The United States-Mexico-Canada Agreement (USMCA) is the most important trade agreement for US importers. If your goods qualify, you pay 0% on reciprocal tariffs — a massive advantage when non-qualifying Canadian goods face 35% and Mexican goods face 25%. Here's how to determine if your products qualify and what you need to do to claim the exemption.
What Is USMCA and Who Qualifies?
USMCA replaced NAFTA in 2020 and governs trade between the US, Canada, and Mexico. Under USMCA, qualifying goods can enter the US duty-free — specifically exempt from the Section 122 tariff. Currently, approximately 89% of imports from Canada and Mexico claim USMCA preference. To qualify, goods must meet rules of origin requirements, meaning they must be substantially produced, manufactured, or originate within the USMCA member countries. The USMCA joint review is due July 2026.
Rules of Origin Requirements
The rules of origin are the key to USMCA qualification. Generally, a product must meet one of these criteria: (1) it is wholly obtained or produced in USMCA countries (e.g., agricultural products grown in Mexico), (2) it meets the product-specific rule of origin, typically requiring a tariff shift — meaning the raw materials are sufficiently transformed in a USMCA country, or (3) it meets a regional value content (RVC) requirement, usually 75% for most goods. The RVC can be calculated using either the transaction value method or the net cost method.
What Happens If You Don't Qualify
If your goods fail to meet USMCA rules of origin, they're subject to the full 10% Section 122 tariff. Under the old IEEPA regime, Canada faced 35% and Mexico 25% — so the SCOTUS ruling actually reduced the penalty for non-qualifying goods. Common reasons for disqualification include: too much non-USMCA content (e.g., Chinese components assembled in Mexico), failure to provide proper documentation, or goods that simply don't meet the tariff shift requirements. Even at 10%, the difference from 0% is significant for high-volume importers.
Auto Parts Special Rules
Automobiles and auto parts have the strictest USMCA rules. Passenger vehicles must meet 75% regional value content, with specific requirements for core parts (engine, transmission, body) at 75% RVC. Additionally, 70% of steel and aluminum used must originate in North America, and 40-45% of auto content must be made by workers earning at least $16/hour. Parts not meeting these standards face 25% Section 232 auto tariffs. Steel/aluminum components face 50% Section 232 (doubled June 2025). Note: goods subject to Section 232 auto tariffs are exempt from the Section 122 tariff (anti-stacking rule).
How to Claim USMCA Preference
Step 1: Determine if your product meets the rules of origin using the product-specific annex. Step 2: Obtain or prepare a USMCA certificate of origin — this can be a formal certificate or a statement on the commercial invoice. Step 3: Ensure you have supporting documentation (bills of materials, production records). Step 4: Declare the USMCA preference on your customs entry. Step 5: Retain records for at least 5 years — CBP can audit claims retroactively.
USMCA Review July 2026
The USMCA includes a joint review clause, with the first full review scheduled for July 1, 2026. All three countries will assess the agreement and can propose modifications. While a full renegotiation is unlikely, targeted adjustments to rules of origin (especially for EVs and batteries), digital trade provisions, and agricultural quotas are expected. Importers should monitor these negotiations as changes could affect qualification requirements.
Key Takeaway
USMCA offers the best tariff deal available to US importers — 0% versus 10% Section 122. The key is meeting rules of origin requirements and maintaining proper documentation. If you're sourcing from Canada or Mexico, investing in USMCA compliance is almost always worth it. The USMCA joint review is due July 2026.
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