[Senate Report 116-283]
[From the U.S. Government Publishing Office]
116th Congress} { Report
SENATE
2d Session } { 116-283
======================================================================
UNITED STATES-MEXICO-CANADA AGREEMENT IMPLEMENTATION ACT
_______
October 21 (legislative day, October 19), 2020.--Ordered to be printed
_______
Mr. Grassley, from the Committee on Finance,
submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 5430]
[Including cost estimate of the Congressional Budget Office]
The Committee on Finance, to which was referred the bill
(H.R. 5430) to implement the Agreement between the United
States of America, the United Mexican States, and Canada
attached as an Annex to the Protocol Replacing the North
American Free Trade Agreement, having considered the same,
reports favorably thereon without amendment and recommends that
the bill do pass.
CONTENTS
Page
I. REPORT AND OTHER MATERIALS OF THE COMMITTEE......................2
A. Report of the Committee on Finance.................. 2
B. Summary of Congressional Consideration of the
Agreement.......................................... 2
1. Background...................................... 2
2. Trade promotion authority procedures in general. 4
3. Notification prior to negotiations.............. 5
4. Negotiations.................................... 5
5. Conclusion of negotiations and signing of
agreement...................................... 6
6. Hearings........................................ 6
7. Development of the implementing legislation..... 6
8. Formal submission of the agreement and
implementing legislation....................... 8
9. Committee and floor consideration............... 9
10. Implementation................................. 10
C. Trade Relations With Canada and Mexico.............. 11
D. Overview of the Agreement........................... 13
1. Background...................................... 13
2. Committee's positions on various USMCA
commitments.................................... 13
a. Qualifying Rules for Automobiles.............. 13
b. Express Shipments............................. 14
c. Sanitary and Phytosanitary Measures........... 14
d. Agricultural Biotechnology.................... 15
e. Technical Barriers to Trade................... 15
f. Labor and Environment......................... 15
g. Investment.................................... 17
h. Dispute Settlement............................ 17
i. Joint Review.................................. 17
j. Digital Trade................................. 18
k. Intellectual Property (IP).................... 18
l. Currency...................................... 19
3. Office of the U.S. Trade Representative Summary. 19
E. General Description of the Bill to Implement the
Agreement.......................................... 39
Title I--Approval of, and General Provisions Relating to, the
USMCA.......................................................... 39
Title II--Customs Provisions..................................... 42
Title III--Application of USMCA to Sectors and Services.......... 45
Title IV--Antidumping and Countervailing Duties.................. 47
Title V--Transfer Provisions and Other Amendments................ 48
Title VI--Transition to and Extension of USMCA................... 50
Title VII--Labor Monitoring and Enforcement...................... 51
Title VIII--Environment Monitoring and Enforcement............... 56
Title IX--USMCA Supplemental Appropriations Act, 2019............ 58
F. Vote of the Committee in Reporting the Bill......... 59
II. BUDGETARY IMPACT OF THE BILL....................................59
III. REGULATORY IMPACT OF THE BILL AND OTHER MATTERS.................61
IV. ADDITIONAL VIEWS................................................62
V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........73
I. REPORT AND OTHER MATERIALS OF THE COMMITTEE
A. Report of the Committee on Finance
The Committee on Finance, to which was referred the bill
(H.R. 5430) to implement the United States-Mexico-Canada
Agreement (Agreement), having considered the same, reports
favorably thereon without amendment and recommends that the
bill do pass.
B. Summary of Congressional Consideration of the Agreement
1. Background
On February 2, 2017, President Trump announced his
intention to renegotiate the North American Free Trade
Agreement (NAFTA). President Trump had made redressing NAFTA's
shortcomings one of his top priorities upon entering into
office. In accordance with Section 105(a)(1) of the Bipartisan
Congressional Trade Priorities and Accountability Act of 2015
(TPA 2015) (Pub. L. 114-26), U.S. Trade Representative Robert
E. Lighthizer notified Congress on May 18, 2017 that the
President intended to initiate negotiations with Canada and the
United Mexican States (Mexico) regarding modernizing NAFTA. In
his letter, Ambassador Lighthizer noted that:
. . . NAFTA was negotiated 25 years ago, and while
our economy and businesses have changed considerably
over that period, NAFTA has not. Many chapters are
outdated and do not reflect modern standards. . . . In
addition, and consistent with the negotiating
objectives in the Trade Priorities and Accountability
Act, our aim is that NAFTA be modernized to include new
provisions to address intellectual property rights,
regulatory practices, state-owned enterprises,
services, customs procedures, sanitary and
phytosanitary measures, labor, environment, and small
and medium enterprises. Moreover, establishing
effective implementation and aggressive enforcement of
the commitments made by our trading partners under our
trade agreements is vital to the success of those
agreements and should be improved in the context of
NAFTA.
This is the first time the United States has sought to
comprehensively update an existing free trade agreement (FTA).
Ambassador Lighthizer consulted with the relevant
congressional committees, including the Senate Committee on
Finance, with respect to the initiation of negotiations. He
also met with the Senate Advisory Group on Negotiations (SAGON)
on May 17, 2017 to discuss the initiation of negotiations. In
accordance with Section 105(a)(1)(D) of TPA 2015, the
President's negotiating objectives were published on the Office
of the U.S. Trade Representative's (USTR) website on July 17,
2017, as was an updated version on November 17, 2017. The
United States, Mexico, and Canada proceeded to formally launch
negotiations on August 16, 2017.
At the launch of negotiations, it was recognized that for
more than two decades, trade among the United States, Canada,
and Mexico had taken place under the auspices of NAFTA. At the
time of its entry into force, NAFTA was the largest free trade
area other than the European Union (EU), and notably the first
reciprocal FTA between developing and advanced economies. It
helped facilitate economic expansion and integration in North
America.
While tariffs with Canada had already been reduced through
the U.S.-Canada Free Trade Agreement (CUSFTA), which entered
into force on January 1, 1989, Mexico's average applied tariff
rate before NAFTA was significantly higher than the average
applied U.S. tariff rate on Mexican goods, in part because
Mexico enjoyed preferential tariff access under the Generalized
System of Preferences Program. NAFTA reduced tariffs with both
Mexico and Canada and complemented tariff reduction and
elimination with important disciplines to tackle non-tariff
barriers, which were a major impediment to expanding trade
among the three countries. For example, while CUSFTA lacked
commitments on the protection of intellectual property, NAFTA
included a chapter on intellectual property. Prior to NAFTA,
approximately 60 percent of U.S. agricultural exports to Mexico
required import licenses or faced other non-tariff barriers.
NAFTA helped to redress these barriers to U.S. competitiveness,
and bring greater overall prosperity to the American people.
Although U.S. exports to both Mexico and Canada increased
significantly from 1993 to 2016--to Mexico by 334 percent in
inflation-adjusted terms, and to Canada by more than 160
percent--international trade and commerce had changed
dramatically since NAFTA was negotiated. When NAFTA was
negotiated, there was no digital economy. By 2017, the digital
economy accounted for nearly 6.9 percent of U.S. GDP, or $1.35
trillion.\1\ In addition, the NAFTA Parties' labor and
environment obligations concerning trade were contained in side
agreements rather than in the core of the FTA itself. There
were also concerns that different or unenforced environmental
and labor standards facilitated outsourcing of economic
activity from the United States. Moreover, it had become
apparent over time that a NAFTA Party could frustrate
enforcement of its rules by preventing the composition of a
dispute settlement panel. Thus, NAFTA lacked important rules in
a number of critically important areas, and those rules that
did exist lacked sufficient enforceability.
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\1\U.S. Bureau of Economic Analysis, https://www.bea.gov/news/blog/
2019-04-04/digital-economy-accounted-69-percent-gdp-2017.
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2. Trade promotion authority procedures in general
The ability of the United States to enter into any trade
agreement--as well as update and modernize any existing
agreement--requires Congress's assent under the Constitution.
Specifically, Article I, Section 8 of the Constitution of the
United States vests Congress with the authority to regulate
international trade. Congress has periodically delegated some
of its authority to the President in order to advance the
economic interests of the United States. In order for any such
delegation to be constitutionally valid, Congress must impose
sufficient strictures on the executive to ensure that Congress
retains ultimate control over the conduct of trade policy. To
that end, Congress has periodically enacted statutes known as
Trade Promotion Authority (TPA) or ``Fast Track,'' which govern
the congressional-executive partnership on trade policy.
TPA represents a compact between Congress and the
Administration, by which Congress guarantees it will vote on a
trade agreement entered into by the Administration without
amendment and the Administration guarantees close consultation
with Congress during the negotiation, approval, and
implementation of the trade agreement in order to achieve the
objectives that Congress identifies. Thus, TPA's provision for
a privileged vote is predicated upon the Administration
strictly following the requirements that Congress sets forth in
the TPA legislation. Thorough and timely consultation by the
Administration with Congress is the essential bedrock upon
which Congress's delegation of constitutional authority rests.
This longstanding compact, periodically renewed over the last
few decades, has resulted in the successful negotiation and
implementation of numerous trade agreements that have
contributed significantly to increased economic growth and
prosperity in the United States.
The most recent incarnation of this compact is found in the
Bipartisan Congressional Trade Priorities and Accountability
Act of 2015 (TPA 2015) (Pub. L. 114-26). The Act includes
prerequisites for congressional consideration of a trade
agreement under expedited procedures, which are found in
Sections 103 through 105 of the Act (19 U.S.C. Sec. Sec. 4203-
4205) and Section 151 of the Trade Act of 1974 (19 U.S.C.
Sec. 2191). Section 102 of the Act outlines the negotiating
objectives that the President must achieve if the President
intends to use TPA procedures to implement a trade agreement.
Section 103 of the Act authorizes the President to enter into
reciprocal trade agreements with foreign countries to reduce or
eliminate tariff or non-tariff barriers and other trade-
distorting measures. And Section 151 of the Trade Act of 1974
sets forth expedited procedures for congressional consideration
of a trade agreement without amendment. The President's
authority under Section 103 extends to trade agreements entered
into on or before July 1, 2021.
