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USMCA Agreement Takes Giant Step Towards Ratification

Earlier today, House Democrats appeared before cameras on Capitol Hill to announce they had reached an agreement with the Trump Administration on the final text of the United States-Mexico-Canada Agreement. US Trade Representative Robert Lighthizer will meet next with his Mexican and Canadian counterparts.

Today’s announcement follows weeks of intense negotiations with the Office of the US Trade Representative on the agreement’s final text, particularly enforcement provisions on labor and environmental rules. Details remain limited, but today’s action moves US ratification efforts close to the finish line. Mexico has already formally ratified the USMCA and Canada is expected to follow suit very shortly.

This legislative action, once completed, will determine the all-important USMCA “effective date.” In the meantime, the current NAFTA rules will remain in place until the USMCA comes into force. Company executives should prepare their divisions for the new rules to take effect sometime in 2020 or possibly by January 2021, depending on the timing of the necessary ratification and regulatory actions.

Once Ottawa and Washington have completed their ratification process, all three capitals will move quickly to publish the critical USMCA “uniform regulations” – the fine print of the agreement. These regulations will be essential for company leaders to follow carefully as they will spell out new rules governing USMCA compliance and preferential tariff treatment. For the automotive industry, the regulations will detail new levels of regional value content requirements, as well as labor value content requirements impacting USMCA eligibility.

What is certain is that the months ahead will be filled with important announcements, clarifications, and legal and policy interpretations that will shape North American trade and global supply chains for decades to come. As we have done since the commencement of the USMCA negotiations, Arent Fox will stay close to these developments and issuing new alerts as information becomes available.

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