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Updated January 11, 2023
U.S.-Mexico-Canada (USMCA) Trade Agreement
Overview
Key Provisions
The 118th Congress, in both legislative and oversight
USMCA, composed of 34 chapters and 12 side letters,
capacities, may be active in numerous trade policy issues
retains most of NAFTA’s chapters, making notable changes
related to the implementation of the United States-Mexico-
to market access provisions for autos and agriculture
Canada Agreement (USMCA), which entered into force on
products, to rules such as investment, government
July 1, 2020, replacing the 1994 North American Free
procurement, and intellectual property rights (IPR), and to
Trade Agreement (NAFTA). USMCA revised and
provisions regarding labor and the environment. New
modernized NAFTA with new provisions such as digital
provisions such as digital trade, state-owned enterprises,
trade and more enforceable labor provisions. Pursuant to
and currency misalignment are part of the new agreement.
trade promotion authority (TPA), the Trump Administration
Market Access
provided the required consultations and notifications to
Motor Vehicles. NAFTA phased out tariffs on motor
Congress. Congress approved implementing legislation for
vehicle trade among the three countries, subject to specific
USMCA in December 2019 (P.L. 116-113).
rules-of-origin (ROO) requirements (see Table 1). USMCA
tightens these rules by including the following.
TPA and Other Key Dates for USMCA
New motor vehicle ROO and procedures, including
product-specific rules and requiring 75% North
May 17, 2017: Ninety-day Presidential notification to
Congress of intent to begin NAFTA renegotiations.
American content.
Wage requirement that 40%-45% of auto content be
July 17, 2017: USTR publishes negotiation objectives.
made by workers earning at least $16 an hour.
August 16, 2017: Negotiations began.
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.
Streamlining of ROO certification enforcement.
September 30, 2018: USMCA draft text released. Advisory
committee reports released.
Table 1. Select USMCA Changes to NAFTA
November 30, 2018: USMCA signed.
Sector
USMCA
NAFTA
January 29, 2019: List of required changes to U.S. law
delivered to Congress.
Autos
75% ROO; 70% steel
62.5% ROO;
April 18, 2019: International Trade Commission (ITC)
and aluminum
no wage
report released.
requirement; steel
requirement;
must be melted and
no steel and
May 30, 2019: Draft Statement of Administrative Action
(SAA) and text of the agreement submitted to Congress.
poured in region;
aluminum
wage requirement.
requirement.
December 13 and 16, 2019: Implementing legislation
introduced in House of Representatives (H.R. 5430) and
IPR protection
Biologics: No
Biologics: No
companion bil introduced in the Senate (S. 3052).
commitments (10
commitments
December 19, 2019, and January 7, 2020: Legislation
years in original text).
Copyright: 50
approved by the House of Representatives by a vote of 385-
Copyright: 70 years.
years.
41 and by the Senate by a vote of 89-10.
Government
U.S.-MEX only; CAN
Trilateral
January 29, 2020: USMCA signed into law (P.L. 116-113).
Procurement
to use WTO GPA.
commitments.
July 1, 2020: USMCA entered into force.
Digital Trade
Cross-border data
No commitments.
After the initial USMCA was concluded in 2018, some
flows; restricts data
Members of Congress expressed concern over certain key
localization.
provisions and negotiated with USTR to amend the
Investor-State
Applicable only to
Trilateral
agreement. On December 10, 2019, the United States,
Dispute
certain U.S.-MEX
commitments.
