Updated January 14, 2021
U.S.-Mexico-Canada (USMCA) Trade Agreement
Overview
Market Access
On November 30, 2018, President Trump and the leaders of
Motor Vehicles. While NAFTA phased out tariffs on
Canada and Mexico signed the United States-Mexico-
automotive imports among the three countries, subject to
Canada Agreement (USMCA). USMCA revises and
rules-of-origin (ROO) requirements of 62.5% content for
modernizes the North American Free Trade Agreement
autos, light trucks, engines, and transmissions, and 60% for
(NAFTA), in place since 1994. USMCA replaced NAFTA
all other vehicles and automotive parts, USMCA tightens
as of July 1, 2020. Pursuant to trade promotion authority
ROO by including the following.
(TPA), the Administration provided the required
consultations and notifications to Congress.
New motor vehicle ROO and procedures, including
product-specific rules and requiring 75% North
TPA and Other Key Dates for USMCA
American content.
Wage requirements stipulating that 40%-45% of auto
August 30, 2018: Notification to Congress of intent to sign
content be made by workers earning at least $16 per
agreement with Mexico.
hour.
September 30, 2018: USMCA draft text released. Advisory
A requirement that 70% of a vehicle’s steel and
committee reports released.
aluminum must originate in North America (changes to
November 30, 2018: Agreement is signed.
USMCA require that steel be melted and poured in
North America).
January 29, 2019: List of required changes to U.S. law
delivered to Congress.
Streamlining of ROO certification enforcement.
April 18, 2019: International Trade Commission (ITC)
To provide manufacturers time to adjust, the date of entry
report released (extended due to government shutdown).
into force of motor vehicle ROO was delayed until January
May 30, 2019: Draft Statement of Administration Action
2021.
(SAA) and text of the agreement submitted to Congress.
December 10, 2019: Protocol of amendment agreed to by
Table 1. Select USMCA Changes to NAFTA
United States, Mexico, and Canada.
Sector
USMCA
NAFTA
December 13 and 16, 2019: Implementing legislation
introduced in House and Senate (H.R. 5040 and S. 3052).
Autos
(Starting in Jan. 2021)
62.5% ROO;
December 17, 2019: USMCA implementing legislation
75% ROO; 70% steel
no wage
approved in the House by a vote of 385-41.
and aluminum
requirement;
requirement; steel
no steel and
January 16, 2020: USMCA implementing legislation approved
in the Senate by a vote of 89-10.
must be melted and
aluminum
poured in region;
requirement.
January 29, 2020: President Trump signed legislation P.L.
wage requirement.
116-113.
IPR protection
Biologics: No
Biologics: No
On December 10, 2019, the United States, Canada, and
commitments (10
commitments
Mexico agreed to a protocol of amendment to the original
years in original text).
Copyright: 50
USMCA text. The revisions include modifications to key
years.
elements of the original text regarding dispute settlement,
Copyright: 70 years.
labor and environmental provisions, intellectual property
Government
U.S.-MEX only; CAN
Trilateral
rights (IPR) protection, and steel and aluminum
Procurement
to use WTO GPA.
commitments.
requirements in the motor vehicle industry rules of origin.
The revised agreement provides for a facility-specific rapid
Digital Trade
Cross-border data
No commitments.
response labor mechanism to address worker rights
flows; restricts data
provisions.
localization.
Key Provisions
Investor-State
Not applicable to
Trilateral
Dispute
U.S.-CAN disputes;
commitments.
USMCA, composed of 34 chapters and 12 side letters,
retains most of NAFTA’s chapters, making notable changes
Settlement
U.S.-MEX disputes
(ISDS)
restricted.
to market access provisions for autos and agriculture
products, to rules such as investment, government
State-owned
SOEs to adhere to
No commitments.
procurement, and intellectual property rights (IPR), and to
enterprises
market forces.
provisions regarding labor and the environment. New
Source: CRS from USMCA Agreement.
issues, such as digital trade, state-owned enterprises, and
currency misalignment are also addressed.
https://crsreports.congress.gov
U.S.-Mexico-Canada (USMCA) Trade Agreement
Dairy. USMCA increases U.S. dairy access to Canada’s
USMCA has new provisions affecting labor and
dairy market, but it does not dismantle Canada’s supply-
environmental disputes that shift the burden of proof to the
management system. Canada also removed its “Class 7”
responding party that a complaint affects trade and
pricing for ultra-high filtration (UHF) milk. In return, the
investment unless otherwise demonstrated. USMCA also
United States expanded import quota levels for Canadian
includes a rapid response mechanism for worker rights
dairy and sugar products.
complaints at covered facilities, Mexican labor reform
monitoring, creation of a new interagency committee on
Dispute Settlement
labor with reporting requirements to Congress, and
enhanced anti-worker violence and forced labor provisions.