3. Notification prior to negotiations
In accordance with Section 105(a)(1) of TPA 2015, the
President must provide written notice to Congress at least 90
calendar days before initiating negotiations. Ambassador
Lighthizer notified Congress on May 18, 2017 that the President
intended to initiate negotiations with Canada and Mexico
regarding modernizing NAFTA. This was the first time the United
States had sought to comprehensively update and expand an
existing FTA.
As noted earlier, Ambassador Lighthizer consulted with the
relevant congressional committees, including the Senate
Committee on Finance, with respect to the initiation of
negotiations. He also met with the Senate Advisory Group on
Negotiations (SAGON) on May 17, 2017 to discuss the initiation
of negotiations. In accordance with Section 105(a)(1)(D) of TPA
2015, the President's negotiating objectives were published on
the USTR website on July 17, 2017, as was an updated version on
November 17, 2017. The United States, Mexico, and Canada
launched negotiations on August 16, 2017.
4. Negotiations
Section 104(a) of TPA 2015 provides that USTR must consult
closely and keep fully apprised the Committee on Ways and Means
of the House of Representatives and the Committee on Finance of
the Senate regarding the status of the trade negotiations.
Moreover, Section 104(a) of TPA 2015 requires USTR to
promulgate written guidelines for consultation with Congress
(Consultation Guidelines). The Trump Administration continued
to utilize the Consultation Guidelines promulgated under the
Obama Administration.
The Finance Committee considers this requirement key to
ensuring compliance with the consultation requirement in TPA
2015, and to ensuring that Congress retains appropriate
oversight over trade policy consistent with the Constitution.
To that end, USTR and committee staff met regularly to review
and discuss potential negotiating proposals. Committee staff
also attended the negotiations to ensure they could be kept
fully informed regarding the status of negotiations, convey the
views of Members of the Committee to negotiators in real time,
and be in a position to update Members promptly.
There were seven formal rounds of negotiations regarding
the modernization of NAFTA.
1. August 16-22, 2017 (Washington, DC, United States)
2. September 1-5, 2017 (Mexico City, Mexico)
3. September 23-27, 2017 (Ottawa, Canada)
4. October 11-17, 2017 (Arlington, VA, United States)
5. November 15-21, 2017 (Mexico City, Mexico)
6. January 23-29, 2018 (Montreal, Canada)
7. February 25-March 5, 2018 (Mexico City, Mexico)
In addition to these formal rounds, negotiations advanced
through digital videoconferences, telephone calls, and
Ministerial level meetings. The Committee notes its view that
these negotiations are not excluded from the ambit of ``key
negotiation meetings'' under the Consultation Guidelines if
they concern substantive issues, regardless of whether they
were part of a formally designated negotiating round or not.
Moreover, TPA 2015 itself requires that the Committee be kept
timely apprised and consulted regarding all aspects of the
negotiations, including any proposals that might be tabled on
behalf of the United States.
5. Conclusion of negotiations and signing of agreement
Under Section 106(a)(1)(A) of TPA 2015, the President must
notify Congress at least 90 calendar days before entering into
an agreement of his intent to enter into the agreement. On
August 31, 2018, President Trump notified Congress of his
intent ``to enter into a trade agreement with Mexico--and with
Canada if it is willing'' pursuant to Section 106(a)(1)(A) of
TPA 2015.\2\ The three parties published the text of the new
proposed agreement on September 30, 2018 on USTR's website as
required by Section 106(a)(1)(B) of TPA 2015, a requirement
that ensures that both the public and Members of Congress are
aware of the content of the Agreement before it is signed by
the President. On November 30, 2018, the three Parties signed
the Agreement in Buenos Aires, Argentina.
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\2\Text of a letter from the President to the Speaker of the House
of Representatives and the President of the Senate, 31 August, 2018,
https://www.whitehouse.gov/briefings-statements/text-letter-president-
speaker-house-representatives-president-senate-33/.
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6. Hearings
The Committee believes it to be critical to obtain the
input of the Administration and the stakeholders that are the
intended beneficiaries of a trade agreement to effectively
evaluate the agreement and develop implementing legislation. To
that end, the Committee held two hearings on USMCA. The first
hearing was held on June 18, 2019, and was titled ``The
President's 2019 Trade Policy Agenda and the United States-
Mexico-Canada Agreement.'' The sole witness was Ambassador
Lighthizer. The second hearing was held on July 30, 2019, and
titled ``The United States-Mexico-Canada Agreement.'' The
witnesses at this hearing were Paula Elaine Barnett, Owner,
Paula Elaine Barnett Jewelry; the Honorable Matt Blunt,
President, American Automotive Policy Council; James Collins,
CEO, Corteva Agriscience; Derek Leathers, President and CEO,
Werner Enterprises; the Honorable Thomas Vilsack, President and
CEO, U.S. Dairy Export Council; and Michael Wessel, President,
Wessel Group, and member of the Labor Advisory Committee for
Trade Negotiations and Trade Policy.
7. Development of the implementing legislation
Under TPA procedures, Congress and the Administration work
together to produce legislation that implements an FTA. Draft
legislation is developed in close consultation among the
Administration, the House Committee on Ways and Means, and the
Senate Committee on Finance. The committees may hold informal
meetings to consider the draft legislation and make
recommendations to the Administration. Although not a TPA
requirement, the Administration normally also receives
Congressional input through a ``mock markup'' process, in which
members of the House Committee on Ways and Means and the Senate
Committee on Finance can make proposed amendments to a draft
implementing bill. The Administration then finalizes the
implementing legislation for formal submission to Congress.
These procedures are meant to ensure close cooperation between
the executive and legislative branches on the development of
legislation that faithfully implements the agreement. Under TPA
2015, trade agreement implementing bills may include only those
provisions that are strictly necessary or appropriate to
implement the agreement.
a. House Working Group
Typically, obligations in the FTA are settled upon
conclusion of the agreement between the parties, allowing the
Administration and Members of the relevant congressional
committees to have time to thoroughly consider the content of
the FTA and to discuss what legislative and administrative
actions would be necessary for implementation. One of the
rationales for TPA is to enhance the Administration's
effectiveness during negotiations by giving trading partners
confidence that the agreement reached is the agreement that
Congress will vote on, subject to minor changes if any,
including changes that might be implemented through side
letters. However, TPA does not preclude the Administration from
going back to a trading partner and requesting changes to an
agreement, in consultation with Congress.
On June 13, 2019, House Speaker Nancy Pelosi appointed a
Working Group of House Democrats to conduct negotiations with
the Administration regarding changes to USMCA required to
secure their support. These negotiations were kept confidential
from most Members of the House and Senate.
On December 10, 2019, the House Democrats' Trade Working
Group and the Administration reached a deal that would secure
Democratic support. That same day, the USMCA Parties signed a
Protocol of Amendment to USMCA in Mexico City. The publication
of the Protocol of Amendment was the first time most members of
Congress had an opportunity to see the changes the House
Democrats' Trade Working Group requested for USMCA. The Parties
agreed to amend Chapter 1 (Initial Provisions and General
Definitions), Chapter 4 (Rules of Origin), Chapter 20
(Intellectual Property), Chapter 23 (Labor), Chapter 24
(Environment), and Chapter 31 (Dispute Settlement). The final
Protocol of Amendment to USMCA made the following changes to
the agreement:
Enforcement: Eliminated the requirement for
the Free Trade Commission to convene before a panel is
established, and ended the NAFTA practice of blocking
dispute settlement panels by allowing the complaining
party to appoint the panelists if the defending party
refuses to participate in the panelist selection
procedure.
Labor: Created a presumption that violations
of the relevant labor obligations in USMCA occur in a
manner affecting trade and investment between the
Parties, and established a unique mechanism to
investigate facilities that are denying fundamental
labor rights. Specifically, the mechanism is unique
because it supports labor reforms that the Mexican
government has itself chosen to undertake. To that end,
the purpose of this mechanism as noted in the Protocol
of Amendment is ``to ensure a remediation of a Denial
of Rights . . . [and] not to restrict trade.''
Environment: Created a presumption that
violations of the relevant environmental obligations in
USMCA occur in a manner affecting trade and investment
between the Parties. The Parties agreed to adopt,
maintain, and implement seven multilateral
environmental agreements, an obligation which is
modeled after obligations in our FTAs with Colombia,
Panama, and Peru.
Intellectual Property: Eliminated Article
20.49.1 of USMCA, which required the parties to
``provide effective market protection through the
implementation of Article 20.48.1 . . . for a period of
at least ten years from the date of first marketing
approval of that product in that Party.'' Also
eliminated the requirement that the Parties confirm the
availability of patents for new uses of known products,
as well as provided greater clarity that certain U.S.
practices would comply with obligations in the chapter.
Rules of Origin: Instituted a requirement
that steel used in the automotive sector only receive
preferential treatment under USMCA if it is melted and
poured in the region.
In addition, the United States and Mexico signed a side
agreement creating a framework for cooperation and customs
verification to combat illegal trafficking of flora and fauna.
b. Mock Markup
For consideration of every other FTA to date, the Committee
has conducted a ``mock markup'' to consider the draft
implementing legislation for the trade agreement and the draft
Statement of Administrative Action (SAA). The Committee can
propose amendments for both, although the Administration is not
required to accept them. Mock markups are not required by
statute. Nonetheless, the Committee considers them valuable
opportunities to engage in the development of implementing
legislation. Mock markups are also an important way to
reinforce the requirement in TPA 2015 that provisions in the
implementing legislation be ``strictly necessary or
appropriate'' to implement the trade agreement. To fulfill its
purpose, a mock markup has to happen before the Administration
formally submits the implementing bill and corresponding
materials to Congress. The Committee notes that the lack of a
mock markup for USMCA was an exceptional situation that should
not be a precedent for the future consideration of FTA
implementing bills by Congress.
8. Formal submission of the agreement and implementing legislation
When the President formally submits a trade agreement to
Congress under Section 106(a)(1)(E) of TPA 2015, the President
must include in the submission the final legal text of the
agreement, together with implementing legislation, an SAA
describing regulatory and other changes to implement the
agreement, and a statement setting forth the reasons of the
President regarding how and to what extent the agreement makes
progress in achieving the applicable purposes, policies,
priorities, and objectives set forth in TPA 2015; how the
agreement serves the interests of U.S. commerce; and how the
implementing bill meets the standards to qualify for trade
authorities procedures under Section 103(b)(3) of TPA 2015.
