The United States-Mexico-Canada Agreement (USMCA) — which replaced NAFTA in July 2020 — is the most heavily used free trade agreement for U.S. importers. If you're sourcing from Canada or Mexico and not checking USMCA eligibility for every shipment, you're almost certainly paying more duty than you need to.

The Basics: What USMCA Does for Importers

USMCA eliminates or reduces customs duties on qualifying goods traded between the United States, Canada, and Mexico. For many product categories, the preferential rate under USMCA is Free — meaning zero duty, compared to the General (MFN) rate that applies to imports from most other countries. The savings can be substantial: if your product's MFN rate is 8% and the USMCA rate is Free, you save $80 per $1,000 of product value on every shipment.

In the HTS, USMCA rates appear in the Special column with the indicators CA (for Canada) and MX (for Mexico). When you look up an HTS code on LookupHTS, these country indicators appear as pills in the detail panel, giving you an immediate visual signal of eligibility.

Rules of Origin: The Gatekeeper

Here's where most importers either succeed or stumble with USMCA: the rules of origin. Just because a product is shipped from Canada or Mexico doesn't mean it qualifies for USMCA treatment. The product must originate in the USMCA region under the agreement's specific rules, which vary by product.

USMCA rules of origin generally work through one of three mechanisms. The first is a tariff shift rule, which requires that non-originating materials undergo a specified change in tariff classification through production in a USMCA country. The second is a regional value content (RVC) requirement, which requires that a minimum percentage of the product's value come from the USMCA region. The third is a process rule, which requires specific manufacturing steps to be performed in the region. Many products use a combination of these.

🚗 The auto sector example: USMCA's auto rules of origin are among the most complex of any trade agreement. They require 75% regional value content (up from 62.5% under NAFTA), with specific requirements for core parts like engines and transmissions, and labor value content provisions requiring that a certain percentage of production be done by workers earning at least $16 per hour. If the auto industry finds it complex, don't feel bad if your product's rules of origin take some effort to understand.

How to Certify Origin

One of the improvements USMCA made over NAFTA is simplifying the origin certification process. Under NAFTA, you needed a specific certificate of origin form (CBP Form 434). Under USMCA, the certification can be made on any document — a commercial invoice, a standalone letter, or even an email — as long as it contains the nine required data elements specified in the agreement. These include the certifier's identity, the producer's identity, a description of the goods, the HTS classification, the origin criterion met, and the certification period.

Importantly, USMCA allows the importer to self-certify origin, not just the exporter or producer. This gives U.S. importers more control over claiming the preferential rate, but it also means you bear the responsibility if the claim turns out to be wrong. If CBP audits your USMCA claim and you can't substantiate it, you'll owe back duties plus interest and potentially penalties.

Common USMCA Pitfalls

The most common pitfall is claiming USMCA treatment without actually verifying that the product meets the rules of origin. I've seen importers assume that because their supplier is a Canadian company, everything they sell qualifies. But if that Canadian company is importing components from Asia and doing minimal processing in Canada, the finished product may not meet the tariff shift or RVC requirement.

Another frequent issue is failing to maintain records. USMCA requires that you keep all documents supporting your origin claim for at least five years from the date of importation. This includes supplier certifications, bills of materials, production records, and any RVC calculations. If CBP comes knocking in year four and you can't produce these documents, you're in trouble.

Is It Worth the Effort?

For most importers sourcing from Canada or Mexico, the answer is a clear yes. The duty savings on qualifying goods are real and recurring. The certification process, while it requires some initial setup, becomes routine once your supply chain documentation is in place. If you're importing from Canada or Mexico and haven't done a USMCA utilization review, it's one of the highest-ROI compliance exercises you can undertake.