KPMG Says Start Evaluating Now How USMCA Will Change Your Importing Practices

While the changes are likely at least a year away, a KPMG managing director of Trade & Customs Services, Gisele Belotto, told clients that the "changes [to NAFTA] are pretty extensive, and a lot more than changing the name." KPMG held a webcast on understanding the trade implications of the United States-Mexico-Canada Agreement on Oct. 16. While media coverage has been extensive on the changes to the auto rules of origin, and how that will make it more difficult for Mexican and Canadian autos to enter the U.S. duty-free, KPMG professionals noted that many other products' rules of origin became looser, making it easier to qualify the imports as originating in one of the NAFTA countries.

The presentation noted that the new methodologies for confirming chemical rules of origin "is expected to substantially increase the number of chemical imports qualifying for duty-free treatment." Imported chemicals that are purified, blended, have a change in particle size, chemical reaction, isomer separation, or have a biotechnical process done in any of the three countries will count as originating from those countries. In the past, chemicals only qualified if there was a tariff shift as a result of the transformation.

Andy Doornaert, another managing director at Trade & Customs Services, said the de minimis value standard in calculating rules of origin also was loosened. Under NAFTA, a product that had less than 7 percent foreign content didn't have to describe country of origin for components that only made up that amount of the value or less. Now, it will be 10 percent, though that cannot include international freight costs.

The tariff shift rule is "much more flexible" for agricultural and construction machinery such as backhoes, he said. In cars, there will be no tracing rules, though they remain in ATVs and motorcycles. "The entire purchasing price [of a part produced in a NAFTA country] would be considered originating," he said. "This will make life easier for suppliers that are confused or stressed about providing trace value." The new rule of origin for cars and light trucks that requires regional steel content is only for the carmaker, not for Tier 1 and Tier 2 suppliers, he said.

Belotto said the new agreement will affect some companies more strongly than others. But even if you don't currently use NAFTA to import items duty-free, you should see if the products you import from Mexico or Canada might qualify in the future, KPMG said. "If there’s anything we learned from the additional tariffs on China and the additional tariffs on steel and aluminum -- it takes time … to take measures to handle that impact," Belotto said. "Don’t wait. Start looking at that right now. This is not something that can be done by the trade function alone."