On December 13, 2019, President Trump transmitted to
Congress the final text of the Agreement, the implementing
legislation, the SAA, and other supporting information under
Section 106 of TPA 2015. On the same day, House Majority Leader
Steny Hoyer introduced H.R. 5430. On December 16, 2019, Mr.
Grassley, for himself, Mr. Wyden, and Mr. McConnell, introduced
the bill as S. 3052, and it was referred to the Committee on
Finance. On December 17, H.R. 5430 was referred to the House
Committee on Ways and Means. The Committee on Ways and Means
met in open session on December 17, 2019 to consider H.R. 5430
and ordered the bill favorably reported by voice vote. On
December 19, 2019, the House passed H.R. 5430 by a vote of 385-
41.
On January 3, 2020, H.R. 5430 was transmitted to the Senate
and referred to the Committees on: Finance; Health, Education,
Labor, and Pensions; Environment and Public Works;
Appropriations; Foreign Relations; Commerce, Science, and
Transportation; and the Budget.
The Committee notes that H.R. 5430 was referred to multiple
committees while the identical Senate bill, S. 3052, was
referred solely to the Committee on Finance on December 16,
2019. It is the view of the Committee that the subject matters
that predominated the USMCA implementing bill were customs,
revenue, reciprocal trade agreements, tariffs and import
quotas, and matters related thereto, most of which are within
the jurisdiction of the Committee on Finance.
The Committee notes that the implementing bill also
included an Appropriations title, granting $843 million in
appropriations. In large part, these appropriations are
dedicated to the monitoring and enforcement of certain
commitments that are specific to Mexico. Moreover, the
Congressional Budget Office has projected that even with these
appropriations, USMCA will, on net, be revenue-positive. The
Committee recognizes that undertaking certain trade agreement
obligations may entail the need for appropriations to ensure
the obligations can be carried out. However, the Committee
believes that any such appropriation needs careful scrutiny and
consultation, because of Congress's constitutional authority
over appropriations and because TPA 2015 provides that only
provisions strictly necessary or appropriate to implement the
final trade agreement are permitted in the implementing bill.
Since 1984, no implementing bill for a trade agreement passed
pursuant to expedited procedures has included discretionary
appropriations. The provision of appropriations in the USMCA
Implementation Act must be considered in light of these
particular circumstances.
9. Committee and floor consideration
If the requirements of TPA 2015 are satisfied, implementing
revenue bills are subject to the legislative procedures of
Section 151 of the Trade Act of 1974. The following schedule
for congressional consideration applies under these procedures:
(i) House committees have up to 45 session days in which to
report the bill; any committee which does not do so in that
period will be automatically discharged from further
consideration.
(ii) A vote on final passage by the House must occur on or
before the 15th session day after the committees report the
bill or are discharged from further consideration.
(iii) Senate committees must act within 15 session days of
receiving the implementing revenue bill from the House or
within 45 session days of Senate introduction of the
implementing bill, whichever is later, or they will be
discharged automatically.
(iv) The full Senate then must vote within 15 session days
on the implementing bill.
Once the implementing bill has been formally submitted by
the President and introduced, no amendments to the bill are in
order in either house of Congress. Floor debate in each house
is limited to no more than 20 hours, to be equally divided
between those favoring the bill and those opposing the bill.
The House passed H.R. 5430 on December 19, 2019, by a roll
call vote of 385 ayes, 41 nays. The Committee on Finance met in
open executive session on January 7, 2020, to consider
favorably reporting H.R. 5430. At this meeting, Senator Toomey
sought to offer an amendment to Section 621 of the USMCA
Implementation Act that would require approval of Congress
before USMCA could expire under the Agreement's sunset clause.
The Chairman ruled the amendment out of order because of the
privileged status of the bill under TPA 2015. Senator Toomey
did not appeal the ruling of the chair. The Committee then
proceeded to favorably report H.R. 5430 without amendment by
roll call vote of 25 ayes, 3 nays. Ayes: Grassley, Crapo,
Roberts, Enzi, Cornyn, Thune, Burr (proxy), Portman, Scott,
Lankford, Daines, Young, Sasse, Wyden, Stabenow, Cantwell,
Menendez, Carper, Cardin (proxy), Brown, Bennet, Casey, Warner,
Hassan, and Cortez Masto. Nays: Toomey, Cassidy, and
Whitehouse.
On January 16, 2020, the Senate passed H.R. 5430 by a roll
call vote of 89 ayes, 10 nays. President Donald J. Trump signed
H.R. 5430 into law on January 29, 2020 (Pub. L. 116-113).
10. Implementation
Congress's constitutional role with respect to trade policy
includes the passage of legislation and oversight of its
implementation. Congress has a key role to play in the
implementation of FTAs and expects that to continue with USMCA.
The Administration's Consultation Guidelines correctly
acknowledge as much:
Prior to entry into force of a trade agreement with a
trading partner, USTR will consult with the Committees
on Finance and Ways and Means regarding measures taken
or to be taken by that trading partner to implement
provisions of the trade agreement. In addition, USTR
will also consult regularly on trading partner
compliance with provisions of a trade agreement after
entry into force.
To that end, the Committee expects USTR to routinely update the
Committee, and to be available promptly upon request to answer
any of the Committee's queries.
C. Trade Relations With Canada and Mexico
1. United States-Canada Trade
Canada ranks first among U.S. export markets and third
among foreign exporters to the United States. U.S. exports to
Canada totaled $292.69 billion in 2019, while U.S. imports
totaled $319.7 billion. The top export categories (2-digit HS)
in 2018 were: vehicles ($52 billion), machinery ($45 billion),
mineral fuels ($27 billion), electrical machinery ($26
billion), and plastics ($14 billion).\3\ The top import
categories (2-digit HS) in 2018 were: mineral fuels ($85
billion), vehicles ($53 billion), machinery ($23 billion),
special other (returns) ($16 billion), and plastics ($12
billion). The United States had a services trade surplus of an
estimated $28 billion with Canada in 2018.
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\3\HS refers to the Harmonized Commodity Description and Coding
System, an international nomenclature used to classify products.
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The following graph shows nominal values of American
imports in Canada since 1995.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
2. United States-Mexico Trade
Mexico ranks second among U.S. export markets and second
among foreign exporters to the United States. U.S. exports to
Mexico totaled $358.1 billion in 2019, while U.S. imports
totaled $256.37 billion. The top export categories (2-digit HS)
in 2018 were: machinery ($46 billion), electrical machinery
($43 billion), mineral fuels ($35 billion), vehicles ($22
billion), and plastics ($18 billion). The top import categories
(2-digit HS) in 2018 were: vehicles ($93 billion), electrical
machinery ($64 billion), machinery ($63 billion), mineral fuels
($16 billion), and optical and medical instruments ($15
billion). The United States had a services trade surplus of an
estimated $8.0 billion with Mexico in 2018.
The following graph shows nominal values of American
imports in Mexico since 1995.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
3. Tariffs and Trade Agreements
Canada acceded to the World Trade Organization (WTO) on
January 1, 1995. It has an average bound tariff rate of 6.5
percent for all goods (15 percent for agricultural goods and
5.1 percent for non-agricultural goods). In 2018, Canada
maintained a simple average applied most-favored nation (MFN)
tariff rate of 4 percent for all goods (15.9 percent for
agricultural goods and 2.1 percent for non-agricultural goods).
In addition to NAFTA and CUSFTA, Canada has the following FTAs
in force: the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CP-TPP), and FTAs with Chile,
Colombia, Cost Rica, the EU, the European Free Trade
Association (EFTA), Honduras, Israel, Jordan, Korea, Panama,
Peru, and Ukraine.
Mexico acceded to the WTO on January 1, 1995. It has an
average bound tariff rate of 36.2 percent for all goods (45
percent for agricultural goods and 34.8 percent for non-
agricultural goods). In 2018, Mexico maintained a simple
average applied MFN tariff rate of 7 percent for all goods
(13.9 percent for agricultural goods and 5.8 percent for non-
agricultural goods). In addition to NAFTA, Mexico has the
following FTAs in force: CP-TPP, and FTAs with Central America
(Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua),
Chile, the EU, EFTA, Israel, Japan, Panama, Peru, and Uruguay.
4. U.S. International Trade Commission Study
As required by Section 105(c) of TPA 2015, the U.S.
International Trade Commission (USITC or Commission) released
in April 2019 a report from its investigation (Investigation
No. TPA 105-003) into the probable economic effect of the
Agreement (USITC Pub. 4889). In the Highlights Section of the
report, the Commission noted the following:
The Commission's model estimates that USMCA would
raise U.S. real GDP by $68.2 billion (0.35 percent) and
U.S. employment by 176,000 jobs (0.12 percent). The
model estimates that USMCA would likely have a positive
impact on U.S. trade, both with USMCA partners and with
the rest of the world. U.S. exports to Canada and
Mexico would increase by $19.1 billion (5.9 percent)
and $14.2 billion (6.7 percent), respectively. U.S.
imports from Canada and Mexico would increase by $19.1
billion (4.8 percent) and $12.4 billion (3.8 percent),
respectively. The model estimates that the agreement
would likely have a positive impact on all broad
industry sectors within the U.S. economy. Manufacturing
would experience the largest percentage gains in
output, exports, wages, and employment, while in
absolute terms, services would experience the largest
gains in output and employment.
The Commission also estimated that there would be employment
gains for the U.S. agriculture, manufacturing, and services
sectors. The following table from the report summarizes the
respective gains estimated for those sectors.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
D. Overview of the Agreement
1. Background
USMCA continues the trilateral free trade area that was
established under NAFTA. It continues duty-free treatment among
Canada, Mexico, and the United States for qualifying goods, and
contains updated rules and disciplines intended to reduce non-
tariff barriers. It also allows for the United States to take
prompt action against such barriers through dispute settlement.
USMCA contains a number of commitments that have not been
included in previous U.S. FTAs. As such, the Committee believes
it is relevant to discuss them below.
