Trade Cases

USMCA Implementation Not Likely Before July

April 9, 2020

Implementation of the U.S.-Mexico-Canada Agreement, the replacement for NAFTA, is now likely to occur July 1, possibly with portions of the agreement subject to a transition period.

Canada and Mexico have completed their entry-into-force notifications and the U.S. is expected to submit its notice soon. Procedure rules dictate that the agreement will go into effect three months after the last country submits its notification. The July 1 date is a month later than the Trump administration had hoped, but attempts at moving the date to June 1 were met with pushback from concerned parties.

Auto industry groups have requested more time to comply with the new rules-of-origin measures in the USMCA. The COVID-19 crisis has complicated the issue by causing the shutdown of automotive plants in North America as well as refocusing government attention from the agreement to fighting the pandemic.

The president of the Mexican auto industry says that it will take more than 90 days to make supply chain adaptations to meet the new origin requirements. Director Fausto Cuevas has asked for rules-of-origin implementation to be delayed until January 2021.

Mexican Undersecretary for Foreign Trade Luz María de la Mora said he could see a scenario where the agreement enters into force with a transition period allowed for the automotive sector.

“We have put this issue on the table many times, but unfortunately this is not a Mexican decision. This is a trilateral decision,” said de la Mora. “If there were to be flexibility on the part of the U.S. and Canada, we’re more than happy to do that.”

Rep. Debbie Dingell (D-MI) and Senate Finance Committee Chairman Chuck Grassley have urged the U.S. Trade Representative to delay the entry-into-force.

“We, a lot of people on my committee, see that [early date] as being a major problem, particularly for the supply chain for automobiles, and we’re asking for a later starting date,” Grassley told reporters on a conference call. “And I think that Lighthizer believes he doesn’t have leverage if he delays it, particularly on agriculture…. [But] we haven’t heard those sorts of concerns from agriculture.”

During a webinar on Monday focusing on trade during the COVID-19 emergency, Dingell said a delay of USMCA is necessary.

“We are — and I can’t believe that I myself am saying this — probably going to have to postpone some of the implementation of the NAFTA 2.0 because we have devastated the supplier base, but we can’t do it for a long period of time,” she said.