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Updated March 5, 2024
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 United States-Mexico-Canada Agreement
to market access provisions for autos and agriculture
(USMCA), which entered into force on July 1, 2020 (see
products, to rules on investment, government procurement,
CRS Report R44981, The United States-Mexico-Canada
and intellectual property rights (IPR), and to provisions
Agreement (USMCA)). USMCA replaced the 1994 North
regarding labor and the environment. New provisions such
American Free Trade Agreement (NAFTA). Congress
as digital trade, state-owned enterprises, and currency
approved implementing legislation for USMCA in
misalignment are part of the new agreement.
December 2019 (P.L. 116-113).
Market Access
Motor Vehicles. NAFTA phased out tariffs on motor
TPA and Other Key Dates for USMCA
vehicle trade among the three countries, subject to specific
rules-of-origin (ROO) requirements (see Table 1). USMCA
•
May 17, 2017: Ninety-day Presidential notification to
tightened these rules by including the following.
Congress of intent to begin NAFTA renegotiations.
• New motor vehicle ROO and procedures, including
•
July 17, 2017: USTR publishes negotiation objectives.
product-specific rules and requiring 75% North
•
August 16, 2017: Negotiations began.
American content.
•
•
August 30, 2018: Notification to Congress of intent to sign
Wage requirement that 40%-45% of auto content be
agreement.
made by workers earning at least $16 an hour.
•
•
Requirement that 70% of a vehicle’s steel and aluminum
September 30, 2018: USMCA draft text released. Advisory
committee reports released.
must originate in North America; steel be melted and
poured in North America.
•
November 30, 2018: USMCA signed.
• Streamlining of ROO certification enforcement.
•
January 29, 2019: List of required changes to U.S. law
delivered to Congress.
Table 1. Select USMCA Changes to NAFTA
•
April 18, 2019: International Trade Commission (ITC)
Sector
USMCA
NAFTA
report released.
•
Autos
75% ROO; 70% steel
62.5% ROO;
May 30, 2019: Draft Statement of Administrative Action
(SAA) and text of the agreement submitted to Congress.
and aluminum
no wage
requirement; steel
requirement;
•
December 13 and 16, 2019: Implementing legislation
must be melted and
no steel and
introduced in House of Representatives (H.R. 5430) and
poured in region;
aluminum
companion bil introduced in the Senate (S. 3052).
wage requirement.
requirement.
•
December 19, 2019, and January 7, 2020: Legislation
approved by the House of Representatives by a vote of 385-
IPR protection
Biologics: No
Biologics: No
41 and by the Senate by a vote of 89-10.
commitments (10
commitments
years in original text).
Copyright: 50
•
January 29, 2020: USMCA signed into law (P.L. 116-113).
Copyright: 70 years.
years.
•
July 1, 2020: USMCA entered into force.
Government
U.S.-MEX only; CAN
Trilateral
After the initial USMCA was concluded in 2018, some
Procurement
to use WTO GPA.
commitments.
Members of Congress expressed concern over certain key
provisions and negotiated with USTR to amend the
Digital Trade
Cross-border data
No commitments.
agreement. On December 10, 2019, the United States,
flows; restricts data
Canada, and Mexico agreed to a protocol of amendment to
localization.
the original USMCA text. The revisions include
Investor-State
Applicable only to
Trilateral
modifications regarding dispute settlement, labor and
Dispute
certain U.S.-MEX
commitments.
environmental provisions, intellectual property rights (IPR)
Settlement
disputes.
protection, and motor vehicle industry rules of origin. The
(ISDS)
revised agreement provides for a facility-specific “rapid
response” labor mechanism, which has been used by the
State-owned
SOEs to adhere to
No commitments.
U.S. Department of Labor and USTR to protect worker
enterprises
market forces.
rights in numerous. The first USMCA panel hearing under
Source: CRS from USMCA Agreement.
this mechanism took place on February 28 and 29, 2024.
The outcome is pending.
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,
$180,000 as compared to NAFTA’s $25,000.
and in other sectors if national remedies are exhausted first.
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
• Preparing for the formal trilateral six-year review of
and Canada launched USMCA disputes against Mexico and
USMCA in 2026 in which the parties will decide
are in state-to-state consultations over policies by Mexico’s
whether to extend the agreement for another 16 years.
president to undo some of the 2013 market opening energy
• Monitoring of USMCA disputes on energy,
reforms. Mexico has provided proposals to resolve
biotechnology and corn, labor, and tariff-rate quotas.
concerns, but the dispute may be challenging to resolve.
• Oversight of the effective implementation of the new
Labor and Environment
motor vehicle rules of origin and the effect on the U.S.
motor vehicle industry as the industry adapts to the more
USMCA revised NAFTA and incorporates provisions to
complex rules.
provide expanded provisions for labor and environment
• Monitoring USMCA rules of origin in the context of
issues. USMCA requires parties to
increasing competition from Chinese manufacturers in
• Adopt, maintain, enforce, and not derogate from statutes
the motor vehicle industry and the possible movement
and regulation regarding the International Labor
of Chinese companies to Mexico to avoid U.S. tariffs.
Organization (ILO) Declaration of Rights at Work.
• Adopt, maintain, enforce, and not derogate from
M. Angeles Villarreal, Specialist in International Trade
environmental laws, including seven multilateral
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 22 · UPDATED