2. Committee's positions on various USMCA commitments
a. Qualifying Rules for Automobiles
One of the Administration's objectives in USMCA was to
strengthen the North American automobile industry. The process
of integrating supply chains in North America began in 1965
with the Canada--United States Automotive Products Agreement
(Auto Pact). NAFTA brought Mexico into the supply chain as
well. North America has become one of the world's most
important, innovative, and efficient automotive manufacturing
hubs.
To attempt to address concerns regarding the functioning of
the auto rules of origin, USMCA contains two innovations.
First, it creates a new ``Labor Value Content'' rule requiring
that 40 to 45 percent of auto content be made by workers
earning at least $16 per hour. Second, USMCA provides that
eligibility for preferential tariff treatment requires that an
increased percentage of the auto content originate in North
America.
The Committee believes these requirements are reasonable
approaches with respect to the North American automobile sector
because of the continent's uniquely integrated automobile
industry. However, as noted in the USITC's USMCA report, these
requirements may inadvertently increase costs for American
consumers and increase compliance costs for U.S.-based
manufacturers, and they require careful consideration before
use with other countries or for other sectors. Because these
requirements are unique and novel, the Committee expects the
Administration to continue consulting closely with automakers
that have a significant U.S. manufacturing presence to ensure
the companies can continue to grow employment and investment in
the United States. The Committee expects to be timely briefed
on such engagement and any developments resulting from such
engagement.\4\
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\4\The Committee notes that there are certain changes to the rules
of origin made by the Protocol of Amendment that are to be phased in at
a later time, or that address calculation methodologies. See Protocol
of Amendment, para. 2. The Committee did not have an opportunity to
evaluate the potential economic implications of these changes since
they occurred after the International Trade Commission prepared its
economic assessment of USMCA. Committee members will monitor these
changes to assess their impact, and provide appropriate input.
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b. Express Shipments
USMCA's chapter on customs and trade facilitation includes
important commitments that will reduce costs and advance
business opportunities for U.S. small and medium enterprises.
The agreement creates a new informal shipment level of $2,500,
allowing express shipments under that amount to benefit from
reduced paperwork and red tape. It also raises the de minimis
level for express shipments in Canada and Mexico. In Mexico,
shipments valued at or below US$117 may enter free of customs
duties, and shipments valued at or below US$50 may enter free
of taxes. In Canada, shipments valued at or below C$150 may
enter free of customs duties, and shipments valued at or below
C$40 may enter free of taxes.
Although the increased de minimis levels are a significant
improvement upon the past, especially in Canada, the Committee
notes that the preferred outcome would have been for Canada and
Mexico to have matched the U.S. de minimis level of $800. The
Committee expects USTR to continue pushing our trading partners
to match the U.S. de minimis level in future negotiations. The
Committee further notes that the U.S. de minimis level
continues to enjoy broad bipartisan support and any changes to
this level would have to be enacted by Congress.
c. Sanitary and Phytosanitary Measures
USMCA's chapter on sanitary and phytosanitary (SPS)
measures contains a number of critical commitments that should
prevent countries from disguising discriminatory restrictions
on agricultural products in the name of food safety or animal
or plant health. The SPS chapters in other U.S. FTAs simply
established a committee for the Parties to discuss SPS issues
rather than binding the Parties to concrete obligations. In
contrast, USMCA's SPS chapter has a number of enforceable
commitments, including that SPS measures be based on scientific
principles and that risk assessment and risk management for SPS
regulations be documented and afforded opportunities for public
comment. These commitments achieve the negotiating objectives
in TPA 2015 to ensure more open and equitable market access
through robust rules on SPS measures.\5\ The Committee strongly
supports these commitments and believes they should be a model
for future FTAs.
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\5\(b)(3).
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d. Agricultural Biotechnology
Section B of the Agriculture Chapter of USMCA contains
disciplines to avoid unreasonable restrictions on products
derived through agricultural biotechnology and increase
cooperation regarding the trade in these products.
Unfortunately, such restrictions have become a major trade
irritant over the last two decades, including through the
application of moratoriums on approval processes for such
products. The Committee notes in particular that Article 3.14.4
of USMCA provides that Parties must accept and review
applications for authorizing products of agricultural
biotechnology year-round. The Committee views this obligation
as an important commitment that requires the Parties to refrain
from adopting any type of moratorium, official or otherwise, on
the approval of agricultural biotechnology.
e. Technical Barriers to Trade
The Committee appreciates that our trading partners can use
standards-related measures to achieve legitimate commercial and
policy objectives. Unfortunately, many trading partners also
use such measures as a disguised restriction on trade. USMCA's
chapter on technical barriers to trade (TBT) contains a number
of important disciplines to ensure U.S. commerce is not
unreasonably frustrated through standards-related measures. The
Committee supports obligations including Article 11.5, which
requires the Parties to facilitate the acceptance of multiple
international standards; Article 11.6, which requires the
Parties to provide national treatment to conformity assessment
bodies; and Article 11.7, which requires that TBT measures be
developed transparently, including by allowing persons of
another Party to participate in the development of technical
regulations, standards, and conformity assessment on terms no
less favorable than accorded to its own citizens. These
outcomes adhere to the objective in TPA 2015 to achieve greater
openness, transparency, and convergence on standards
development processes.\6\ The Committee expects that the
Administration will seek a similar level of ambition in future
trade agreements. This is particularly important because an
increasingly problematic impediment to U.S. commerce in recent
years has been the failure of trading partners to afford
national treatment to U.S. conformity assessment bodies,
resulting in unnecessary testing and costs.
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\6\(b)(7)(D).
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f. Labor and Environment
TPA 2015 provides that the U.S. negotiating objectives for
labor and environment include that each Party to an FTA adopts
and maintains measures implementing internationally recognized
core labor standards and obligations under common multilateral
environmental agreements.\7\ Moreover, no obligations in USMCA
or other U.S. FTAs preclude the United States from changing its
laws or implementing measures with respect to environmental
laws, or labor laws, provided they achieve the relevant rights
in the ILO Declaration on Rights at Work enumerated in Article
23.3 of USMCA.
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\7\(b)(10).
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USMCA's ``facility-specific rapid response labor
mechanism'' provides authority for designated panelists to
conduct verifications for reasons relating to a ``Denial of
Rights.'' When determining whether there has been a Denial of
Rights, the relevant panelists must be objective, reliable,
independent, and of sound judgment. The mechanism also provides
disputing Parties the right to submit evidence, and to test the
veracity of any evidence that may be submitted. Accordingly,
the mechanism is designed to be a fair and impartial process
for determining whether certain specific labor rights have been
breached. The inclusion in USMCA of a ``facility-specific rapid
response labor mechanism'' will not change U.S. labor law, or
impose any additional obligations on state and local
governments, or the private sector. Moreover, the Committee's
view is influenced by the fact that Mexico had already chosen
to adopt significant reforms to its labor laws. The mechanism
is thus supporting a decision independently made by Mexico.
The Committee notes that the mechanism operates differently
with respect to Mexico and the United States. In particular,
the footnote to Article 31-1.2 of USMCA provides as follows:
With respect to the United States, a claim can be
brought only with respect to an alleged Denial of
Rights owed to workers at a covered facility under an
enforced order of the National Labor Relations Board.
With respect to Mexico, a claim can be brought only
with respect to an alleged Denial of Rights under
legislation that complies with Annex 23-A (Worker
Representation in Collective Bargaining in Mexico).
Before Mexico can invoke the mechanism against the United
States, there must be an enforced order where a United States
Court of Appeals has issued a final and conclusive decree
requiring compliance with an order issued by the National Labor
Relations Board (NLRB). Accordingly, this mechanism cannot be
utilized against facilities in the United States unless federal
litigation on the issue has been fully concluded and U.S.
courts have determined that a U.S. facility has denied a
fundamental right. There is no comparable mechanism between the
United States and Canada.
USMCA as originally negotiated contained commitments that
the Parties would not waive or otherwise derogate from core
labor standards or environmental laws in a manner affecting
trade or investment between the United States and that Party.
The language requiring that the waiver or derogation occur in a
manner affecting trade or investment is drawn directly from TPA
2015.\8\ The Protocol of Amendment also includes an amendment
to USMCA providing that dispute settlement panels shall presume
that a waiver or derogation is conducted in a manner affecting
trade or investment, unless the responding party demonstrates
otherwise. The presumption does not prevent a defending party
from rebutting it, including by provision of evidence or
demonstrating that relevant circumstances undermine the
presumption's application.
---------------------------------------------------------------------------
\8\(b)(10).
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g. Investment
USMCA's investment provisions are similar to NAFTA's, with
one major exception: USMCA significantly curtails the scope of
matters where there is recourse to investor-state dispute
settlement (ISDS). ISDS is eliminated with Canada after a
grandfathering period, and access to ISDS is limited to
specified sectors with respect to Mexico. USMCA also imposes
certain procedural challenges to recourse, including attempts
to resolve matters through domestic courts.
In general, ISDS allows an investor recourse to dispute
settlement when a government discriminates against an investor,
repudiates contracts, or expropriates property without due
process of law and appropriate compensation. The United States,
as a nation committed to the rule of law, has never lost an
ISDS case even though it is party to nearly 50 agreements
containing ISDS provisions. The principle function of ISDS,
like courts, is to provide some form of relief when a Party has
failed to comply with obligations it willingly accepted. With
respect to ISDS, it provides recourse in a particularly
challenging situation: when a U.S. citizen has been wronged by
a foreign government, and would like to be heard in a forum
other than courts controlled by that government. In this
respect, ISDS has often been claimed to further the rule of law
by removing incentives for corruption and politicization of
courts. Finally, TPA 2015 contained a negotiating objective
related to investment that, among other things, required the
Administration to seek ``to improve mechanisms used to resolve
disputes between an investor and a government.''\9\
Accordingly, the Committee is of the view that the approach to
ISDS in USMCA raises concerns.
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\9\TPA 2015, Sec. 102(b)(4).
