United States: NAFTA Renegotiation Concluded: Introducing The USMCA

Last Updated: October 10 2018
Article by Doreen M. Edelman, Alan F. Enslen and Julius Bodie

On September 30, 2018, hours before a deadline that mandated the publication of a modernized NAFTA text, the United States, Mexico, and Canada agreed to an updated trade agreement after more than a year of negotiations. The 1994 North American Free Trade Agreement (NAFTA) was originally implemented to promote economic growth and the harmonization of trade standards throughout the continent; however, critics of the deal believed it to be outdated in many respects. Key issues at the negotiating table included automotive content rules of origin, access to government procurement, various dispute resolution chapters, labor standards, agricultural safeguards, and much more.

The new agreement will be known as the United States-Mexico-Canada Agreement, or USMCA, and will now head back to the respective legislative bodies of the three nations for domestic implementation. While many of the main provisions won't take effect until 2020, it is critical for U.S. businesses to understand the updated features, highlights, and changes in the new 34-Chapter USMCA. Read on for an analysis of key features of the agreement.

Automobile Content Rules of Origin

One of the main sticking points in the last year of negotiations was the U.S. position on automobile content rules of origin. Under the USMCA, automakers will now be able to qualify for zero tariffs on cars and trucks if 75 percent of their vehicles' components are manufactured in one of the three nations, up from the 62.5 percent requirement in NAFTA. The change will be implemented in stages, and cannot be first implemented before January 1, 2020. In addition, 40 – 45 percent of all North American vehicle production will have to be produced by workers making at least $16 an hour.

Labor Standards

The Labor Chapter provides for enforceable labor obligations for the parties, and obliges the nations to adopt labor rights laws and practices as recognized by the International Labor Organization. The Chapter includes an Annex on Worker Representation in Collective Bargaining in Mexico, and as mentioned above, increases the minimum wage for automobile workers.

Environmental Standards

The Chapter on environmental standards obliges the parties not to weaken or reduce environmental protection laws to encourage business or trade, and recognizes key issues such as the protection of the ozone layer, the protection of marine life from ship pollution, marine litter, air quality, and endangered species. It further obliges all three countries to prevent overfishing and stop subsidizing fisheries.

Currency Manipulation

A new chapter was added in the USMCA that addresses "Macroeconomic Policies and Exchange Rate Matters." It obliges the parties to avoid manipulating exchange rates through competitive devaluation and also establishes certain reporting provisions to promote transparency involving monthly and quarterly reports to the International Monetary Fund (IMF). The provision also establishes a trilateral "Macroeconomic Committee" to monitor the implementation of the chapter.

Intellectual Property Protection

A new intellectual property chapter largely resembles the provisions in the Trans-Pacific Partnership trade agreement that the U.S. abandoned in early 2016. The new provisions strengthen key copyright and patent protections, including giving biologic drugs ten years of data exclusivity protection (Canada's domestic law currently only protects biologics for eight years), and lengthening the protection on copyright to the term of the author's life plus 70 years (Canada's copyright law is currently only the life of the author plus 50 years). The Chapter also strengthens provisions for protecting trademarks, such as well-known marks.

Market Access for Goods and Updated Dairy Rules

One of the tensest negotiating points between the U.S. and Canada concerned Canadian dairy market access for the U.S. dairy industry. Under NAFTA, Canada maintained a dairy pricing scheme that effectually prevented U.S. farmers from entering the market. Under the USMCA, the dairy market will be greatly expanded for U.S. farmers and exporters.

Digital Trade

A new digital trade chapter addresses customs duties in cross-border digital transactions, data localization, and enforceable consumer protection in the digital marketplace. It also promotes collaboration in addressing modern cybersecurity challenges.

Dispute Settlement

The NAFTA Chapter 11 on investor-state dispute settlement (ISDS) mechanisms that allowed companies to sue governments for interfering with potential future profits with legislation or policy was removed for the USMCA. However, the NAFTA Chapter 19 dispute resolution process that provides an arbitration process for companies who feel they have been unfairly affected by anti-dumping and countervailing duties remains in the new USMCA text. This was an important concession Canada sought because of its history of softwood lumber disputes that challenged certain U.S. trade restriction mechanisms.

Non-Market Economy Restriction

The USMCA also contains a provision that gives the parties an option to terminate the entire agreement if any of the three countries enter into a free trade agreement with a "non-market economy," language clearly aimed at preventing Mexico or Canada from entering into any type of trade deal with China. If this clause is triggered, it gives the remaining parties the option to continue the USMCA in an amended bilateral agreement.

De Minimis

Under the USMCA, Mexico and Canada will increase their de minimis shipment value levels, which is the minimum value an imported shipment is subject to duty collection and customs documentation. Mexico's de minimis threshold will double from $50 to $100, and Canada is doubling its threshold from C$20 to C$40.

Section 232 Tariffs

Although the U.S. Section 232 tariffs on steel and aluminum were not lifted, Section 232 was addressed in various side letters that accompanied the text of the USMCA. The U.S. agreed to exclude 2.6 million automobile imports each from Canada and Mexico from potential Section 232 tariffs, a number that is far higher than either nation's current level of automobile exports to the U.S.

Lifespan of USMCA

The USMCA will expire in 16 years, and the three nations will conduct a joint review six years after the deal enters into force with an option to extend the deal beyond the planned 16-year term.

The updated chapters also address topics like anticorruption, textiles and apparels, financial services, and telecommunications. The U.S., Mexico, and Canada are expected to sign to the USMCA by the end of November, and it will then be up to the domestic legislatures to enact the provisions of the USMCA into domestic law. If you have any questions about any of the new requirements or provisions of the USMCA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions