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Pursuant to executive orders 14193 and 14194 of Feb. 1, 2025 (Original Executive Orders), President Trump announced the adjustment of duties on almost all imported products of Mexico and Canada by imposing an additional 25% ad valorem rate of duty (with an exception for Canadian energy products, which were subject to a 10% tariff) (National Emergency Tariffs). The National Emergency Tariffs were temporarily paused by additional executive orders 14197 and 14198 of Feb. 3, which suspended implementation of the duties for thirty days until March 4. On March 2, executive orders 14226 and 14227 amended Section 2 of the Original Executive Orders relating to the availability of de minimis treatment for certain articles.
No Tariffs for USMCA-Compliance Imports
Most recently, on March 6, the President announced new executive orders (here and here) adjusting the National Emergency Tariffs that had come into force on March 4. These new changes include:
- USMCA Exemptions – all products of Canada and Mexico that comply with the United States-Mexico-Canada Agreement (USMCA) and are imported into the United States on or after 12:01 a.m. EST on March 7 are exempt from the National Emergency Tariffs.
- Reduced Duties for Potash – the rate of duty for potash is reduced from 25% to 10%.
The newly announced exemptions for USMCA-compliant goods are significant given that many imports from Mexico and Canada that have previously not been claimed under the USMCA could be eligible. For example, importers of goods may not have previously sought USMCA compliance because prior low rates of duty meant limited savings with respect to compliance costs, but the higher National Emergency Tariffs could cause that economic analysis to change. Note also that the National Emergency Tariffs are in addition to the tariffs on aluminum and steel imports that the President announced in two separate proclamations on February 10.
USMCA Qualification
In order for a good to qualify for duty-free treatment under the USMCA, a good must (i) be “originating,” meaning it must be produced primarily in the United States, Canada or Mexico, and (ii) meet specific “rules of origin” requirements that typically involve a certain percentage of the product's value being sourced from within the North American region, with the specific percentage depending on the product category. Put more simply, a significant portion of the good's production and materials must come from within the USMCA countries to qualify for duty-free treatment.
Some of the key considerations for USMCA qualification include:
- Originating Goods – a good is considered “originating” if (i) it is produced entirely in one of the USMCA countries, or (ii) if it is produced using a combination of materials from all three countries but meets the specific rules of origin for that product category.
- Rules of Origin (ROO) – the ROOs are detailed regulations that set forth how much of a product's value must come from North America to qualify as originating.
- Regional Value Content (RVC) – this is the percentage of a product's value that must be sourced from within the USMCA region to qualify.
Different from the prior North American Free Trade Agreement requirements, the USMCA does not require a specific certificate of origin form (the CBP Form 434 is no longer in use, but CBP has made available on its website an optional certification of origin template for the USMCA and other trade agreements). Instead, a claim for preferential treatment can be made on an invoice or other document, including the necessary data elements to prove origin (which include the nine data elements listed on Annex 5-A to USMCA Chapter 5).
The importer of record is responsible for properly declaring the value, classification and country of origin of entered products, as well as paying duties, taxes and other fees. Importers must maintain documentation supporting customs declarations, including USMCA originating status, for five years. Any false statements about the country of origin or legal compliance with trade agreements can trigger enforcement under the federal False Claims Act, leading to severe civil and criminal penalties that may include treble damages.
For clients wishing to determine whether their products may qualify under the USMCA, they should consult the ROOs to determine the required RVC and manufacturing processes of the goods, and confirm the good materials to calculate the percentage of the good’s value that originates in USMCA countries.
[1] The proclamations modified the steel and aluminum tariffs that the President had originally imposed in 2018 under Section 232 of the Trade Expansion Act of 1962. More specifically, the actions expanded the original Section 232 tariffs by (i) ending all country exemptions, phasing out the specific product exclusion process, and terminating all existing General Approved Exclusions (GAEs); (ii) raising the aluminum tariffs from 10% to 25%; (iii) adding more downstream steel and aluminum products to the tariffs' coverage; (iv) and creating an exemption process for imported derivative articles made from steel “melted and poured” and aluminum “smelted and cast” in the United States.
