In a Cargo Systems Messaging Service bulletin issued this week, U.S. Customs and Border Protection reminded importers that the six-month “restrained enforcement” period of the United States-Mexico-Canada Agreement will be ending on December 31, 2020.
Additionally, CBP provided information concerning various USMCA updates and technical corrections that were finally taken up in the Consolidated Appropriations Act of 2021 (H.R.133 - Title VI) recently signed into law by President Trump.
End of Restrained Enforcement
In order to provide importers with the time needed to adjust to new requirements of the USMCA, CBP has been exercising what it calls “restrained enforcement” on preferential treatment claims under the Agreement since it was implemented at the start of July.
Having now afforded companies six months to undertake the business process changes necessary to achieve full compliance, the restrained enforcement period will conclude on December 31, 2020. Going forward, importers can expect claims for USMCA tariff treatment to be more closely scrutinized by CBP for potential compliance issues than has been the case up to now.
Note: Despite the restrained enforcement period ending Dec. 31, with respect to automotive goods, CBP advises that until June 30, 2021, the agency may allow additional time for importers to respond to a verification.
USMCA Technical Corrections
The Appropriations Act also includes a number of technical corrections that have been in the works for months, most notably those affecting the USMCA’s treatment of goods entered through foreign trade zones and merchandise processing fee refunds on post-importation 520(d) and reconciliation claims.
Foreign Trade Zones
Under NAFTA, non-originating goods used in production processes in FTZs could not qualify as originating as a result of that processing. Specifically, the special rule applicable to FTZs prohibited non-originating goods used in manufacturing within FTZs from ever qualifying as originating goods even if all conditions under the general rules were otherwise satisfied.
Initially, this prohibition was not incorporated into the USMCA Implementation Act, much to the approval of the trade association representing FTZ operators who argued that the program’s structure under NAFTA “handicapped their ability to compete with Canadian and Mexican products in the North American market.”
Title VI, Sec. 601(b) of the Appropriations Act, however, now applies this FTZ restriction to USMCA preferential treatment claims. In other words, the FTZ provision will be retroactively changed back to the original NAFTA language, which was the administration’s intent, according to U.S. Trade Representative Robert Lighthizer. The USTR has previously stated that reinstating the prohibition will incentivize more manufacturing in the region through “stronger rules of origin that further limit the use of non-originating inputs for goods traded under the Agreement.”
Merchandise Processing Fees
Title VI, Sec. 601(e) of the Appropriations Act authorizes CBP to refund merchandise processing fees for post-importation claims (i.e., 520(d) and reconciliation claims) for USMCA preferential treatment.
A drafting error in the USMCA implementing legislation had inadvertently eliminated the right to a refund of the MPF. As a result of this change, importers will now be able to claim applicable refunds retroactive to July 1, 2020.
Need More Information?
Should you have any questions about the change in compliance enforcement by CBP and updates to the USMCA requirements, or if you require assistance in the recovery of MPF overpayments, don’t hesitate to contact one of our knowledgeable trade experts.