On April 24, 2020, U.S. Trade Representative (USTR) Robert Lighthizer notified Congress that Canada and Mexico have taken the necessary measures to comply with their obligations under the United States–Mexico–Canada Agreement (USMCA), which replaces the North American Free Trade Agreement (NAFTA). The U.S. also sent a notification to Canada and Mexico saying it had completed the necessary measures for the trade agreement to take effect. The agreement is expected to enter into force on July 1, 2020.
The implementation date was announced despite requests from U.S. trade associations and some members of Congress, including the Senate Finance Committee, to delay the launch date because of the COVID-19 pandemic, which they argued has diverted resources required to ensure a smooth transition. Separately, 31 members of the House of Representatives also sent a letter to the USTR requesting flexibility around the rules of origin requirements for automotive manufacturers in the agreement, "to allow the auto industry an appropriate adjustment period and account for delays caused by the COVID-19 pandemic." On the other hand, Lighthizer has argued for continuing with the implementation timeline, noting that the COVID-19 pandemic, more than ever, demonstrates the need for the U.S. to increase manufacturing capacity and investment.
Since the announcement, Ambassador Lighthizer has been engaged in discussions with Congress regarding entry-into-force issues and enforcement mechanisms outlined in the agreement, including the effect of the COVID-19 pandemic, the establishment of a labor panel for facility-based enforcement of the agreement's labor obligations, and the creation of a 12-member independent labor-expert board to monitor and evaluate the implementation of Mexico's labor reform and compliance.
For a summary of the principal provisions of the new agreement, please see our prior update here.
We will continue to monitor developments in the implementation process, but in the interim, if you have any questions regarding how USMCA implementation is expected to affect your business, please contact Venable's International Trade Group.