to consider USMCA under TPA rules,
modified language is intended to close what some saw
which is the time-limited authority that Congress uses to
as a possible loophole.
consider implementing legislation for trade agreements
under expedited procedures, provided that they meet certain
Violence Against Workers. Language that a party
statutory requirements. Under TPA, Congress has a
would have to prove that a violation was in a “sustained
maximum of 90 legislative days to vote on the agreement.
or recurring” pattern was removed. In addition, the
Dispute Settlement
amended agreement shifts the burden of proof to the
responding party by stating that a panel shall presume
Some Members of Congress criticized the 1994 North
that a failure to comply affects trade or investment
American Free Trade Agreement (NAFTA), and
unless the responding party demonstrates otherwise.
subsequent USMCA, for an ineffective dispute settlement
process. The NAFTA mechanism was used for three cases
Rapid Response Mechanism. A new “rapid-response”
in its 25-year history, the last in 2000. The amended
mechanism would provide for an independent panel
USMCA includes:
investigation at “covered facilities,” as opposed to a
government inspection, for suspected denial of the right
Panel Blocking. The revisions prevents the ability of a
of free association and collective bargaining. For the
party to block establishment of a dispute settlement
United States, covered facilities would be limited to
panel by ensuring the formation of a panel in cases
those that have previously been proven to have violated
where a party refuses to participate in the process of
U.S. law. For Mexico, a claim can be brought only with
selecting panelists.
respect to an alleged worker rights violation under
Mexico’s labor reform commitment
s under USMCA.
Rules of Procedure. The amendment revises the
Violations could result in a suspension of preferential
guidelines for the Rules of Procedure for panels to give
tariffs or potential penalties on goods manufactured at or
the parties the right to submit testimony, the right to test
services provided by the covered facility.
the veracity of submitted testimony, the right to submit
anonymous testimony, and for the panel to accept
Mexico’s Labor Reform Monitoring. USMCA
agreed stipulations prior to a hearing, among other
implementing legislation creates a new interagency
issues.
committee and reporting requirements to Congress on
Mexico’s implementation of labor reforms.
Also
Free Trade Commission. The revised language dispute
establishes key benchmarks for Mexico’s
process by eliminating the consultative role of the
implementation processes and for labor attachés based
USMCA Free Trade Commission, which acts as a
in Mexico.
https://crsreports.congress.gov
USMCA: Amendment and Key Changes
Environmental Provisions
The pharmaceutical industry and other observers contend
To address some congressional concerns about the
that patent and regulatory exclusivity protect U.S. creativity
enforceability of environmental provisions, the amendments
and innovation.
to USMCA revised the environment chapter to expand the
Regulatory Exclusivity
coverage, enforcement, and monitoring functions of the
agreement. Some of the amendments to USMCA are
Biologics. The revised agreement removes a 10-year
analogous to those in the labor chapter.
period of data exclusivity, under which a biosimilar
“In a Manner Affecting Trade and Investment.”
cannot use clinical trials generated by the reference
The
(branded) biologic to obtain marketing approval. The
revised text asserts the presumption that an
United States currently provides a 12-year period of
environmental dispute affects trade and investment
exclusivity, Canada eight years and Mexico five years.
unless a respondent party can proved otherwise.
Multilateral Environmental Agreements (MEAs).
Exclusivity Period. A three-year exclusivity period was
The revisions require each party to adopt, maintain, and
removed which would prevent a generic manufacturer
implement laws, regulations and other measures to
from using clinical data submitted in connection with an
fulfill the following MEAs to which they are a party:
application for marketing approval for new uses of a
previously-approved product.
Convention on International Trade in Endangered
Species of Wild Flora and Fauna (CITES)
Regulatory Review. The revised text clarifies that the
Montreal Protocol on Substances that Deplete the
regulatory review exception allows a person other than
Ozone Layer
the rights-holder to use, sell, or import a product
International Convention for the Prevention of
covered by an existing patent to generate information
Pollution from Ship (MARPOL)
used in the marketing approval process.
Ramsar Convention on Wetlands
Convention on Antarctic Marine Living Resources
Patents
International Whaling Convention
Inter-American Tropical Tuna Convention
Patent Availability. The revised text precludes the
availability of patents for new uses, methods, or
The USMCA, as originally signed, only made explicit
processes of an existing product.
reference to CITES, MARPOL, and the Montreal
Protocol.
Patent Term Extension. The revisions limit the
circumstance when an adjustment is available to extend
Interagency Monitoring Committee. USMCA changes
a patent term for delays in the market approval process.
create in the implementing legislation an Interagency
Patent Linkages. The changes modify the patent
Environment Committee for Monitoring and
linkage provision to provide for “effective rewards,”
Enforcement analogous to the labor chapter, and
such as a period of market exclusivity, for a successful
establishes environment-focused attachés in Mexico
challenge to the validity or a finding of non-
City to monitor compliance with the agreement.
infringement of a patent.
Border Environment Cooperation. The implementing
De Minimis
legislation authorizes for grants under the U.S.-Mexico
USMCA raised the De Minimis customs threshold for duty-
Border Water Infrastructure Program, the Trade
free treatment to $117 for Canada and Mexico. A footnote
Enforcement Trust Fund and a recapitalization of the
that would have allowed the United States to lower its $800
North American Development Bank (NADB).
threshold to maintain reciprocity was dropped.
Motor Vehicle Rules of Origin
Outlook
To address U.S. concerns about North American vehicle
Numerous policymakers welcomed the changes to the
production, the amendments further tightened the motor
proposed USMCA, stating that they include stronger and
vehicle rules of origin.
more enforceable labor and environmental provisions and
that the removal of data exclusivity for biologic drugs will
Steel Production. USMCA added a requirement that
foster generic competition and lower prices. Other
70% of a motor vehicle’s steel and aluminum must
policymakers are concerned about the rolling back of
originate in North America to receive duty-free benefits.
previous trade liberalization measures affecting the motor
The revisions states that steel must be melted and
vehicle industry and in regards to IPR protection.
poured within North America to be considered as
For more information, see CRS In Focus IF10997,
originating, beginning at year seven of the agreement.
Proposed U.S.-Mexico-Canada (USMCA) Trade
For aluminum, the parties shall consider appropriate
Agreement, by Ian F. Fergusson and M. Angeles Villarreal,
requirements at year ten.
and CRS In Focus IF10038, Trade Promotion Authority
Intellectual Property Rights
(TPA), by Ian F. Fergusson.
The amendment changed some of the patent and regulatory
M. Angeles Villarreal, Specialist in International Trade
exclusivity provisions of USMCA. Some observers criticize
and Finance
these provisions, long included in previous U.S. free trade
agreements (FTAs), as contributing to the rise of drug costs.
Ian F. Fergusson, Specialist in International Trade and
Finance
https://crsreports.congress.gov
USMCA: Amendment and Key Changes
IF11391
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https://crsreports.congress.gov | IF11391 · VERSION 1 · NEW