The United States-Mexico-Canada Agreement (USMCA) is the trilateral trade agreement that replaced NAFTA on July 1, 2020. It governs approximately $2 trillion in annual trade between the three North American countries and provides preferential — often zero — duty rates for goods that meet its rules of origin requirements. The agreement includes updated provisions for digital trade, intellectual property, labor standards, and environmental protections that were absent from NAFTA.
Why It Matters for Importers
For importers sourcing from Mexico or Canada, USMCA can eliminate or significantly reduce duty costs. However, the agreement's rules of origin are more stringent than NAFTA's were. Products must meet specific criteria — including tariff shift requirements, regional value content thresholds, and in some cases labor value content requirements — to qualify for preferential treatment. Simply being manufactured in Mexico or Canada does not automatically mean a product qualifies.
The stakes for getting USMCA claims right are high. CBP verifies origin claims and can retroactively deny preferential treatment, assess full MFN duties on past entries, and impose penalties. Importers should be auditing their USMCA compliance now to ensure their claims are defensible.
Key Details
- USMCA entered into force on July 1, 2020, replacing the 26-year-old NAFTA.
- The agreement has a 16-year term with a mandatory joint review at the 6-year mark. At the first joint review on July 1, 2026, the United States did not agree to extend it, so the three countries now hold a joint review every year. Withdrawal is a separate step: under Article 34.6, it takes effect six months after a country gives written notice.
- Automotive rules of origin are the most complex in any trade agreement, requiring 75% regional value content (up from 62.5% under NAFTA) and a minimum labor value content of $16/hour for 40-45% of vehicle content.
- USMCA eliminated NAFTA's investor-state dispute settlement between the U.S. and Canada, and limited it between the U.S. and Mexico.
- The agreement requires a certificate of origin (which can be self-certified by the producer, exporter, or importer) to claim preferential treatment.
The 2026 Review
The first mandatory joint review of USMCA was held on July 1, 2026, and the United States did not agree to extend the agreement for a new 16-year term. Canada and Mexico both said they support renewing it. USMCA remains in force, and the three countries now hold a joint review every year. Unless all three confirm an extension, the agreement terminates on July 1, 2036; they can still extend it for another 16 years at any time before then, with each head of government confirming in writing. USTR is taking public comments for the 2027 annual joint review until 11:59 p.m. EST on January 12, 2027 (docket USTR-2026-0595 at comments.ustr.gov). Importers relying on USMCA preferences should follow each annual review closely.
For a detailed comparison of USMCA and NAFTA requirements, see our guide on USMCA vs. NAFTA.