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Pac-West Panelists on USMCA Replacing NAFTA

Pac-West Panelists on USMCA Replacing NAFTA
September 08
09:48 2020

The United States-Mexico-Canada Agreement (USMCA) went into effect on July 1, replacing the North American Free Trade Agreement (NAFTA).  In Canada the new agreement is called CUSMA, and in Mexico it’s known as T-MEC.

Regardless of what you call it, here are the practical effects for the fastener industry.

“NAFTA is officially gone,” stated Jamie Lawrence of AVK Industrial Products.

Lawrence, Würth International trade compliance officer Chad Bussell and John Gaudette of Metric & Multistandard led a September 3 panel sponsored by the Pacific-West Fastener Association.

“USMCA is in effect now, so please reach out to a trade advisor to understand how this affects your (fastener) business,” Lawrence advised.

NAFTA still governs orders placed before July 1, Bussell clarified.

While NAFTA’s certificate of origin is no longer needed, fastener distributors still need some sort of certification, Bussell explained.

“Even if you’ve been to a factory and seen the fasteners made, someone can issue a certification of origin, the fasteners are not originated,” Bussell explained.

Overall, the USMCA is more flexible than NAFTA, allowing claim information to be written on a commercial invoice, according to the panelists.

Most fastener codes remain unchanged under USMCA, but there is a regional value content that requires calculation.

“If you’re a manufacturer, you have to do the math, and if you’re a distributor, you need to make sure your manufacturer did the math,” Bussell stated.

One of the most significant impacts on fastener distributors involves a delayed clause in the act.

“You have a little bit of a time bomb built into this act,” Bussell explained.

From now until July 1, 2023, nails can “tariff shift,” meaning foreign material has to start as something other than a nail, go through manufacturing in the U.S., Canada or Mexico, and end up as a nail. But in 2023, nails will require both tariff shift and that 70% of the steel used must originate in North America.

“This does not impact screws,” Bussell noted.

The best way to request documentation from a manufacturer is at the time the order is placed so that when the product ships the documentation is included with the order.

What is the transactional value of a fastener under USMCA?  It’s the overall value of a part, including value-added work, such as machining or plating, which changes the percentage of origin.

“60% is a threshold but it’s not where you want to be,” Bussell stated.

Beware discounts, Bussell warned, because they increase the foreign content value of a fastener.

“All of your math goes out the window at that point,” according to Bussell.

There is a low-value threshold for small orders under $1,000, Bussell explained.

“But if you have several orders under $1,000 go across the  border in a single day, customs is going to investigate,” he added.

As with any international order, proper documentation is essential.

“You need to have a really good paper trail,” Gaudette explained. 

The terms of USMCA will remain in effect for 16 years.  Web: Pac-West.org

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