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h. Dispute Settlement
The Committee fully supports the changes made by the
Protocol of Amendment to preclude a USMCA Party from blocking
composition of a dispute settlement panel. The Committee notes
this change comports with an objective in TPA 2015 at Section
102(b)(16): ``to seek provisions in trade agreements providing
for resolution of disputes between governments under those
trade agreements in an effective, timely, transparent,
equitable, and reasoned manner.'' In light of the continued
impasse to reform WTO dispute settlement, it is more imperative
than ever that the United States have recourse to effective and
efficient dispute settlement under its FTAs.
i. Joint Review
Article 34.7 of USMCA concerns Review and Term Extension of
USMCA, otherwise known as the ``sunset clause.'' Under the
provision, USMCA will be terminated 16 years after its
implementation, unless the Parties agree to extend its
operation after a review that takes place six years after entry
into force. At this review, the parties could extend the
termination date to 16 years from the six-year review, with
another joint review to follow six years later. Failure to
agree would require additional reviews to occur each year
thereafter until the initial 16-year period concludes or until
a consensus is reached on how to address the complainant
Party's concerns.
The Committee notes that stability in North American trade
is critical to the health of our economy, and the Committee
does not believe that this provision was necessary,
particularly because, like all trade agreements, USMCA provides
for withdrawal at any time with six months' notice. This
provision does not change the constitutional structure of the
United States with respect to the conduct of trade policy.
Specifically, the Committee notes that Article 34.7.3 provides
that each Party shall confirm in writing through its head of
government whether it wishes to extend the term of USMCA. The
provision thus only dictates how the communication regarding
term extension should be made to the other Parties; it does not
address how the decision itself is made within a Party.
Further, the United States cannot withdraw from a
congressionally approved trade agreement without the consent of
Congress.
j. Digital Trade
USMCA modernizes NAFTA by directly addressing digital trade
among the United States, Canada, and Mexico. USMCA contains
broad provisions supporting cross-border data flows, as well as
restrictions on data localization. It also prohibits customs
duties on electronically transmitted products and limits source
code disclosure requirements. The Committee strongly supports
provisions addressing modern means of international trade,
including digital trade and eCommerce.
k. Intellectual Property (IP)
USMCA's IP Chapter requires national treatment for
copyright and related rights, and provides a minimum copyright
term. It also establishes patentability standards and describes
patent-office best practices. The Protocol of Amendment revised
certain provisions in USMCA's IP Chapter, including an
obligation to provide 10 years of protection for test and other
data for biologic medicines.
Pursuant to TPA 2015, the United States should seek to
ensure ``that the provisions of any trade agreement governing
intellectual property rights that is entered into by the United
States reflect a standard of protection similar to that found
in United States law.''\10\ The Administration relies on TPA's
objective to guide their negotiations--and to confirm for our
trading partners that Congress in fact supports many of the
relevant asks. These objectives have been carefully vetted
through regular order in Congress, including substantive work
in relevant committees. Before deviating from these objectives,
the Committee believes that the Administration should closely
and thoroughly consult with the Committee to ensure its Members
are comfortable with whatever deviations may be under
consideration. Because that consultation did not take place for
certain provisions with respect to Intellectual Property
included in the Protocol of Amendment, the Committee does not
believe they should be deemed a model for future trade
agreements under TPA 2015 without such consultations taking
place.
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\10\(b)(5).
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l. Currency
USMCA is the first trade agreement entered into by the
United States that contains disciplines intended to combat
currency manipulation. The Committee notes that the Parties are
obliged to achieve market-determined exchange rates, and
refrain from competitive devaluations. This is a significant
achievement that the Committee strongly supports.
3. Office of the U.S. Trade Representative Summary
The Office of the U.S. Trade Representative prepared a
summary of the Agreement that was included among the documents
that the President transmitted to Congress on December 12,
2019. This summary was distributed to Members of the Committee
to aid in their consideration of the implementing legislation,
and it is reprinted below:
AGREEMENT BETWEEN THE UNITED STATES OF AMERICA, THE UNITED MEXICAN
STATES, AND CANADA
SUMMARY OF THE AGREEMENT
This summary briefly describes key provisions for each
chapter of the Agreement between the United States of America,
the United Mexican States, and Canada (USMCA or Agreement).
PREAMBLE
The Preamble to the Agreement provides the Parties'
underlying objectives in entering into the USMCA and provides
context for the provisions that follow.
CHAPTER ONE: INITIAL PROVISIONS AND GENERAL DEFINITIONS
This chapter states that the Agreement establishes a free
trade area consistent with Article XXIV of the GATT 1994 and
Article V of the GATS. It also confirms that each Party retains
its existing rights and obligations with respect to each other
under the WTO Agreement and other agreements to which they are
party. Finally, the chapter provides for definitions that apply
Agreement-wide.
CHAPTER TWO: NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS
Chapter Two and its relevant annexes and appendices set out
the Agreement's principal rules governing trade in goods. Each
Party must treat products from the other Parties in a non
discriminatory manner and eliminate a wide variety of non-
tariff trade barriers that restrict or distort trade flows.
Chapter Two maintains duty-free treatment under the North
American Free Trade Agreement (NAFTA) for originating goods
under the USMCA.
Chapter Two maintains the NAFTA prohibition on export
duties, taxes, and other charges, and the waiver of specific
customs processing fees for originating goods; adds new
provisions for transparency in import licensing and export
licensing procedures; prohibits Parties from applying
requirements to use local distributors for importation;
prohibits restrictions on the importation of commercial goods
that contain cryptography; prohibits restrictions on imports of
remanufactured goods.; prohibits consular transactions and
their associated fees and charges.
Agriculture Market Access. The Parties agree to maintain
existing duty-free market access for originating agricultural
goods. The Agreement grants U.S. exporters unprecedented access
to the Canadian dairy, poultry, and egg markets.
Dairy. Canada agreed to provide new access through new
tariff-rate quotas (TRQs) for U.S. dairy exports, including
fluid milk, cream, butter, skim milk powder, cheese, and other
dairy products. Canada will also eliminate its tariffs on U.S.
whey and margarine over a number of years. The United States
will provide Canada reciprocal market access for Canadian dairy
products.
Poultry. Canada will provide new access for U.S. exports of
chicken and eggs through TRQs and expand access for U.S.
exports of turkey.
Sugar. The United States will provide Canada small tariff-
rate quotas for refined sugar and sugar-containing products.
Peanuts. The United States will eliminate tariffs over five
years for Canadian peanuts and peanut products made from
peanuts grown in one of the USMCA countries.
CHAPTER THREE: AGRICULTURE
Chapter Three and its annexes contain commitments related
to trade in agricultural products.
General Provisions. Chapter Three includes provisions to
prohibit the use of export subsidies; increase transparency and
consultation regarding the use of export restrictions for food
security purposes; and minimize the use of trade-distorting
domestic support measures. The Parties also commit to work
together at the WTO on agriculture matters to promote increased
transparency, and to improve and further develop multilateral
disciplines.
Biotechnology. This chapter also includes provisions to
enhance information exchange and cooperation on agricultural
biotechnology trade-related matters to support 21st century
innovations in agriculture. The chapter covers all
biotechnologies, including new technologies such as gene
editing, in addition to traditional rDNA technology.
TRQ Administration. The chapter also includes strong rules
for administration of TRQs to ensure that TRQs are administered
fairly and transparently, including an obligation not to
allocate TRQs to producer groups or limit an allocation to
processors, unless otherwise agreed.
Dairy. Canada commits to the elimination of its milk
classes 6 and 7 within six months of entry into force of the
Agreement. Canada will ensure that the price for non-fat solids
used to manufacture skim milk powder, milk protein
concentrates, and infant formula will be no lower than a level
based on the USDA price for nonfat dry milk. In addition,
Canada will apply export charges to its exports of skim milk
powder, milk protein concentrates, and infant formula at
volumes over thresholds specified in the Agreement.
Wheat. Addressing longstanding Canadian barriers to U.S.
wheat, the United States and Canada agree to non-discriminatory
treatment in the grading of originating wheat imported from the
territory of the other Party and to not require a country of
origin statement on a quality grade certificate for such wheat.
Distinctive Products. The Parties agree to continue
recognition of Bourbon Whiskey, Tennessee Whiskey, Tequila,
Mezcal, and Canadian Whisky as distinctive products.
Distilled Spirits, Wine, Beer, and Other Alcohol Beverages
Annex. This annex contains nondiscrimination, transparency, and
due process commitments regarding the internal sale and
distribution of alcohol beverages, including beer. The Parties
agree to labeling and certification provisions that will help
the Parties avoid barriers to trade in wine and distilled
spirits.
Proprietary Food Formulas Annex. This annex requires each
Party to protect the confidentiality of information relating to
companies' proprietary formulas in the same manner for domestic
and imported products, and to limit such information
requirements to what is necessary to achieve legitimate
objectives.
CHAPTERS FOUR AND FIVE: RULES OF ORIGIN AND ORIGIN PROCEDURES
Chapters Four, Five, and their respective annexes and
appendices establish the rules of origin that a good must meet
to qualify as ``originating'' and the procedures that each
Party and its importers and exporters must adhere to in order
to ensure that preferential tariff rates of the USMCA can be
applied to their respective goods. These rules ensure that the
benefits of the USMCA accrue primarily to Parties to the
Agreement.
Chapter Four contains product-specific rules (PSRs) of
origin for goods. This chapter also outlines new provisions
such as the labor value content and higher regional value
content requirements for vehicles and parts, as well as steel
and aluminum purchasing requirements for vehicle producers.
Labor Value Content (LVC). In addition to the PSRs outlined
in Chapter Four, Appendix 4-B Article 7 establishes that a
vehicle producer of a Party must certify it has met an LVC in
order for its vehicle to qualify as ``originating'' and
therefore receive the preferential tariff treatment established
in the USMCA. The LVC requires that 40 percent of a passenger
vehicle's value and 45 percent of a light truck or heavy
truck's value must be produced in a North American plant or
facility with an average hourly wage of at least $US16 per
hour. Parties agree that this provision will be implemented
fully by January 1, 2023, or three years after the date of
entry into force of the Agreement, whichever is later, unless
there is an alternative staging period for a vehicle producer.
Automobiles and Automotive Parts. In Appendix 4-B Articles
2 through 4, Parties establish the PSRs and Regional Value
Content (RVC) required for vehicles, passenger vehicles, light
trucks, heavy trucks, and parts to receive preferential tariff
treatment under USMCA. Parties agreed to raise the minimum RVC
of passenger vehicles, light trucks, and associated parts to 75
percent and to 70 percent for heavy trucks and associated
parts. Further, Parties established higher thresholds for the
RVC of core, principal, and complimentary parts for passenger
vehicles, light trucks, and heavy trucks in order to qualify as
``originating.''