Canada, and Mexico agreed to a protocol of amendment to
Settlement
disputes.
the original USMCA text. The revisions include
(ISDS)
modifications regarding dispute settlement, labor and
environmental provisions, intellectual property rights (IPR)
State-owned
SOEs to adhere to
No commitments.
protection, and steel and aluminum requirements in the
enterprises
market forces.
motor vehicle industry rules of origin. The revised
Source: CRS from USMCA Agreement.
agreement provides for a facility-specific rapid response
labor mechanism.
https://crsreports.congress.gov
U.S.-Mexico-Canada (USMCA) Trade Agreement
Dairy. USMCA increased U.S. dairy access to Canada’s
USMCA has new provisions that shift the burden of proof
dairy market, but it does not dismantle Canada’s supply-
to the responding party so that a complaint affects trade and
management system. Canada also removed its “Class 7”
investment unless otherwise demonstrated. USMCA also
pricing for ultra-high filtration (UHF) milk. In return, the
includes a new rapid response mechanism for worker rights
United States expanded import quota levels for Canadian
complaints at covered facilities, Mexican labor reform
dairy and sugar products.
monitoring, creation of a new interagency committee on
labor with reporting requirements to Congress, and
Dispute Settlement
enhanced anti-worker violence and forced labor provisions.
USMCA maintains the NAFTA state-to-state mechanism
Government Procurement (GP)
for most disputes arising under the agreement and retains
NAFTA set standards and parameters for government
the binational dispute settlement mechanism to review trade
purchases of goods and services and opportunities for firms
remedy disputes. New provisions prevent panel blocking by
of each nation to bid on certain contracts for specified
ensuring the formation of a dispute settlement panel. On
government agencies above a set monetary threshold on a
investor-state dispute settlement (ISDS), which is a form of
reciprocal basis. The USMCA provisions only apply to
binding arbitration that allows private investors to pursue
U.S.-Mexico procurement, while Canada remains covered
claims against sovereign nations, provisions were
by the more recent and comprehensive World Trade
eliminated for Canada. For Mexico, ISDS remains in place
Organization Government Procurement Agreement (GPA).
for government contracts in the oil, natural gas, power
However, the monetary threshold for the GPA is higher at
generation, infrastructure, and telecommunications sectors,
and in other sectors if national remedies are exhausted first.
$180,000 as compared to NAFTA’s $25,000.
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 core protections for
products and limits on source code disclosure requirements,
copyrights, patents, exclusivity periods for test data, trade
and broad provisions on cross-border data flows and
secrets, trademarks, and geographical indications, as well as
restrictions on data localization requirements.
specific enforcement requirements. The revised USMCA
removes provisions on biologic data protection, among
Other Key USMCA Provisions
other changes. USMCA provisions include
New 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.
at $50 for Mexico and C$40 for Canada.
Energy
Allowing a party to withdraw from the agreement if
another party enters into an FTA with a country it deems
USMCA removed NAFTA’s energy chapter, while adding
a new chapter with provisions recognizing Mexico’s
to be a nonmarket economy (e.g., China).
constitution and the Mexican government’s direct
Issues for Congress
ownership of hydrocarbons. U.S. investors in the energy
sector, however, appear to remain protected by similar
Some issues for Congress include
provisions as those in NAFTA. In 2022, the United States
Oversight of the effective implementation of the new
and Canada launched USMCA disputes against Mexico and
and revised USMCA commitments, including new
are in state-to-state consultations over policies by Mexico’s
motor vehicle rules of origin and labor provisions.
president to undo some of the 2013 market opening energy
Monitoring of USMCA disputes on energy, motor
reforms. Mexico has provided proposals to resolve
vehicle rules of origin, labor and tariff-rate quotas.
concerns, but the dispute may be challenging to resolve.
Consulting with the executive branch on trilateral trade
Labor and Environment
challenges, such as Mexico’s potential ban on
genetically modified corn, that are being addressed
USMCA revised NAFTA and incorporate provisions to
through dialogue and cooperation.
provide the same dispute mechanism as other parts of the
How USMCA revisions will affect the future of U.S.
agreement. USMCA requires parties to
trade policy given its reduced commitments in some
Adopt, maintain, enforce, and not derogate from statutes
areas and expanded commitments in others.
and regulation regarding the International Labor
See also CRS Report R44981, The United States-Mexico-
Organization (ILO) Declaration of Rights at Work.
Canada Agreement (USMCA), by M. Angeles Villarreal.
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
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https://crsreports.congress.gov | IF10997 · VERSION 19 · UPDATED