USMCA: Amendment and Key Changes

USMCA: Amendment and Key Changes

Updated January 30, 2020
USMCA: Amendment and Key Changes
Overview
agreed stipulations prior to a hearing, among other
On December 10, 2019, the United States, Canada, and
issues.
Mexico agreed to a protocol of amendment to the proposed
 Free Trade Commission. The amended language
U.S.-Mexico-Canada Agreement (USMCA). The
revised the dispute process by eliminating the
amendments include modifications to key elements of the
consultative role of the USMCA Free Trade
original text in regard to dispute settlement, labor and
Commission, which acts as a secretariat for the
environmental provisions, intellectual property rights (IPR),
agreement, as an intermediate step to resolve disputes.
and steel and aluminum requirements in the rules of origin
for autos. On December 13, the Trump Administration
Labor
submitted to Congress the proposed USMCA implementing
USMCA revised NAFTA by adding more enforceable labor
legislation, which also reflects the recent amendments. On
provisions and an annex with Mexican commitments to
the same day, the United States-Mexico-Canada
reform its labor laws and practices. Numerous policymakers
Implementation Act (H.R. 5430) was introduced in the
remained concerned about enforcement and the full
House of Representatives. On December 16, the companion
implementation of Mexican labor reforms. Amendments to
bill was introduced in the Senate (S. 3052). The legislation
USMCA include the following:
was passed by the House Ways and Means Committee on
 “In a Manner Affecting Trade and Investment.”
December 17; by the full House on December 19 by a vote
Original provisions required a party to prove a violation
of 385-41; by the Senate Finance Committee on January 7,
regarding worker rights occurred “in a manner affecting
2020; and by the full Senate on January 16 by a vote of 89-
trade and investment.” The amendment shifts the burden
10. President Trump signed the legislation on January 29,
of proof by stating that a panel shall presume a violation
2020 (P.L. 116-113).
affects trade and investment unless otherwise
demonstrated.
The U.S. Trade Representative (USTR) and some Members
of Congress negotiated proposed changes to the USMCA to
 Forced Labor. Text on forced labor commitments was
address ongoing congressional concerns. USTR then
changed by removing language that a party could adopt
negotiated the amendments with USMCA parties. Mexico
measures it “considered appropriate” to stop the
was the first country to ratify the agreement in June 2019
importation of goods produced by forced labor. The
and approve the amendments by a 107-1 vote in the
modified language is intended to close what some saw
Mexican Senate on December 12, 2019. Canada’s
as a possible loophole.
Parliament is expected to ratify it in early 2020.
 Violence Against Workers. Language that a party
Congress is considering USMCA under TPA rules, which is
would have to prove that a violation was in a “sustained
the time-limited authority that Congress uses to consider
or recurring” pattern was removed. In addition, the
implementing legislation for trade agreements under
amended agreement shifts the burden of proof to the
expedited procedures, provided that they meet certain
responding party by stating that a panel shall presume
statutory requirements. Under TPA, Congress has a
that a failure to comply affects trade or investment
maximum of 90 legislative days to vote on the agreement.
unless the responding party demonstrates otherwise.
Dispute Settlement
 Rapid Response Mechanism. A new “rapid-response”
Some Members of Congress criticized the 1994 North
mechanism would provide for an independent panel
American Free Trade Agreement (NAFTA), and
investigation at “covered facilities,” as opposed to a
subsequent USMCA, for an ineffective dispute settlement
government inspection, for suspected denial of the right
process. The NAFTA mechanism was used for 3 cases in its
of free association and collective bargaining. For the
25-year history, the last in 2000. The amended USMCA
United States, covered facilities would be limited to
includes the following:
those that have previously been proven to have violated
 Panel Blocking. The revisions prevents the ability of a
U.S. law. For Mexico, a claim can be brought only with
party to block establishment of a dispute settlement
respect to an alleged worker rights violation under
Mexico’s labor reform commitments under USMCA.
panel by ensuring the formation of a panel in cases
where a party refuses to participate in the process of
Violations could result in a suspension of preferential
selecting panelists.
tariffs or potential penalties on goods manufactured at or
services provided by the covered facility.
 Rules of Procedure. The amendment revises the
 Mexico’s Labor Reform Monitoring
guidelines for the Rules of Procedure for panels to give
. USMCA
the parties the right to submit testimony, the right to test
implementing legislation creates a new interagency
the veracity of submitted testimony, the right to submit
committee and reporting requirements to Congress on
Mexico’s implementation of labor reforms.
anonymous testimony, and for the panel to accept
Also
establishes key benchmarks for Mexico’s
https://crsreports.congress.gov

