Canada becomes third country to ratify new NAFTA agreement
March 16, 2020
Authored by RSM Canada LLP
Cleo L. Melanson, CPA, CA, CMA shared this article
TAX ALERT |
On March 13, 2020, Canada finished passing the ratification legislation for the Canada-United States-Mexico Agreement (CUSMA), which will replace the North America Free Trade Agreement (NAFTA) as the new rules for trade in North America. Now that the agreement has been ratified in all three countries, there only remains the formality for the governments of the United States of America, Mexico and Canada to notify each other of the agreement being ratified in their respective countries. Once the notification is received by all three countries, the agreement will be effective on the first day of the third month from this time. For example, if the notifications are completed in March, then the agreement will be effective as of June 1, 2020.
With the effective date of the agreement fast approaching, North American importers should review their supply chains to ensure they are ready for the new agreement. The CUSMA agreement, also known as the United States-Mexico-Canada Agreement (USMCA) and Tratado entre Mexico, Estados Unidos y Canada (T-MEC), in the U.S. and Mexico respectively, has largely been discussed for its changes to the rules of origin surrounding automobiles. However, importers across North America should be aware that the agreement changes the rules of origin for many imported products. With the changes coming into effect, importers should take this opportunity to review their import process to ensure:
- Do goods that originate under NAFTA, still originate under CUSMA/USMCA/T-MEC?
- Are goods being classified properly upon import?
- Is the correct value being applied to inputs in the manufacturing process?
- What are the ramifications of the non-rule of origin changes under the new agreement?
- Can I change my source of supply to ensure goods qualify or make goods qualify under the agreement?
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This article was written by Kenn Jordan and originally appeared on 2020-03-16 RSM Canada, and is available online at https://rsmcanada.com/our-insights/tax-alerts/canada-becomes-third-country-to-ratify-new-nafta-agreement.html.
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