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USMCA Language "Pretty Exciting" For Supply Chain Professionals

USMCA Language "Pretty Exciting" For Supply Chain Professionals

A lobbyist for C.H. Robinson Worldwide Inc. (NASDAQ: CHRW) believes the United States will approve the U.S.-Mexico-Canada Agreement sometime between November and March.

Negotiations among the three nations to replace NAFTA concluded in September 2018. Mexico has signed the USMCA into law, and Canada is close to ratifying it. In the United States, Congress has yet to take up the free trade agreement.

"There is one more major step in the process, and that is when the administration actually sends the formal text to Congress for consideration. That starts a 90-day clock. Once that happens, Congress has 90 days to get it through both the House and the Senate," Jason Craig, director of government affairs for C.H. Robinson told an audience at the CSCMP Edge 2019 conference in Anaheim, CA, on Sept. 16. "The text is already public. It can't be changed, except for one or two instances. … For the most part, this is an up-or-down vote."

Craig, the lobbyist, continued, "Nancy Pelosi and the Democrats have had a working group going on for most of the summer identifying issues that they would like to see addressed."

Those issues include patent protection for biologics and labor, environmental and enforcement questions.

"We anticipate that 90-day clock could start at any time," Craig said. "I'd say the window (for passage) is sometime between November and maybe March, once that 90-day clock starts. Could it be a choppy process? Could it be a little hair-raising? Absolutely. But right now it looks optimistic.

"So what should we be dialing into as supply chain professionals? We should be dialing into Chapter 7, which is the customs and trade facilitation chapter," he continued, explaining that the USMCA's 28 chapters also includes sections on the automotive and agriculture industries and intellectual property. "In NAFTA, the trade facilitation and customs chapter is exceedingly short. I think it was two or three pages at most. With this, we've got 30 pages of text to deal with."

"A big step"

Ben Bidwell, director of customs brokerage for C.H. Robinson, said Chapter 7 includes rules for online publication.

"It's about what needs to be posted online, what is in the agreement that every country must do. Some of these things sounds very basic and if you're looking at it solely through a U.S. importer lens or U.S. shipper lens, I think we've come to expect a lot of these things are just there. But that's not necessarily the case throughout North America," Bidwell said.

Bidwell said the Chapter 7 text lays out procedures for posting required documents as well as information on duties, taxes and fees.

"The other big one is how to correct errors within customs transactions," he said. "We all know that customs errors happen. Regardless of how that comes to be, when they're discovered, they need to be corrected. This really details out what that process is in each country to correct those errors."

Craig pointed out, "The language is there. That's a big step."

Advance ruling provisions

Brent Connor, senior counsel for Thompson Hine in Washington, DC, said advance ruling provisions in USMCA are similar to those in NAFTA, but "these provisions go further than any other free trade agreement. This is really going to be the benchmark for future agreements. 

"Each party, each country is required to issue advance rulings on how certain imports are going to be treated," Connor said. "The ruling has to apply uniformly throughout the party's territory. There can't be variance from port to port. That's a problem now, even in the United States."

Connor said Chapter 7 contains something "extraordinary."

"If a requester demonstrates reliance in good faith to its detriment on a ruling and then the ruling gets modified or revoked, Customs has to give you a 90-day postponement on making that ruling effective. I've never seen that in any rules or laws or regulations. It's really rare. Whenever Customs comes out typically with a ruling, it's effective immediately and you have to comply. Now if you shown you've relied on a ruling that they came out with to your detriment," Connor said, "they can't just up and switch it on you. They have to give you a 90-day cushion. That I've never seen before."

De minimis

Bidwell said when looking at informal entry procedures and what's changing, "Canada is raising their informal value limit from $2,500 Canadian dollars to $3,300 Canadian dollars. Mexico is increasing theirs from $1,000 USD to $2,500 USD. They're both doing that to meet the current U.S. informal limit of $2,500."

Bidwell said that although the USMCA text has been written, rules on de minimis could be revised.

"Right now the U.S. has an $800 de minimis level. Both Canada and Mexico, as part of this agreement, are raising their de minimis levels. However, what they're raising them to is still less than one-third of our threshold," Bidwell said. "The text is done. Nothing can change, except for one or two things. De minimis is one of those areas that can change to an extent."

