New NAFTA Changes Include Stricter Rules of Origin for Steel Products, AIIS Says

Significant changes to rules of origin for steel products are coming, should the U.S.-Mexico-Canada Agreement be ratified and take effect as scheduled in 2020, the American Institute for International Steel said in a Nov. 20 blog post. As currently drafted, those rules would become more restrictive for North American steel products of several headings in Chapter 73, with fewer allowable tariff shifts and new regional value content requirements.

The changes would affect non-seamless pipe and tube products of headings 7305 and 7306; pipe fittings of heading 7307; steel structures of heading 7308; wire, rope, cable, barbed wire, grill, netting and fencing of headings 7312, 7313 and 7314; chain of heading 7315; nails of heading 7317; and screws, bolts and nuts of heading 7318. They would be phased in over two to three years after the date USMCA enters into force, which is currently set for Jan. 1, 2020.

A major change will be the addition of regional value content requirements for changes in classification from Chapter 72 to Chapter 73, which previously had conferred origin based solely on tariff shift rules. Under USMCA, many of those tariff shifts will “no longer be sufficient unless at least 70% by weight of the inputs from specified provisions of Chapter 72 and 73 are considered originating products, or the required RVC amount (ranging from 50% to 75% depending on product and method of calculation) is met,” AIIS said.

The new rules of origin are “very specific,” and tariff shift rules and regional value content thresholds vary from product to product, AIIS said. “For example, the four six-digit headings in HTS 7308 (the only heading with a two year rather than three-year phase in period) have similar but slightly differing rules, specifically regarding the required [regional value content],” it said.

The new 70 percent originating requirement and expanded regional content requirements “will require producers seeking to qualify their goods for tariff preferences to undertake increased recordkeeping and accounting activities, and to be prepared to defend preference claims using those procedures,” the trade group said. Other administrative changes include that NAFTA Certificates will no longer be required; that certificates of origin may be provided in invoices or other documents, and need not follow a prescribed format; and that importers will be able to provide certifications.

“The specific rules remain subject to legal review and authentication, and of course final ratification by the three governments,” AIIS said. The agreement is seen as likely to get past the newly Democratic House of Representatives, though that body could make changes related to implementation (see 1810250039). Some Senate Republicans are pushing for a USMCA vote during the lame duck (see 1811210010).