Tax & Trade Blog
CUSMA Update: Compliance Changes Incoming!
With the passage of the Canada United States Mexico Agreement’s (“CUSMA”) implementing legislation on March 13, 2020, the Canada Border Services Agency (“CBSA”) has released several new Customs Notices which outline the specific implementation steps for when the agreement comes into force (which is scheduled to be July 1st, 2020).
Customs Notice 20-14 (Implementation of the Canada-United States-Mexico Agreement (CUSMA)) provides the following big-ticket changes, among others, that importers and exporters can expect under the new regime:
Tariff Provisions – The Notice states that access to preferential tariff treatment under CUSMA will be determined using the updated Rules of Origin and Origin Procedures found under CUSMA Chapters 4 and 5, respectively. The Notice also highlights additional specific rules regarding Textiles and Apparel under Chapter 6 as well as the use of the Mexico-United States Tariff (MUST), which can no longer be used for CUSMA.
Advance Rulings – The Notice provides that all advance rulings for origin issued under NAFTA will only remain valid for goods imported under NAFTA’s preferential tariff treatment. This means that new advance rulings must be obtained for CUSMA.
New Certificates of Origin – CUSMA also substantially changes the Certificate of Origin process from the old NAFTA regime.
Under CUSMA, there is no prescribed form for the Certificate of Origin. Instead, a Certificate is required to contain several prescribed elements (names, email addresses, etc.) of the producer, exporter, and importer of the goods.
Additionally, Certificates can now be certified by the Importer (a change from NAFTA) provided they keep records to substantiate the origin of the goods.
Last, CUSMA prescribes specific wording for the certification—which differs from the existing NAFTA language. Businesses must take note that new CUSMA Certificates of Origin will be required for all importations beginning July 1st, 2020.
Additionally, the CBSA has also released two other Customs Notices which deal with increases to the Low Value Shipment (LSV) and De Minimus Shipment thresholds on account of CUSMA.
Customs Notice 20-15 (Increase to the Low Value Shipment (LVS) Threshold for Goods Imported into Canada) provides that the LVS thresholds for all commercial importations will increase to $3,300 CAD from their current amounts once CUSMA is in force. The LVS threshold determines a good’s eligibility for the Courier Low Value Shipment Program, which allows for express clearance of goods and reduced documentary requirements. Because of this, commercial goods valued at less than $3,300 will be exempt from the Proof of Origin requirements under subsection 35.1(1) of the Customs Act.
Customs Notice 20-18 (De Minimis Thresholds with Respect to Customs Duties and Taxes for Courier Imports) provides that the de minimus threshold for importing goods will increase to $150 for customs duties and $40 for taxes once CUSMA comes into force. This is a substantial increase from the previous amount of $20—one of the lowest de minimus thresholds in the world.
While there was some initial uncertainty on when CUSMA would enter into force, it now appears that the scheduled entry into force date of July 1st, 2020 will be observed. Furthermore, customs authorities in the United States have indicated that there will be no grace period for importers to come into compliance with these new rules.
Accordingly, exporters and importers need to ensure that their trade practices are compliant with CUSMA—ideally by July 1, 2020!
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