The following are the RVC breakdowns for the respective
parts categories for passenger vehicles and light trucks under
the net cost method: 75 percent for core parts, 70 percent for
principal parts, and 65 percent for complimentary parts. For
parts categories for heavy trucks under the net cost method the
RVC is 70 percent for principal parts and 60 percent for
complimentary parts. These commitments will be fully
implemented by January 1, 2023, or three years after the date
of entry into force of the Agreement, whichever is later,
unless there is an alternative staging period for individual
producers.
Steel and Aluminum. In addition to the PSRs outlined in
Chapter Four, Appendix 4-B Article 6 commits Parties to
consider a passenger vehicle, light truck, or heavy truck as
``originating'' only if 70 percent of the vehicle producer's
steel and aluminum purchases, by value, originate from within
one or more of the Parties of the Agreement.
Remanufactured Goods. Chapter Four provides for recovered
materials to be treated as an originating good when these
materials are used in the production of or incorporated into a
remanufactured good.
Chapter Five includes specific rules on how to claim
preferential tariff treatment and verify products are
originating, as well as provisions on cooperation between
customs authorities and enforcement of these new rules.
Certificates of Origin (COO). In this chapter, the Parties
establish data fields in order to complete a valid COO. Minor
errors or discrepancies in a COO shall not be grounds for
rejection. Parties also agree to allow for the electronic
submission of COOs and allow them to be signed electronically
or digitally. USMCA also establishes that COOs are not required
if the value of the goods being imported does not exceed
$US1,000, except in certain circumstances.
Origin Verification. To ensure imported goods are
originating, the USMCA allows a Party's customs administration
to conduct verifications through both written requests for
information and site visits of the producers or exporters. If
an importer, exporter, or producer is found to be making a
pattern of false or unsupported claims that a product is
originating, their access to preferential tariff treatment may
be withheld.
Committee on Rules of Origin and Origin Procedures. Chapter
Five establishes both the Committee on Rules of Origin and
Origin Procedures (Committee) and the Sub-Committee of Origin
Verification (Sub-Committee). The Committee is to be composed
of government representatives from each Party and its primary
objective is to ensure that Chapter Four and Five commitments
are administered effectively. The Sub-Committee's primary
objectives are to develop and improve the processes, materials,
and guidance associated with origin verifications.
CHAPTER SIX: TEXTILES AND APPAREL
Chapter Six and its annexes contain provisions covering
trade in textiles and apparel among the Parties.
The chapter establishes textile-specific provisions related
to rules of origin, customs cooperation, verification, and
determinations, including tools for preventing fraud and
circumvention. It also includes provisions establishing a
Committee on Textile and Apparel Matters and for monitoring
tariff preference levels (TPLs) and will promote greater
transparency and the sharing of information among the Parties.
Appendices to the chapter set forth rebalanced TPLs for certain
non-originating products, allowing for limited use of third-
country inputs.
The PSRs for textile and apparel articles, included in
Chapter Four, incentivize the use of fibers, yarns, and fabrics
produced within the territory of the Parties. The updated rules
of origin require the use of U.S. or regional sewing thread,
pocketing fabric, narrow elastic bands, and coated fabric in
most USMCA-qualifying apparel and other finished textile goods.
CHAPTER SEVEN: CUSTOMS ADMINISTRATION AND TRADE FACILITATION
Chapter Seven establishes rules designed to encourage
transparency, predictability, and efficiency in the operation
of each Party's customs procedures and to provide for
cooperation between the Parties on customs matters.
Trade Facilitation. In Chapter Seven, each Party commits to
observe transparency obligations, including commitments on
online publication of laws, regulations, and procedures for
customs and other trade matters. Provisions also require
customs administrations to be responsive to importers and
exporters. Additional provisions relating to appeals,
penalties, and standards of conduct require customs
administrations to follow rules to ensure fairness and
integrity in customs work. This chapter requires that the
Parties, through respective customs administration, issue a
written advance ruling prior to arrival, promptly release
goods, and maintain disciplines on setting bonds and surety
instruments. The chapter also requires the Parties to create a
``single window'' system for imports into each Party and
commitments on Authorized Economic Operator programs, with
cooperation to promote best practices and identify benefits for
traders.
The chapter also provides new cost-cutting and efficiencies
for traders by allowing for reducing reliance on customs
brokers and creating more competition among customs brokers in
addition to promoting coordinated inspections of merchandise.
Additional provisions require standards of conduct to support
anti-corruption efforts among customs officers.
Cooperation and Enforcement. The chapter also contains
provisions aimed at strengthening and expanding customs and
trade enforcement efforts and cooperation between the Parties.
This chapter contains provisions on customs compliance
verification requests, and the exchange of specific
confidential information.
Express Shipments. Under provisions in this chapter, the
Parties agree to create a new informal shipment level of
$US2,500, including procedures to reduce paperwork and
formalities required for entry, and to set a de minimis
shipment value level for each Party. The de minimis level for
Canada is set at C$40 for taxes, and provides for duty free
shipments up to C$150. Canada will also allow a period of 90
days after entry for the importer to make payment of taxes.
Mexico will provide a $US50 tax-free de minimis and also
provide duty-free shipments up to the equivalent level of
$US117. Shipment values up to these levels will enter with
minimal formal entry procedures.
CHAPTER EIGHT: RECOGNITION OF THE UNITED MEXICAN STATES' DIRECT,
INALIENABLE, AND IMPRESCRIPTIBLE OWNERSHIP OF HYDROCARBONS
In Chapter Eight, the United States and Canada recognize
that Mexico has ownership of all hydrocarbons in the subsoil of
its national territory.
CHAPTER NINE: SANITARY AND PHYTOSANITARY MEASURES
Chapter Nine sets out the Parties' obligations regarding
sanitary and phytosanitary (SPS) measures under the Agreement.
It reflects the Parties' understanding that implementation of
existing obligations under the WTO Agreement on the Application
of Sanitary and Phytosanitary (SPS Agreement) is a shared
objective. Nothing in the Agreement imposes limitations on any
Party establishing its appropriate level of protection for
human, animal, and plant life and health.
Under Chapter Nine, the Parties agree to strengthen
disciplines for science-based SPS measures. Parties are
obligated to base SPS measures on international standards or an
assessment of risk. Provisions include increasing transparency
in the development and implementation of SPS measures;
advancing science-based decision making; improving processes
for certification, regionalization and equivalency
determinations; conducting systems-based audits; improving
transparency for import checks; and working together to enhance
compatibility of measures.
Under chapter obligations, Parties must publish proposed
regulations, provide the relevant scientific evidence, and
provide for the opportunity to comment on proposed regulations
and risk assessments. The Parties are obligated to limit
information required on certificates to essential information.
In addition, Parties shall promote electronic certification and
other technologies to facilitate trade. Parties may not stop
importation of goods solely because an SPS measure is being
reviewed.
Cooperation. The chapter establishes a Committee on
Sanitary and Phytosanitary Measures to implement the chapter,
consisting of relevant trade and regulatory officials, and
allows for technical working groups on SPS issues. The SPS
chapter establishes a mechanism for technical consultations to
resolve issues between two Parties, prior to moving a matter to
dispute settlement.
CHAPTER TEN: TRADE REMEDIES
Chapter Ten includes provisions covering safeguards, global
safeguards, and antidumping (AD) and countervailing duties
(CVD). Provisions will ensure due process and transparency
standards, including the use of electronic filing, to enable
businesses of a Party to effectively participate in AD/CVD
proceedings. Parties also agree to strong duty evasion
cooperation provisions to combat attempts to undermine existing
antidumping, countervailing duty, and safeguards measures. The
chapter provides for duty evasion verifications and in-country
facility visits by respective customs authorities, as well as
the sharing of customs information for the specific purpose of
combatting duty evasion.
The Parties have also agreed to share information to more
effectively address potentially injurious dumped or subsidized
imports, particularly from third countries. Each Party will
permit investigating authorities to consider information and
data from existing AD/CVD petitions filed in another Party, as
well as third-party subsidy information, in determining whether
to self-initiate an AD/CVD investigation or take other relevant
action.
Section D of Chapter Ten replicates without substantive
changes the NAFTA mechanism for review and dispute settlement
in AD and CVD matters.
CHAPTER ELEVEN: TECHNICAL BARRIERS TO TRADE
The USMCA chapter on technical barriers to trade (TBT)
strengthens disciplines related to transparency, standards,
technical regulations conformity assessment procedures and
trade facilitation matters. The chapter maintains each
government's sovereign right to regulate products and
manufacturing processes that ensure the protection of human,
animal, or environmental health and safety.
Key Concepts. TBTs refer to barriers that may arise in
preparing, adopting, or applying voluntary product standards,
mandatory product standards (``technical regulations''), and
procedures used to determine whether a particular good meets
such standards, i.e., ``conformity assessment'' procedures.
Provisions in this chapter enhance rights and obligations
under the WTO Agreement on Technical Barriers to Trade (WTO TBT
Agreement), and build on WTO rules to promote transparency,
accountability, and cooperation between the Parties on
regulatory issues. This includes using the WTO TBT Committee
Decision on International Standards as a basis in determining
what standards are ``international.'' In cases where there is
no international standard, the chapter provides an alternative
pathway for standards developed in North America to be
considered in technical regulations. The chapter also prevents
discriminatory treatment of the conformity assessment bodies
that are located in one Party's territory and seeks to prevent
testing procedures from becoming unnecessary obstacles to
trade. The chapter incorporates good regulatory practices for
technical regulations, and emphasizes the Parties' commitment
to reduce unnecessary barriers and to provide national
treatment with respect to labeling.
