Panel Optimistic About USMCA Ratification, Stressed About Time to Prepare

Trade lawyers talking about changes to NAFTA's rule of origin said they're fairly optimistic the trade deal rewrite will be ratified in Congress in 2019. But aside from the auto sector, which has a multiyear transition period, they're concerned that by the time ratification comes, there won't be time for importers and exporters to adjust by Jan. 1, 2020, when the replacement agreement is supposed to be in force.

Trade practitioner George Tuttle III, who was speaking on a panel at the American Association of Exporters and Importers Annual Conference June 27 in Washington, said he thinks it's possible a vote could come in October or November, but he thinks it's most likely to happen before the Christmas break. "I think this is going to go down to the wire," he said, though he said he does think it will be ratified, because otherwise House Democrats would look obstructionist.

Fellow panelist Jessica Wasserman, a partner at Greenspoon Marder, said she thinks it looks "very good right now" for ratification, and pointed to President Donald Trump's comments the day before, when he said he's willing to make some changes to the pact to win Democratic votes. She said the fact he made that statement "is huge!"

The moderator said she's afraid that the tariffs on Mexican imports over migration could come back in 90 days if the administration isn't satisfied that Mexico is doing enough to prevent migration to the U.S. across its territory. "I think that’s not going to happen," Wasserman said. "I don’t know why."

She said a USMCA vote might come in October, because September will be consumed with passing spending bills before the end of the fiscal year.

Wasserman, who has agricultural exporting clients, said that even though Canada provided less than 5 percent additional access in poultry, dairy and eggs, the NAFTA rewrite made some good changes to sanitary and phytosanitary regulation and biotechnology. She said that SPS holds frequently frustrate her, as there is little transparency around why goods are stopped.

Tuttle told the audience about certificates of origin, how you can say the good qualifies "right on the invoice."

"It allows the importer to self-certify that the goods are qualifying. Big change from the existing NAFTA agreement," he said. "It’s going to look a lot more like other FTAs in that respect."

Tuttle warned that although "there is going to be lots of pressure from your company that you self-certify," compliance professionals would have to be able to prove through a verification audit that the goods are in compliance. "You have to be able to back it up," he said.

He also noted that exporters have to pay attention to rules of origin, too. He said Mexican auditors "are not very kind. It will give you ulcers if you have to go through a Mexico USMCA audit."

Mercedes-Benz trade compliance specialist Justin Huguet said the Alabama assembly plant will be most affected by the steel and aluminum localization requirements and the increase in regional value content from 62.5 percent to 75 percent. When making sourcing decisions, Huguet said, they already had NAFTA rules of origin in mind, but not past 70 percent. So purchasing will need to change over the next few years, he said.