Updated December 20, 2019
USMCA: Amendment and Key Changes
Overview
Free Trade Commission. The revised language dispute
On December 10, 2019, the United States, Canada, and
process by eliminating the consultative role of the
Mexico agreed to a protocol of amendment to the proposed
USMCA Free Trade Commission, which acts as a
U.S.-Mexico-Canada Agreement (USMCA). The
secretariat for the agreement, as an intermediate step to
amendments include modifications to key elements of the
resolve disputes.
original text in regard to dispute settlement, labor and
environmental provisions, intellectual property rights (IPR),
Labor
and steel and aluminum requirements in the rules of origin
USMCA revised NAFTA by adding more enforceable labor
for autos. On December 13, the Trump Administration
provisions and an annex with Mexican commitments to
submitted to Congress the proposed USMCA implementing
reform its labor laws and practices. Numerous policymakers
legislation, which also reflects the recent amendments. On
remained concerned about enforcement and the full
the same day, the United States-Mexico-Canada
implementation of Mexican labor reforms. Amendments to
Implementation Act (H.R. 5430) was introduced in the
USMCA include the following:
House of Representatives. On December 16, the companion
bill was introduced in the Senate (S. 3052). The House
“In a Manner Affecting Trade and Investment.”
Ways and Means Committee approved the legislation on
Original provisions required a party to prove a violation
December 17, 2020 and the full House approved it on
regarding worker rights occurred “in a manner affecting
December 19 by a vote of 385-41.
trade and investment.” The amendment shifts the burden
of proof by stating that a panel shall presume a violation
U.S. Trade Representative (USTR) and some Members of
affects trade and investment unless otherwise
Congress negotiated proposed changes to the USMCA.
demonstrated.
USTR then negotiated the amendments with USMCA
parties. Mexico was the first country to ratify the agreement
Forced Labor. Text on forced labor commitments was
in June 2019 and approve the amendments by a 107-1 vote
changed by removing language that a party could adopt
in the Mexican Senate on December 12. Canada’s
measures it “considered appropriate” to stop the
Parliament is expected to ratify it in early 2020.
importation of goods produced by forced labor. The
modified language is intended to close what some saw
Congress is considering USMCA under TPA rules, which is
the time-limited authority that Congress uses to consider
as a possible loophole.
implementing legislation for trade agreements under
Violence Against Workers. Language that a party
expedited procedures, provided that they meet certain
would have to prove that a violation was in a “sustained
statutory requirements. Under TPA, Congress has a
or recurring” pattern was removed. In addition, the
maximum of 90 legislative days to vote on the agreement.
amended agreement shifts the burden of proof to the
Dispute Settlement
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
Rapid Response Mechanism. A new “rapid-response”
process. The NAFTA mechanism was used for 3 cases in its
mechanism would provide for an independent panel
25-year history, the last in 2000. The amended USMCA
investigation at “covered facilities,” as opposed to a
includes the following:
government inspection, for suspected denial of the right
of free association and collective bargaining. For the
Panel Blocking. The revisions prevents the ability of a
United States, covered facilities would be limited to
party to block establishment of a dispute settlement
those that have previously been proven to have violated
panel by ensuring the formation of a panel in cases
U.S. law. For Mexico, a claim can be brought only with
where a party refuses to participate in the process of
respect to an alleged worker rights violation under
selecting panelists.
Mexico’s labor reform commitments under USMCA.
Violations could result in a suspension of preferential
Rules of Procedure. The amendment revises the
tariffs or potential penalties on goods manufactured at or
guidelines for the Rules of Procedure for panels to give
services provided by the covered facility.
the parties the right to submit testimony, the right to test
the veracity of submitted testimony, the right to submit
Mexico’s Labor Reform Monitoring. USMCA
anonymous testimony, and for the panel to accept
implementing legislation creates a new interagency
agreed stipulations prior to a hearing, among other
committee and reporting requirements to Congress on
issues.
Mexico’s implementation of labor reforms. Also
establishes key benchmarks for Mexico’s
https://crsreports.congress.gov
USMCA: Amendment and Key Changes
implementation processes and for labor attachés based
these provisions, long included in previous U.S. free trade
in Mexico.
agreements (FTAs), as contributing to the rise of drug costs.