The chapter ensures notification of the entirety of the
text of draft and final regulations, with a reasonable period
of at least six months between the publication of the
regulation and its entry into force. It also provides for
participation of interested persons in the development of
standards, technical regulations, and conformity assessment
procedures. The chapter includes three articles to prevent
other practices from creating barriers, including that no
preference may be accorded to standards that have been
developed in a manner inconsistent with the WTO TBT Committee
Decision, or where the standard setting body does not allow
equal opportunity to participate in the standards development;
that technical assistance should not promote the use of
standards developed in a manner inconsistent with the WTO TBT
Agreement; and that no Party can be party to an agreement with
another country which would require it to withdraw or limit the
use of a standard developed according to the WTO TBT Committee
Decision.
Finally, the chapter lays out specific time lines and
information requirements to discuss a specific trade concern
that is under consideration for dispute settlement.
Committee on Technical Barriers to Trade. The chapter
establishes a committee to strengthen collaboration and
facilitate trade between the Parties, including a commitment to
engage the public in work of the TBT Committee.
CHAPTER TWELVE: SECTORAL ANNEXES
Chapter Twelve is comprised of six sectoral annexes
containing provisions covering chemical substances, cosmetic
products, information and communication technology, energy
performance standards, medical devices, and pharmaceuticals.
Chemical Substances Annex. This annex contains provisions
to enhance regulatory compatibility and data and information
exchange between the three Parties, while recognizing the
regulatory authority of each Party. This annex commits the
Parties to make efforts to align risk assessment methodologies
and risk management measures for chemical substances. Moreover,
the annex recognizes the importance of minimizing unnecessary
economic barriers or impediments to technological innovation
and Parties have agreed to define and, where appropriate, use a
risk-based approach to the assessment of chemicals. In a risk-
based approach, the evaluation of a chemical substance or
chemical mixture includes the consideration of both the hazard
and exposure as well as the protection of health and the
environment.
Cosmetic Products Annex. This annex contains provisions to
enhance regulatory compatibility in the cosmetics sector. In
this annex, the Parties commit to a risk-based approach for
cosmetics and further agreed to not require marketing
authorization for a cosmetic product unless there is a human
health or safety concern. The Parties also agree to not require
cosmetic products be tested on animals unless no validated
alterative test method exists to assess a product's safety. The
annex also encourages the Parties to consider internationally
developed science and technical guidance documents when
implementing regulations to promote greater compatibility among
the Parties, including for good manufacturing practice
guidelines. The annex also requires the Parties to share post-
market surveillance information of cosmetics products, where
appropriate.
Information and Communication Technology (JCT) Annex. This
annex contains provisions on regional cooperation activities on
telecommunication equipment. These provisions capture the
emerging regulatory practice of electronic labeling for devices
with a screen, and require the Parties to allow for certain
regulatory information to be displayed electronically rather
than being physically etched on the device. The annex also
includes obligations to protect innovation of encryption
products to meet consumer and business demand for product
features that protect privacy and security, while also allowing
law enforcement access to communications consistent with
applicable law.
Energy Efficiency Performance Standards (EPS) Annex. This
annex contains provisions to enhance regulatory compatibility
on EPS. Provisions in this annex aim to harmonize federally
mandated energy performance standards across a wide range of
product categories (household appliances, HVAC, lighting,
industrial equipment, and others) within a nine-year timeframe,
and establish a mechanism for continued regulatory cooperation
on EPS.
Medical Devices Annex. This annex contains provisions to
enhance regulatory compatibility for medical devices.
Provisions commit the Parties to follow a risk-based approach
for the classification of medical devices, specifically to
administer marketing authorization procedures to ensure timely,
transparent, impartial, and science-based decision making for
medical device approvals. This annex contains commitments that
each Party will base its respective marketing authorization
decision only on safety and efficacy of the product and not on
unrelated factors, such as sales, pricing, or financial data,
and to maintain an appeal process. The annex includes
obligations to recognize each Party's audits of medical device
manufacturers conducted under the International Medical Device
Regulator's Forum Single Audit Program.
Pharmaceuticals Annex. This annex contains provisions to
enhance regulatory compatibility for the pharmaceutical sector.
Provisions commit the Parties to administer marketing
authorization procedures to ensure timely, transparent,
impartial, and science-based decision making for pharmaceutical
approvals. This annex also contains commitments that each Party
will base its respective marketing authorization decision only
on safety and efficacy of the product and not on unrelated
factors, such as sales, pricing, or financial data, and to
maintain an appeal process.
This annex encourages cooperation on inspections of
pharmaceutical manufacturers by permitting the Parties to
participate in each other's inspections, as well as to share
data on the outcome of those inspections. Furthermore, the
Parties agreed to take necessary steps to permit the exchange
of confidential information for such inspections.
CHAPTER THIRTEEN: GOVERNMENT PROCUREMENT
Chapter Thirteen and its annexes contain government
procurement provisions applicable to the United States and
Mexico only. The chapter specifies covered procurement measures
as well as activities not covered under the Agreement. Under
this chapter, the United States and Mexico must apply fair and
transparent procurement procedures and rules. This chapter also
contains provisions clarifying that technical specifications
and conditions for participation in tenders can be used to
promote the conservation of natural resources, protection of
the environment, or can be designed to promote compliance with
laws regarding international labor rights, as long as they are
otherwise consistent with the Agreement and provided the
conditions do not constitute a disguised barrier to trade.
General Principles. Chapter Thirteen establishes a basic
rule of ``national treatment'' meaning that the United States
and Mexico must treat goods, services, and suppliers of such
goods and services from the other Party in a manner that is
``no less favorable'' than their domestic counterparts. The
chapter provides incentives for putting information about
procurement systems online; for electronic publishing of
notices; and for permissible reductions in time periods when
using electronic procurement methods.
Support for Small Businesses. The chapter contains
provisions to facilitate small business participation in
procurement, including by encouraging that, to the extent
possible and appropriate, Mexico and the United States make
tender documentation free of charge and consider how to better
structure procurements to help small businesses compete, among
other things.
Transparency. Mexico and the United States must make
procurement statistics publicly available online.
Ensuring Integrity. Mexico and the United States must have
measures in place to address corruption, fraud, or abuse in
government procurement, both by businesses and by tendering
agencies. The chapter also mandates transparency requirements
for any debarment procedures.
CHAPTER FOURTEEN: INVESTMENT
Chapter Fourteen establishes rules to protect investors
from one Party against wrongful or discriminatory government
actions when they invest or attempt to invest in another
Party's territory.
Key Concepts. Under this chapter, the term ``investment''
covers all forms of investment, including enterprises,
securities, certain forms of debt, intellectual property
rights, licenses, and certain contracts. The chapter covers
both investments existing when the Agreement enters into force,
and future investments. The term ``investor of a Party''
encompasses U.S., Canadian, and Mexican nationals as well as
firms (including branches) established in one of the Parties.
General Principles. The key investment protection
provisions include rules prohibiting expropriation without
prompt, adequate, and effective compensation; discrimination;
performance requirements (e.g., technology transfer and local
content requirements); nationality-based requirements on the
appointment of senior management; restrictions on the transfer
of investment-related capital; and denial of justice and other
breaches of the customary international law minimum standard of
treatment. In the event of an investment dispute, each Party
can seek remedies for breach of these rules in State-to-State
dispute settlement procedures.
Sectoral Coverage and Non-Conforming Measures. With the
exception of investments in or by regulated financial
institutions, Chapter Fourteen generally applies to all
sectors, including service sectors. However, each Party
negotiated a limited list of exemptions from the chapter's
obligations relating to national treatment, most-favored nation
(MFN) treatment, performance requirements, or senior management
and boards and directors as ``non-conforming measures.'' Annex
I contains each Party's list of existing non-conforming
measures at the central and regional levels of government. The
United States has scheduled an exemption from all of the
aforementioned obligations for all existing state measures. All
existing local measures are exempt from those obligations for
all Parties without the need to be listed. In Annex II, each
Party has listed sectors or activities in which it reserves the
right to adopt or maintain future non-conforming measures.
Annexes I and II also include exemptions from Chapter Fifteen
(Cross Border Trade in Services).
Investor-State Dispute Settlement (ISDS). Under the
reformed approach to ISDS in the Investment chapter, U.S. and
Mexican investors in all sectors will have limited access to
ISDS as a last resort to provide protection in the context of
such egregious issues as discrimination and direct
expropriation. In certain sectors-such as oil and gas,
telecommunications, and certain infrastructure-investors that
enter into government contracts will have broader access to
ISDS to protect the long-term, capital-intensive investments in
these sectors, which are subject to heightened political risks.
ISDS with Canada will be phased out over three years, but
State-to State remedies will remain between the United States
and Canada.
CHAPTER FIFTEEN: CROSS-BORDER TRADE IN SERVICES
Chapter Fifteen governs measures affecting cross-border
trade in services between the Parties. Certain provisions also
apply to measures affecting investments to supply services.
The chapter includes the core obligations of national
treatment and most-favored nation (MFN) treatment, ensuring
nondiscrimination in the supply of services. The chapter also
includes a local presence rule that helps ensure that U.S.
suppliers will not be required to establish an office in Mexico
or Canada as a condition for supplying cross-border services.
This chapter also includes commitments to keep services markets
open and free from new quantitative restrictions, enhanced
rules for ensuring good governance in licensing regimes, and a
new article to enhance commercial opportunities for small and
medium-sized businesses. Except where the Parties have
negotiated specific exceptions, the obligations in the chapter
apply to all services and are subject to enforcement through
dispute settlement. National treatment, MFN treatment, market
access, and local presence obligations do not apply to non-
conforming measures as set out by the Parties in their
respective Schedules to Annexes I and II.
Chapter Fifteen also contains an annex requiring that
Canada eliminate its rule prohibiting simultaneous substitution
of advertising for the Super Bowl, and will increase access for
teleshopping broadcasters. Additional annexes provide the basis
for ongoing work in professional services and transportation
services, and a new set of disciplines for delivery services.
CHAPTER SIXTEEN: TEMPORARY ENTRY
Chapter Sixteen permits temporary entry for professionals
and businesspeople seeking to engage in certain activities in
the territory of another Party. These commitments, included in
the NAFTA, provide predictability for companies and qualified
professionals in serving clients, moving senior managers,
initiating new investments, and other business activities
conducted on a temporary basis in another USMCA country.
Annexes to this chapter include provisions on Parties' measures
applicable to temporary entry and define business activities
and professionals eligible for temporary entry into a Party.