USMCA: Amendment and Key Changes
implementation processes and for labor attachés based
agreements (FTAs), as contributing to the rise of drug costs.
in Mexico.
The pharmaceutical industry and other observers contend
that patent and regulatory exclusivity protect U.S. creativity
Environmental Provisions
and innovation.
To address some congressional concerns about the
Regulatory Exclusivity
enforceability of environmental provisions, the amendments
to USMCA revised the environment chapter to expand the
 Biologics. The revised agreement removes a 10-year
coverage, enforcement, and monitoring functions of the
period of data exclusivity, under which a biosimilar
agreement. Some of the amendments to USMCA are
cannot use clinical trials generated by the reference
analogous to those in the labor chapter.
(branded) biologic to obtain marketing approval. The
 “In a Manner Affecting Trade and Investment.”
United States currently provides a 12-year period of
The
exclusivity, Canada 8 years, and Mexico 5 years.
revised text asserts the presumption that an
environmental dispute affects trade and investment
 Exclusivity Period. A three-year exclusivity period was
unless a respondent party can proved otherwise.
removed which would prevent a generic manufacturer

from using clinical data submitted in connection with an
Multilateral Environmental Agreements (MEAs).
application for marketing approval for new uses of a
The revisions require each party to adopt, maintain, and
previously-approved product.
implement laws, regulations and other measures to
fulfill the following MEAs to which they are a party:
 Regulatory Review. The revised text clarifies that the

regulatory review exception allows a person other than
Convention on International Trade in Endangered
the rights-holder to use, sell, or import a product
Species of Wild Flora and Fauna (CITES)

covered by an existing patent to generate information
Montreal Protocol on Substances that Deplete the
used in the marketing approval process.
Ozone Layer
 International Convention for the Prevention of
Patents
Pollution from Ship (MARPOL)


Patent Availability. The revised text precludes the
Ramsar Convention on Wetlands

availability of patents for new uses, methods, or
Convention on Antarctic Marine Living Resources

processes of an existing product.
International Whaling Convention
 Inter-American Tropical Tuna Convention
 Patent Term Extension. The revisions limit the
circumstance when an adjustment is available to extend
The USMCA, as originally signed, only made explicit
a patent term for delays in the market approval process.
reference to CITES, MARPOL, and the Montreal
Protocol.
 Patent Linkages. The changes modify the patent

linkage provision to provide for “effective rewards,”
Interagency Monitoring Committee. USMCA changes
such as a period of market exclusivity, for a successful
create in the implementing legislation an Interagency
challenge to the validity or a finding of noninfringement
Environment Committee for Monitoring and
of a patent.
Enforcement analogous to the labor chapter, and
establishes environment-focused attachés in Mexico
De Minimis
City to monitor compliance with the agreement.
USMCA raised the de minimis customs threshold for duty-
 Border Environment Cooperation. The implementing
free treatment to $117 for Canada and Mexico. A footnote
legislation authorizes for grants under the U.S.-Mexico
that allowed the United States to lower its $800 threshold to
Border Water Infrastructure Program, the Trade
maintain reciprocity was dropped.
Enforcement Trust Fund and a recapitalization of the
North American Development Bank (NADB).
Outlook
Some Members of Congress welcomed the changes to the
Motor Vehicle Rules of Origin
proposed USMCA, stating that they include stronger and
To address U.S. concerns about North American vehicle
more enforceable labor and environmental provisions and
production, the amendments further tightened the motor
that the removal of data exclusivity for biologic drugs will
vehicle rules of origin.
foster generic competition and lower prices. Other

Members are concerned about the rolling back of previous
Steel Production. USMCA added a requirement that
trade liberalization measures affecting the motor vehicle
70% of a motor vehicle’s steel and aluminum must
industry and in regards to IPR protection.
originate in North America to receive duty-free benefits.
The revisions states that steel must be melted and
For more information, see CRS In Focus IF10997,
poured within North America to be considered as
Proposed U.S.-Mexico-Canada (USMCA) Trade
originating, beginning at year seven of the agreement.
Agreement, by Ian F. Fergusson and M. Angeles Villarreal,
For aluminum, the parties shall consider appropriate
and CRS In Focus IF10038, Trade Promotion Authority
requirements at year 10.
(TPA), by Ian F. Fergusson.
Intellectual Property Rights
M. Angeles Villarreal, Specialist in International Trade
The amendment changed some of the patent and regulatory
and Finance
exclusivity provisions of USMCA. Some observers criticize
these provisions, long included in previous U.S. free trade
https://crsreports.congress.gov

USMCA: Amendment and Key Changes

IF11391
Ian F. Fergusson, Specialist in International Trade and
Finance

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https://crsreports.congress.gov | IF11391 · VERSION 6 · UPDATED