What is the USMCA and when did it replace NAFTA?

The USMCA is a free trade agreement that replaced NAFTA on July 1, 2020.

What were the main differences between NAFTA and USMCA in the automotive sector?

NAFTA required member countries to produce 62.5% of vehicle parts domestically, whereas USMCA increased this requirement to 75%.

How did USMCA address labor and environmental concerns compared to NAFTA?

USMCA introduced labor reforms and rapid response panels to address facility violations and allocated $600 million to tackle environmental issues, improving upon NAFTA's less enforceable requirements.

What changes did USMCA make regarding the protection of intellectual property and biologic drugs?

USMCA extended copyright protection from 50 to 70 years after an author's death and varied the exclusivity period for biologic drugs: 12 years for the U.S., eight years for Canada, and five years for Mexico.

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NAFTA vs USMCA: A Quick Comparison

Images of phones, hands shaking, and the globe

USMCA replaced NAFTA in July 2020, but some importers still aren’t sure how they differ from one another. We’ll help you understand the differences and how USMCA is an improvement from NAFTA. 

By

Jacob Lee

August 12, 2020

Last Modified:
June 24, 2024

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Trade between Canada, the United States of America, and Mexico has helped each country foster valuable working relationships. However, if you haven’t imported from one of these two countries since 2019, you’ll need to know about the new free trade agreement (FTA) governing each one.

Key Takeaways:

USMCA is a free trade agreement (FTA) that replaced NAFTA in July 2020
USMCA and NAFTA differ on their provisions for automotive, dairy, environment, labor, technology, and biologic drug sectors.

If you’re an importer that’s bringing in goods from Canada or Mexico, our team can help you understand USMCA trade guidelines.

What Was NAFTA?

The North American Free Trade Agreement (NAFTA) was an FTA that eliminated tariffs on most products traded between Mexico, Canada, and the United States. The FTA went into effect on January 1, 1994, and it gradually phased out tariffs for numerous products until January 1, 2008.

Tariffs were eliminated for many items, such as:

Agricultural products
Textiles
Automobiles

NAFTA succeeded in creating a huge free-trade zone between these three countries. The FTA also established many other beneficial provisions.

Intellectual property protections
Environmental and labor protections
Dispute resolution

On June 30th, 2020, NAFTA came to an end and would be replaced by a new FTA.

Related: Import Costs from Mexico

What Is the USMCA?

On November 30, 2018, the United States-Mexico-Canada Agreement (USMCA) was signed and took full effect on July 1, 2020. This FTA replaced and improved many of the provisions set by NAFTA.

USMCA consists of 34 chapters and numerous side letters. Many of NAFTA’s original chapters remain in this new FTA. That said, the member countries made changes to the provisions of its predecessor.

This includes increased intellectual property protections and the establishment of an independent investigatory panel that looks into worker rights violations. USMCA also contains other provisions for products that weren’t as significant under NAFTA.

Dairy and Agriculture
Automobiles
Sunset Provision

USMCA has a 16-year lifespan, which means it will end in 2036. However, each member country plans to review the FTA in July 2026 to determine if they want to renew it.

Related: Importing from Canada to U.S.

What Are the Differences Between These FTAs?

Now that you have a basic understanding on how these FTAs work, it’s important to know where they differ from one another. I’ve provided a graphic that shows the variations between NAFTA and USMCA.

The table is comparing the provisions offered by the NAFTA and USMCA trade agreements for various sectors. The sectors being compared include automotive, dairy, environment, labor, technology, biologic drugs, and copyright

As the comparison shows, USMCA enhanced many of the provisions created by NAFTA. This has made importing much easier for businesses working under this FTA.

Import From Canada and Mexico With USA Customs Clearance

The requirements and stipulations in USMCA can be difficult to grasp if you haven’t imported since 2019. At USA Customs Clearance, we’ll tell you if your goods are eligible for preferential tariff treatment. You can also use different services to help you with your import needs.

Import/Customs Consulting: Discuss USMCA eligibility requirements for your products before you import from Canada or Mexico.
Importing 101: This guide is essential if you require basic information on importing procedures.
Importer Record of Registration: As a new importer, you’ll have to register with CBP before you can bring goods into the country.

These services are essential if you want to understand USMCA or if you’re a new importer. If you require further guidance, contact our team through the site. USA Customs Clearance Team Members are also available at (855) 912-0406.