The pharmaceutical industry and other observers contend
Environmental Provisions
that patent and regulatory exclusivity protect U.S. creativity
To address some congressional concerns about the
and innovation.
enforceability of environmental provisions, the amendments
Regulatory Exclusivity
to USMCA revised the environment chapter to expand the
coverage, enforcement, and monitoring functions of the
Biologics. The revised agreement removes a 10-year
agreement. Some of the amendments to USMCA are
period of data exclusivity, under which a biosimilar
analogous to those in the labor chapter.
cannot use clinical trials generated by the reference
“In a Manner Affecting Trade and Investment.”
(branded) biologic to obtain marketing approval. The
The
United States currently provides a 12-year period of
revised text asserts the presumption that an
exclusivity, Canada 8 years and Mexico 5 years.
environmental dispute affects trade and investment
unless a respondent party can proved otherwise.
Exclusivity Period. A three-year exclusivity period was
removed which would prevent a generic manufacturer
Multilateral Environmental Agreements (MEAs).
from using clinical data submitted in connection with an
The revisions require each party to adopt, maintain, and
application for marketing approval for new uses of a
implement laws, regulations and other measures to
previously-approved product.
fulfill the following MEAs to which they are a party:
Regulatory Review. The revised text clarifies that the
Convention on International Trade in Endangered
regulatory review exception allows a person other than
Species of Wild Flora and Fauna (CITES)
the rights-holder to use, sell, or import a product
Montreal Protocol on Substances that Deplete the
covered by an existing patent to generate information
Ozone Layer
used in the marketing approval process.
International Convention for the Prevention of
Pollution from Ship (MARPOL)
Patents
Ramsar Convention on Wetlands
Convention on Antarctic Marine Living Resources
Patent Availability. The revised text precludes the
International Whaling Convention
availability of patents for new uses, methods, or
Inter-American Tropical Tuna Convention
processes of an existing product.
The USMCA, as originally signed, only made explicit
Patent Term Extension. The revisions limit the
reference to CITES, MARPOL, and the Montreal
circumstance when an adjustment is available to extend
Protocol.
a patent term for delays in the market approval process.
Interagency Monitoring Committee. USMCA changes Patent Linkages. The changes modify the patent
create in the implementing legislation an Interagency
linkage provision to provide for “effective rewards,”
Environment Committee for Monitoring and
such as a period of market exclusivity, for a successful
Enforcement analogous to the labor chapter, and
challenge to the validity or a finding of noninfringement
establishes environment-focused attachés in Mexico
of a patent.
City to monitor compliance with the agreement.
De Minimis
Border Environment Cooperation. The implementing
USMCA raised the de minimis customs threshold for duty-
legislation authorizes for grants under the U.S.-Mexico
free treatment to $117 for Canada and Mexico. A footnote
Border Water Infrastructure Program, the Trade
that would have allowed the United States to lower its $800
Enforcement Trust Fund and a recapitalization of the
threshold to maintain reciprocity was dropped.
North American Development Bank (NADB).
Motor Vehicle Rules of Origin
Outlook
Some Members of Congress welcomed the changes to the
To address U.S. concerns about North American vehicle
proposed USMCA, stating that they include stronger and
production, the amendments further tightened the motor
more enforceable labor and environmental provisions and
vehicle rules of origin.
that the removal of data exclusivity for biologic drugs will
foster generic competition and lower prices. Other
Steel Production. USMCA added a requirement that
Members are concerned about the rolling back of previous
70% of a motor vehicle’s steel and aluminum must
trade liberalization measures affecting the motor vehicle
originate in North America to receive duty-free benefits.
industry and in regards to IPR protection.
The revisions states that steel must be melted and
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 10.
and CRS In Focus IF10038, Trade Promotion Authority
(TPA), by Ian F. Fergusson.
Intellectual Property Rights
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
https://crsreports.congress.gov
USMCA: Amendment and Key Changes
IF11391
Ian F. Fergusson, Specialist in International Trade and
Finance
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https://crsreports.congress.gov | IF11391 · VERSION 3 · UPDATED