U.S.-Mexico-Canada (USMCA) Trade Agreement



Updated July 1, 2020
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 replaces 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, motor vehicle
report released (extended due to government shutdown).
ROO will not enter into force until January 2021.

May 30, 2019: Draft Statement of Administration Action
(SAA) and text of the agreement submitted to Congress.
Table 1. Select USMCA Changes to NAFTA

December 13 and 16, 2019: Implementing legislation
Sector
USMCA
NAFTA
introduced in House and Senate (H.R. 5040 and S. 3052).

December 17, 2019: USMCA implementing legislation
Autos
(Starting in Jan. 2021)
62.5% ROO;
approved in the House by a vote of 385-41.
75% ROO; 70% steel
no wage

January 16, 2020: USMCA implementing legislation approved
and aluminum
requirement;
in the Senate by a vote of 89-10.
requirement; steel
no steel and

must be melted and
aluminum

January 29, 2020: President Trump Signed legislation P.L.
poured in region;
requirement.
116-113.
wage requirement.
On December 10, 2019, the United States, Canada, and
Mexico agreed to a protocol of amendment to the original
IPR protection
Biologics: No
Biologics: No
USMCA text. The revisions include modifications to key
commitments (10
commitments
elements of the original text regarding dispute settlement,
years in original text).
Copyright: 50
labor and environmental provisions, intellectual property
Copyright: 70 years.
years.
rights (IPR) protection, and steel and aluminum
Government
U.S.-MEX only; CAN
Trilateral
requirements in the motor vehicle industry rules of origin.
Procurement
to use WTO GPA.
commitments.
The revised agreement provides for a facility-specific rapid
response labor mechanism to address worker rights
Digital Trade
Cross-border data
No commitments.
provisions.
flows; restricts data
localization.
Key Provisions
USMCA, composed of 34 chapters and 12 side letters,
Investor-State
Not applicable to
Trilateral
retains most of NAFTA’s chapters, making notable changes
Dispute
U.S.-CAN disputes;
commitments.
to market access provisions for autos and agriculture
Settlement
U.S.-MEX disputes
products, to rules such as investment, government
(ISDS)
restricted.
procurement, and intellectual property rights (IPR), and to
State-owned
SOEs to adhere to
No commitments.
labor and the environment. New issues, such as digital
enterprises
market forces.
trade, state-owned enterprises, and currency misalignment
are also addressed.
Source: CRS from USMCA Agreement.
https://crsreports.congress.gov

U.S.-Mexico-Canada (USMCA) Trade Agreement
Dairy. USMCA increases U.S. dairy access up to 3.59% of
USMCA has new provisions affecting labor and
Canada’s dairy market, but it does not dismantle Canada’s
environmental disputes that shift the burden of proof to the
supply-management system. Canada also removed its
responding party that a complaint affects trade and
“Class 7” pricing for ultra-high filtration (UHF) milk. In
investment unless otherwise demonstrated. USMCA also
return, the United States expanded import quota levels for
includes a rapid response mechanism for worker rights
Canadian 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
adds 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. 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 TPA’s negotiating objectives were
legally bound by its 2013 constitutional energy reforms in
met and implications for Congress.
the energy sector.
 Oversight of the effective implementation of the new
and revised USMCA commitments.
Labor and Environment
 Whether new provisions on labor and environmental
USMCA revises NAFTA and incorporate provisions to
enforcement meet congressional concerns.
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

Organization (ILO) Declaration of Rights at Work.
See also, CRS In Focus IF11391, USMCA: Amendment and

Key Changes, by M. Angeles Villarreal and Ian F.
Adopt, maintain, enforce, and not derogate from
Fergusson
environmental laws, including seven multilateral
environment agreements.
M. Angeles Villarreal, Specialist in International Trade
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 15 · UPDATED