USMCA maintains the NAFTA state-to-state mechanism
for most disputes arising under the agreement. It also
Government Procurement (GP)
retains the binational dispute settlement mechanism to
NAFTA set standards and parameters for government
review trade remedy disputes. However, USMCA:
purchases of goods and services and opportunities for firms
eliminates investor-state dispute settlement (ISDS) for
of each nation to bid on certain contracts for specified
Canada after the termination of NAFTA; maintains ISDS
government agencies above a set monetary threshold on a
only between the United States and Mexico for claimants
reciprocal basis. The USMCA provisions only apply to
regarding government contracts in the oil, natural gas,
U.S.-Mexico procurement, while Canada remains covered
power generation, infrastructure, and telecommunications
by the more recent and comprehensive World Trade
sectors; and maintains U.S.-Mexico ISDS in other sectors
Organization Government Procurement Agreement (GPA).
provided the claimant exhausts national remedies first.
However, the monetary threshold for the GPA is higher at
USMCA removes procedures allowing a party to block the
$180,000 as compared to NAFTA’s $25,000.
formation of a dispute settlement panel.
Intellectual Property Rights (IPR)
E-Commerce, Data Flows, and Data Localization
The USMCA has new digital trade provisions, including
NAFTA was the first free trade agreement (FTA) to include
prohibiting customs duties on electronically transmitted
an IPR chapter. USMCA retains NAFTA’s core protections
products and limits on source code disclosure requirements.
for copyrights, patents, including exclusivity periods for
USMCA contains broad provisions on cross-border data
test data, trade secrets, trademarks, and geographical
flows and restrictions on data localization requirements.
indications, as well as specific enforcement requirements.
NAFTA did not contain digital trade provisions.
The revised USMCA removes provisions on biologic data
protection, among other changes. USMCA provisions
New USMCA Provisions
include:
Binding obligations on currency misalignment.
copyright term extended to 70 years;
A sunset clause requiring a joint review and agreement
prohibitions on circumvention of technological
on renewal at year 6; in lieu of mutual agreement at the
protection measures;
time, USMCA would expire 16 years later.
criminal and civil penalties protections for trade secret
A new chapter on State-Owned Enterprises (SOE).
theft, including by state-owned enterprises and cyber-
De minimis customs threshold for duty free treatment set
theft; and
at $117 for Canada and Mexico. Tax-free threshold set
copyright safe-harbor provisions on ISP liability.
at $50 for Mexico and C$40 for Canada.
Energy
Allowing a party to withdraw from the agreement if
Although USMCA removes NAFTA’s energy chapter, it
another party enters into an FTA with a country it deems
to be a nonmarket economy (e.g., China).
adds a new chapter with provisions recognizing Mexico’s
constitution and the Mexican government’s direct
Issues for Congress
ownership of hydrocarbons. Existing foreign investors in
Some issues for Congress include:
the energy sector likely remain protected by similar
provisions as those in NAFTA. Mexico appears to be
The extent to which USMCA met TPA’s negotiating
legally bound by its 2013 constitutional energy reforms in
objectives and implications for possible TPA renewal by
the energy sector.
Congress.
Oversight of the effective implementation of the new
Labor and Environment
and revised USMCA commitments.
USMCA revises NAFTA and incorporate provisions to
Whether new provisions on labor and environmental
provide the same dispute mechanism as other parts of the
enforcement meet congressional concerns.
agreement. USMCA requires parties to:
How USMCA revisions will affect the future of U.S.
Adopt, maintain, enforce, and not derogate from statutes
trade policy given its reduced commitments in some
and regulation regarding the International Labor
areas and expanded commitments in others.
Organization (ILO) Declaration of Rights at Work.
Adopt, maintain, enforce, and not derogate from
environmental laws, including seven multilateral
M. Angeles Villarreal, Specialist in International Trade
environment agreements.
and Finance
https://crsreports.congress.gov
U.S.-Mexico-Canada (USMCA) Trade Agreement
IF10997
Ian F. Fergusson, Specialist in International Trade and
Finance
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https://crsreports.congress.gov | IF10997 · VERSION 16 · UPDATED