USMCA Technical Corrections
Jan. 12, 2021
By: Lois E. Wetzel
An omnibus legislative package titled “Coronavirus Response and Relief Supplemental Appropriations Act, 2021” that was passed on December 22, 2020 contained technical corrections to the implementing bill for the United States-Mexico-Canada Agreement (“USMCA”). The USMCA replaced the North America Free Trade Agreement (“NAFTA”) and went into effect July 1, 2020. Technical corrections to the new trade agreement, which require congressional approval, have been in the works since spring and were highly anticipated though the bulk of corrections go to non-controversial language and correctional amendments. The full text of the corrections can be found here.
The technical corrections are contained in Division O, Title VI of the Appropriations Act under a section entitled “United States-Mexico-Canada Agreement Implementation Act Technical Corrections, ” starting at page 2471 of the document. The most notable changes to the USMCA implementing bill concern rules of origin for products entered through foreign trade zones (FTZs) and merchandise processing fee refunds on post importation 520(d) and reconciliation claims.
Included in the technical corrections was a provision reinstating a contentious NAFTA-era limitation on products produced within FTZs. Under NAFTA as implemented in 19 USC § 3332(a)(2), products produced within FTZs were prohibited from qualifying for duty-free treatment when withdrawn from the zone and entered for consumption in the U.S. This was true even when all conditions in the rules of origin were satisfied by production in the zone. As initially drafted, the USMCA left out the special treatment of FTZs, allowing for FTZ operators to produce originating merchandise that could be admitted to the U.S. duty free. However, the technical corrections reinstated the bar on qualification for FTZ products and tariffs are now due on any affected goods that have exited FTZs since July 1.
As originally drafted, the USMCA disallowed refunds of the merchandise processing fee (MPF) on post-entry USMCA claims. Unless USMCA claims were made at the time of entry, the MPF was not refunded. The technical corrections fixed this limitation, making the MPF refundable for post entry claims made within a year of importation and in accordance with the regulations or via Reconciliation.
If you have any questions on the implications of the technical corrections to the USMCA, or the USMCA in general, don’t hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.