Craig noted, "If you read the text in Chapter 7, there's actually an asterisk near the de minimis that says any country can lower theirs to meet another country's de minimis. So there is a chance as this goes through Congress the $800 de minimis gets lowered to something similar to what Canada or Mexico is."

He said a decision on de minimis is "something a lot of people in the industry are going to look for because there are very strong forces both for and against this — maintaining the $800 de minimis into the U.S. and changing it to meet Canada and Mexico's lower de minimis." 

Single window

Kathy Neal, global trade compliance director for Regal Beloit, said Chapter 7 addresses a "single window," something that was not included in NAFTA.

"The single window allows for one set of data to be used to transmit goods across the borders of all three countries," Neal said. "It's really exciting when you think about it. The data is pretty much the same. You identify your goods. You have a single description. You have usually a single HTS number — a tariff classification. You have one value. You have one way of packaging. All of that data is going to remain the same no matter where it's going, as is the shipper and receiver."

Neal said the Commercial Customs Operations Advisory Committee has worked with the Mexican and Canadian governments to identify the data elements that need to be transmitted. 

"USMCA calls for additional work to be done to establish this process for all three countries," she said.

Bidwell said USMCA provides consistent procedures throughout North America. "It's that all ports should be the same and uniform when it comes to tariff classification and valuation."

He said USMCA also provides "an outlet for the trade to raise inconsistencies with Customs headquarters. There is going to be a clear … escalation path for the trade community when there are customs issues. … This is something that can only help strengthen that uniformity and consistency."

Risk management, post-clearance audits and appeals also are addressed in USMCA.

"Again, the theme here is consistency and applying things uniformly," Connor said. "The decision has to apply to all traders dealing with the same product. There can be no variance from port to port."

He explained, "When you don't get a satisfactory answer from a port … with regard to administrative guidance, each country has to have procedures where the customs office can request guidance … and the decisions have to be available on a public website."

Today a Mexican customs broker only can operate in four ports. "This article in USMCA gets rid of that arbitrary number."

It's an important change, Craig said.

"Many of you remember when Customs reassigned resources to El Paso to process people instead of freight. That resulted in long lines at the border. One of the issues folks had on the outbound side was if they wanted to change from El Paso to Laredo, they might not have a relationship with a customs broker to file an export entry. They were stuck," Craig said. "They had to establish a new relationship with a new Mexican customs broker."


Connor said there are new enforcement provisions throughout Chapter 7. "There has been nothing like this in NAFTA before."

The new enforcement provisions "create a platform for sharing information. One of the main things is they contain forward-looking initiatives. A lot of the language is hearts and flowers. … But it's significant because this enforcement effort is now more of a government-to-government task," he said. "What's happened with the USMCA enforcement provisions is it's expanded to the full government — all levels."

Connor said the Trump administration is particularly interested in enforcement provisions. "They want to prevent anyone from circumventing duties — anti-dumping duties, countervailing duties, tariffs."

He finds language on trade in the USMCA text interesting.

"That is equally extraordinary in that they're stepping up enforcement cooperation and sharing information and, at the same time, they're sensitive to how it impacts the flow of goods," Connor said.

Craig said while Chapter 7 hasn't gotten a whole lot of notice, "what's in here for supply chain professionals is pretty exciting."

Connor does have a concern.

"The only thing I'm concerned about is are they actually going to do this," he said. "My sense is that USMCA was a kind of a trial run. How far can we push our free trade allies in getting more, to go further in a multilateral free trade agreement? … How long is going to take to get to a single window? … They're biting off a lot. Hopefully it's not more than anyone can chew."

Neal agreed, "As far as negatives, there is not a lot of negative with USMCA compared to NAFTA. For the most part, it's positive."

Bidwell reminded his co-panelists of the concern over de minimis.

"Overall, the one thing that is a concern to some folks in the trade is going to be de minimis. If the U.S. lowers de minimis level from $800 down to, say, $100, that would be a very big change within our industry."

Image Sourced from Pixabay


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