ARTICLE
16 September 2020

USMCA Rules Of Origin: De Minimis As An Alternative To Qualify For Tariff Preferences

FL
Foley & Lardner

Contributor

Foley & Lardner LLP looks beyond the law to focus on the constantly evolving demands facing our clients and their industries. With over 1,100 lawyers in 24 offices across the United States, Mexico, Europe and Asia, Foley approaches client service by first understanding our clients’ priorities, objectives and challenges. We work hard to understand our clients’ issues and forge long-term relationships with them to help achieve successful outcomes and solve their legal issues through practical business advice and cutting-edge legal insight. Our clients view us as trusted business advisors because we understand that great legal service is only valuable if it is relevant, practical and beneficial to their businesses.
The United States–Mexico–Canada Agreement's (USMCA) de minimis provision allows a small percentage of outside-of-North America originating inputs that do not meet the applicable tariff shift, to be used in a qualifying USMCA good.
United States International Law

The United States–Mexico–Canada Agreement's (USMCA) de minimis provision allows a small percentage of outside-of-North America originating inputs that do not meet the applicable tariff shift, to be used in a qualifying USMCA good.

USCMA increased the de minimis threshold from NAFTA's 7%, to 10%. This is, through the current de minimis provision, a good shall be considered USMCA originating even when it fails to qualify as such under the relevant Rule of Origin, as long as the value of all non-originating (outside-of-North America) materials used in the production of the good do not exceed 10% of either the Transaction Value or the total cost of the end product.

Goods that were not eligible under NAFTA at 7%, may now qualify for USMCA tariff preferences under the 10% allowance. Producers may evaluate the replacement of certain USMCA-originating materials with non-originating materials as an alternative to reduce costs and still continue qualifying for preferential treatment under the de minimis rule.

Goods must still satisfy all regional content requirements (i.e. labor) and all other applicable regulations, to qualify as originating.  Still, hey, you have a 10% "free pass" that you may use in your now very strict regional-content calculations, have you taken a look to see if you may benefit from it?

Please note that we are not referring to the express (courier) shipments, at times also referred as de minimis shipments, that benefit from reduced or no duties and taxes, in a nutshell, US$800 for goods coming into the United States, US$117 with no customs duties and US$50 for tax benefits in goods coming into Mexico, and C$150 with no customs duties and C$40 for tax benefits in goods coming into Canada.

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.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More