Updated December 29, 2021
U.S.-Mexico-Canada (USMCA) Trade Agreement
Overview
products, to rules such as investment, government
The United States-Mexico-Canada Agreement (USMCA)
procurement, and intellectual property rights (IPR), and to
entered into force on July 1, 2020, replacing the North
provisions regarding labor and the environment. New
American Free Trade Agreement (NAFTA), which had
provisions such as digital trade, state-owned enterprises,
been in effect since 1994. USMCA revised and modernized
and currency misalignment are part of the new agreement.
NAFTA. Pursuant to trade promotion authority (TPA), the
Market Access
Trump Administration provided the required consultations
Motor Vehicles. NAFTA phased out tariffs on motor
and notifications to Congress. Congress, in both legislative
vehicle trade among the three countries, subject to rules-of-
and oversight capacities was active in numerous trade
origin (ROO) requirements of 62.5% content for autos, light
policy issues related to the renegotiation of NAFTA and
trucks, engines, and transmissions, and 60% for all other
continues to be active in USMCA implementation.
vehicles and automotive parts. USMCA tightens ROO by
TPA and Other Key Dates for USMCA
including the following.
New motor vehicle ROO and procedures, including
May 17, 2017: Ninety-day Presidential notification to
product-specific rules and requiring 75% North
Congress of intent to begin NAFTA renegotiations.
American content.
July 17, 2017: USTR publishes negotiation objectives.
Wage requirement that 40%-45% of auto content be
August 16, 2017: Negotiations began.
made by workers earning at least $16 an hour.
Requirement that 70% of a vehicle’s steel and aluminum
August 30, 2018: Notification to Congress of intent to sign
must originate in North America; steel be melted and
agreement.
poured in North America.
September 30, 2018: USMCA draft text released. Advisory
Streamlining of ROO certification enforcement.
committee reports released.
November 30, 2018: USMCA signed.
To provide manufacturers time to adjust, the date of entry
into force of motor vehicle ROO was delayed until January
January 29, 2019: List of required changes to U.S. law
delivered to Congress.
2021.
April 18, 2019: International Trade Commission (ITC)
Table 1. Select USMCA Changes to NAFTA
report released.
May 30, 2019: Draft Statement of Administrative Action
Sector
USMCA
NAFTA
(SAA) and text of the agreement submitted to Congress.
Autos
75% ROO; 70% steel
62.5% ROO;
December 13 and 16, 2019: Implementing legislation
and aluminum
no wage
introduced in House of Representatives (H.R. 5430) and
requirement; steel
requirement;
companion bil introduced in the Senate (S. 3052).
must be melted and
no steel and
December 19, 2019, and January 7, 2020: Legislation
poured in region;
aluminum
approved by the House of Representatives by a vote of 385-
wage requirement.
requirement.
41 and by the Senate by a vote of 89-10.
IPR protection
Biologics: No
Biologics: No
January 29, 2020: USMCA signed into law (P.L. 116-113).
commitments (10
commitments
July 1, 2020: USMCA entered into force.
years in original text).
Copyright: 50
Copyright: 70 years.
years.
On December 10, 2019, the United States, Canada, and
Government
U.S.-MEX only; CAN
Trilateral
Mexico agreed to a protocol of amendment to the original
Procurement
to use WTO GPA.
commitments.
USMCA text. The revisions include modifications to key
elements of the original text regarding dispute settlement,
Digital Trade
Cross-border data
No commitments.
labor and environmental provisions, intellectual property
flows; restricts data
rights (IPR) protection, and steel and aluminum
localization.
requirements in the motor vehicle industry rules of origin.
Investor-State
Applicable only to
Trilateral
The revised agreement provides for a facility-specific rapid
Dispute
certain U.S.-MEX
commitments.
response labor mechanism to address worker rights.
Settlement
disputes.
Key Provisions
(ISDS)
USMCA, composed of 34 chapters and 12 side letters,
State-owned
SOEs to adhere to
No commitments.
retains most of NAFTA’s chapters, making notable changes
enterprises
market forces.
to market access provisions for autos and agriculture
https://crsreports.congress.gov
U.S.-Mexico-Canada (USMCA) Trade Agreement
Source: CRS from USMCA Agreement.
Adopt, maintain, enforce, and not derogate from
environmental laws, including seven multilateral
Dairy. USMCA increased U.S. dairy access to Canada’s
environment agreements.
dairy market, but it does not dismantle Canada’s supply-
management system. Canada also removed its “Class 7”
USMCA has new provisions that shift the burden of proof
pricing for ultra-high filtration (UHF) milk. In return, the
to the responding party that a complaint affects trade and
United States expanded import quota levels for Canadian
investment unless otherwise demonstrated. USMCA also
dairy and sugar products.
includes a new rapid response mechanism for worker rights
complaints at covered facilities, Mexican labor reform
Dispute Settlement
monitoring, creation of a new interagency committee on
labor with reporting requirements to Congress, and
USMCA maintains the NAFTA state-to-state mechanism
enhanced anti-worker violence and forced labor provisions.
for most disputes arising under the agreement and retains
the binational dispute settlement mechanism to review trade
Government Procurement (GP)
remedy disputes. New provisions prevent panel blocking by
NAFTA set standards and parameters for government
ensuring the formation of a dispute settlement panel. On
purchases of goods and services and opportunities for firms
investor-state dispute settlement (ISDS), which is a form of
of each nation to bid on certain contracts for specified
binding arbitration that allows private investors to pursue
government agencies above a set monetary threshold on a
claims against sovereign nations, provisions were
reciprocal basis. The USMCA provisions only apply to
eliminated for Canada. For Mexico, ISDS remains in place
U.S.-Mexico procurement, while Canada remains covered
for government contracts in the oil, natural gas, power
by the more recent and comprehensive World Trade
generation, infrastructure, and telecommunications sectors,
and in other sectors if national remedies are exhausted first.
Organization Government Procurement Agreement (GPA).
However, the monetary threshold for the GPA is higher at
Intellectual Property Rights (IPR)
$180,000 as compared to NAFTA’s $25,000.
NAFTA was the first free trade agreement (FTA) to include
E-Commerce, Data Flows, and Data Localization
an IPR chapter. USMCA retains core protections for
The USMCA has new digital trade provisions, including
copyrights, patents, exclusivity periods for test data, trade
prohibiting customs duties on electronically transmitted
secrets, trademarks, and geographical indications, as well as
products and limits on source code disclosure requirements,
specific enforcement requirements. The revised USMCA
and broad provisions on cross-border data flows and
removes provisions on biologic data protection, among
restrictions on data localization requirements.
other changes. USMCA provisions include:
copyright term extended to 70 years;
Other Key USMCA Provisions
prohibitions on circumvention of technological
New binding obligations on currency misalignment.
protection measures;
A sunset clause requiring a joint review and agreement
criminal and civil penalties protections for trade secret
on renewal at year 6; in lieu of mutual agreement at the
theft, including by state-owned enterprises and cyber-
time, USMCA would expire 16 years later.
theft; and
A new chapter on State-Owned Enterprises (SOE).
copyright safe-harbor provisions.
De minimis customs threshold for duty free treatment set
at $117 for Canada and Mexico. Tax-free threshold set
Energy
at $50 for Mexico and C$40 for Canada.
Although USMCA removed NAFTA’s energy chapter, it
Allowing a party to withdraw from the agreement if
added a new chapter with provisions recognizing Mexico’s
another party enters into an FTA with a country it deems
constitution and the Mexican government’s direct
to be a nonmarket economy (e.g., China).
ownership of hydrocarbons. Existing foreign investors in
the energy sector likely remain protected by similar
Issues for Congress
provisions as those in NAFTA. Mexico appears to be
legally bound by its 2013 constitutional energy reforms in
Some issues for Congress include:
the energy sector. However, Mexico is currently seeking
Oversight of the effective implementation of the new
another constitutional reform that would shift control of the
and revised USMCA commitments, including new
sector back to the government, which could potentially
motor vehicle rules of origin and labor provisions.
violate USMCA commitments.
Monitoring of trade issues such as Mexico’s current
proposals to scale back some of the 2013 energy reforms
Labor and Environment
and the Canadian softwood lumber trade dispute.
USMCA revised 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.
https://crsreports.congress.gov
U.S.-Mexico-Canada (USMCA) Trade Agreement
See also CRS Report R44981, The United States-Mexico-
M. Angeles Villarreal, Specialist in International Trade
Canada Agreement (USMCA), by M. Angeles Villarreal.
and Finance
IF10997
Disclaimer
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https://crsreports.congress.gov | IF10997 · VERSION 17 · UPDATED