Updated January 10, 2020
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
Labor
environmental provisions, intellectual property rights (IPR),
USMCA revised NAFTA by adding more enforceable labor
and steel and aluminum requirements in the rules of origin
provisions and an annex with Mexican commitments to
for autos. On December 13, the Trump Administration
reform its labor laws and practices. Numerous policymakers
submitted to Congress the proposed USMCA implementing
remained concerned about enforcement and the full
legislation, which also reflects the recent amendments. On
implementation of Mexican labor reforms. Amendments to
the same day, the United States-Mexico-Canada
USMCA include the following:
Implementation Act (H.R. 5430) was introduced in the
House of Representatives. On December 16, the companion
“In a Manner Affecting Trade and Investment.”
bill was introduced in the Senate (S. 3052). The House
Original provisions required a party to prove a violation
Ways and Means Committee approved the legislation on
regarding worker rights occurred “in a manner affecting
December 17, 2019 and the full House approved it on
trade and investment.” The amendment shifts the burden
December 19, 2019 by a vote of 385-41. On January 7,
of proof by stating that a panel shall presume a violation
2020, the Senate Finance Committee approved the
affects trade and investment unless otherwise
legislation.
demonstrated.
The U.S. Trade Representative (USTR) and some Members
Forced Labor. Text on forced labor commitments was
of Congress negotiated proposed changes to the USMCA to
changed by removing language that a party could adopt
address ongoing congressional concerns. USTR then
measures it “considered appropriate” to stop the
negotiated the amendments with USMCA parties. Mexico
importation of goods produced by forced labor. The
was the first country to ratify the agreement in June 2019
modified language is intended to close what some saw
and approve the amendments by a 107-1 vote in the
as a possible loophole.
Mexican Senate on December 12, 2019. Canada’s
Violence Against Workers. Language that a party
Parliament is expected to ratify it in early 2020.
would have to prove that a violation was in a “sustained
Congress is considering USMCA under TPA rules, which is
or recurring” pattern was removed. In addition, the
the time-limited authority that Congress uses to consider
amended agreement shifts the burden of proof to the
implementing legislation for trade agreements under
responding party by stating that a panel shall presume
expedited procedures, provided that they meet certain
that a failure to comply affects trade or investment
statutory requirements. Under TPA, Congress has a
unless the responding party demonstrates otherwise.
maximum of 90 legislative days to vote on the agreement.
Dispute Settlement
Rapid Response Mechanism. A new “rapid-response”
mechanism would provide for an independent panel
Some Members of Congress criticized the 1994 North
investigation at “covered facilities,” as opposed to a
American Free Trade Agreement (NAFTA), and
government inspection, for suspected denial of the right
subsequent USMCA, for an ineffective dispute settlement
of free association and collective bargaining. For the
process. The NAFTA mechanism was used for 3 cases in its
United States, covered facilities would be limited to
25-year history, the last in 2000. The amended USMCA
those that have previously been proven to have violated
includes the following:
U.S. law. For Mexico, a claim can be brought only with
Panel Blocking. The revisions prevents the ability of a
respect to an alleged worker rights violation under
party to block establishment of a dispute settlement
Mexico’s labor reform commitments under USMCA.
panel by ensuring the formation of a panel in cases
Violations could result in a suspension of preferential
where a party refuses to participate in the process of
tariffs or potential penalties on goods manufactured at or
selecting panelists.
services provided by the covered facility.
Mexico’s Labor Reform Monitoring
. USMCA
Rules of Procedure. The amendment revises the
implementing legislation creates a new interagency
guidelines for the Rules of Procedure for panels to give
committee and reporting requirements to Congress on
the parties the right to submit testimony, the right to test
Mexico’s implementation of labor reforms. Also
the veracity of submitted testimony, the right to submit
establishes key benchmarks for Mexico’s
anonymous testimony, and for the panel to accept
implementation processes and for labor attachés based
agreed stipulations prior to a hearing, among other
in Mexico.
issues.
https://crsreports.congress.gov
USMCA: Amendment and Key Changes
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
70% of a motor vehicle’s steel and aluminum must
Members are concerned about the rolling back of previous
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
these provisions, long included in previous U.S. free trade
Ian F. Fergusson, Specialist in International Trade and
agreements (FTAs), as contributing to the rise of drug costs.
Finance
The pharmaceutical industry and other observers contend
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USMCA: Amendment and Key Changes
IF11391
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https://crsreports.congress.gov | IF11391 · VERSION 4 · UPDATED