This chapter maintains the same treatment provided under the
NAFTA.
CHAPTER SEVENTEEN: FINANCIAL SERVICES
Chapter Seventeen and its annexes include commitments to
liberalize financial services markets and create a level
playing field for financial institutions, investors and
investments in financial institutions, and cross-border trade
in financial services.
The chapter includes core obligations, such as national
treatment, to ensure that a Party does not discriminate against
financial service suppliers of another Party. It also contains
market access provisions that prohibit a Party from imposing
certain quantitative or numerical restrictions on financial
services. A separate annex contains commitments of the Parties
relating to cross-border trade, including an expanded list of
cross-border services, such as portfolio management, investment
advice, and electronic payment services. Additionally,
provisions in this chapter create enhanced transparency
obligations for regulatory licensing and other market access
authorizations.
Notably, this chapter includes a key prohibition on local
data storage requirements where the financial regulator has
immediate and ongoing access to data that it needs to fulfill
its regulatory and supervisory mandate.
Chapter Seventeen also contains specific procedures related
to ISDS claims with Mexico, including provisions regarding the
level of expertise required for arbitrators and a special
procedural mechanism to facilitate the application of the
prudential and other exceptions.
CHAPTER EIGHTEEN: TELECOMMUNICATIONS
Chapter Eighteen and its annexes include disciplines on
regulatory measures affecting telecommunications trade and
investment between the Parties. It includes rules to promote
effective competition in the telecommunications sector, provide
access to the networks of other suppliers, and ensure that
regulation of the sector is independent, impartial, and
transparent.
This chapter includes provisions to address competition in
the supply of fixed and mobile telecommunications services. For
Internet of Things devices, this chapter includes new rules to
ensure that countries will not prohibit roaming arrangements
that are often used to support advanced functionality of such
devices. The chapter also includes commitments to make publicly
available information on measures relating to public
telecommunications services, to resolve disputes and provide
effective enforcement, to ensure fair access to government
managed resources, such as spectrum and rights-of-way, to not
discriminate in favor of state-owned enterprises, and to
cooperate with regard to international mobile roaming.
Transparency. In this chapter, the Parties commit to ensure
that their respective telecommunications regulatory body is
independent from and impartial to their suppliers of public
telecommunications services, and to ensure that
telecommunications regulations are set by independent
regulators applying transparent procedures, designed to
encourage adherence to principles of deregulation and
technological neutrality. The chapter also includes
transparency commitments for licensing processes.
CHAPTER NINETEEN: DIGITAL TRADE
Chapter Nineteen contains robust disciplines on digital
trade, providing a firm foundation for the expansion of trade
and investment in innovative products and services. This
chapter includes provisions that prohibit the application of
customs duties and other discriminatory measures to digital
products distributed electronically (e-books, videos, music,
software, games, etc.). It also ensures that data can be
transferred cross-border, and that limits on where data can be
stored and processed are minimized. Additional provisions in
the chapter ensure that suppliers are not restricted in their
use of electronic authentication or electronic signatures, and
guarantee that enforceable consumer protections, including for
privacy and unsolicited communications, apply to the digital
marketplace.The chapter also limits Internet platform's civil
liability with respect to third-party content that such
platforms host or process, except regarding intellectual
property enforcement.
Chapter Nineteen also promotes open access to government-
generated public data, and collaboration in addressing
cybersecurity challenges, while seeking to promote industry
best practices with respect to network security. Additional
provisions limit governments' ability to require disclosure of
proprietary computer source code and algorithms, to better
protect the competitiveness of digital suppliers.
CHAPTER TWENTY: INTELLECTUAL PROPERTY RIGHTS
Chapter Twenty complements and enhances existing
international standards for the protection of intellectual
property and the enforcement of intellectual property rights,
consistent with U.S. law. This chapter requires the Parties to
extend full national treatment for copyright and related
rights, ensuring the same protections for creators of another
Party that its domestic creators receive. It also contains
provisions to ensure transparency With respect to a Party's
laws, regulations, procedures, and administrative rulings
concerning the protection and enforcement of intellectual
property rights, including requirements to publish information
online. The chapter also contains strong standards for
industrial design protection, requiring a minimum term of
protection for industrial designs of at least 15 years.
Public Health. This chapter includes provisions permitting
a Party to adopt measures necessary to protect public health
and nutrition, and to promote the public interest in sectors of
vital importance to their development, provided that those
measures are consistent with the provisions of this chapter.
Trademarks and Geographical Indicators (GIs). Chapter
Twenty contains provisions for protecting trademarks, including
well-known marks. In addition, it includes rules relating to
electronic trademarks systems, a classification system that is
consistent with international standards, and systems to protect
against ``trademark squatting'' with respect to a country-code
top-level domain name. Chapter Twenty also provides important
procedural safeguards for recognition of new GIs, including
strong standards for protection against issuances of GIs that
would prevent producers from using common names, and
establishes a mechanism for consultation between the Parties on
future GIs pursuant to international agreements.
Patents and Pharmaceuticals. This chapter provides robust
patent protection for innovators, enshrining patentability
standards and patent office best practices to ensure that
innovators, including small and medium-sized businesses, are
able to protect their inventions with patents. The chapter also
includes strong minimum standards for pharmaceutical and
agricultural innovators, including with respect to data
protection. For the pharmaceutical sector, this chapter
contains provisions requiring compensation of applicants for
unreasonable marketing approval delays and requires the Parties
to provide an effective mechanism for the early resolution of
potential patent disputes.
Copyright and Related Rights. The chapter requires a
minimum copyright term of life of the author plus 70 years, and
for those works with a copyright term that is not based on the
life of a person, a minimum of 75 years after first authorized
publication. Provisions also establish appropriate copyright
safe harbors to provide protection for IP and predictability
for legitimate enterprises that do not directly benefit from
the infringement.
Trade Secrets. The chapter includes all of the following
protections against misappropriation of trade secrets,
including by state-owned enterprises: civil procedures and
remedies, criminal procedures and penalties, prohibitions
against impeding licensing of trade secrets, judicial
procedures to prevent disclosure of trade secrets during the
litigation process, and penalties for government officials for
the unauthorized disclosure of trade secrets. It also
establishes strong standards of protection of trade secrets
against misappropriation.
Enforcement Provisions. Chapter Twenty contains robust
intellectual property rights enforcement mechanisms, including
provisions that require ex officio authority for border
enforcement officials to stop suspected counterfeit or pirated
goods at every phase of entering, exiting, and transiting
through the territory of any Party; express recognition that IP
enforcement procedures must be available for the digital
environment for trademark and copyright or related rights
infringement; meaningful criminal procedures and penalties for
unauthorized camcording of movies; civil and criminal penalties
for satellite and cable signal theft; and broad protection
against trade secret theft, including by state-owned
enterprises.
CHAPTER TWENTY-ONE: COMPETITION POLICY
Chapter Twenty-One includes provisions on national
competition laws to promote competition. The Parties recognize
the importance of consumer protection policy and enforcement to
creating efficient and competitive markets, and enhancing
consumer welfare. In this regard, each Party must adopt or
maintain national consumer protection laws that address
fraudulent and deceptive commercial activities.
The Parties agree to obligations providing increased
procedural fairness and competition law enforcement. This
provides Parties with a reasonable opportunity to defend their
interests and ensure that Parties have certain rights and
transparency under each Party's competition laws.
The chapter also limits remedies imposed by a national
competition authority relating to conduct or assets outside of
the Party's territory to situations in which there is an
appropriate nexus to harm affecting the Party's territory or
commerce.
The chapter includes cooperation and transparency
provisions related to competition policies and the enforcement
of national competition laws, including coordination of
investigations between national authorities, when warranted.
CHAPTER TWENTY-TWO: STATE-OWNED ENTERPRISES AND DESIGNATED MONOPOLIES
Chapter Twenty-Two and its annexes apply to the activities
of state-owned enterprises (SOEs), state enterprises, and
designated monopolies of a Party that affect or could affect
trade or investment between Parties of the USMCA. The chapter
contains a broad definition of what constitutes an SOE to
ensure that any government ownership of an entity that confers
control is captured.
The chapter prohibits certain subsidies to SOEs that are
particularly trade-distorting. Specifically, it prohibits three
types of subsidies: (1) subsidies to SOEs that are insolvent or
on the brink of insolvency, if there is no credible
restructuring plan; (2) loans or loan guarantees from SOEs such
as state-owned banks to other, uncreditworthy SOEs; and (3)
noncommercial SOE debt-to-equity swaps by the government or
government entities. Further, the SOE Chapter requires the
Parties to share, upon request, information about the extent of
government ownership and control, and the subsidies provided to
their SOEs, as well as all government equity investments made
in an SOE. Lastly, the SOE Chapter includes commitments by the
Parties to ensure that SOEs and designated monopolies make
commercial purchases and sales on the basis of commercial
considerations and do not discriminate against the enterprises,
goods, or services of the other Parties.
Non-Conforming Activities. In Annex N, each Party
negotiated a limited list of exemptions from the Chapter's
obligations relating to non-commercial assistance and non-
discriminatory treatment and commercial considerations as
``non-conforming activities.''
Application to Sub-Central Entities. In Annex 22.D, each
Party indicates the extent to which the obligations in the
chapter do not apply to enterprises owned or controlled by sub-
central governments. In Annex 22.C, Parties agree to commence
negotiations on coverage of sub-central entities within six
months of entry into force of the Agreement.
CHAPTER TWENTY-THREE: LABOR
Chapter Twenty-Three sets out the Parties' commitments and
undertakings regarding trade-related labor rights. USMCA's
labor provisions are in the core of the Agreement and subject
to the same dispute settlement mechanism as other chapters.
The chapter requires the Parties to adopt and maintain
labor rights in law and practice as recognized by the
International Labor Organization, to effectively enforce their
labor laws, and not to waive or derogate from their labor laws.
The chapter includes provisions requiring Parties to
prohibit the importation of goods produced by forced labor, to
address violence against workers exercising their labor rights,
and to ensure that migrant workers are protected under labor
laws. It provides procedural guarantees for the enforcement of
labor laws, including due process through independent and
impartial judicial and administrative tribunals. It establishes
institutional mechanisms to provide for intergovernmental
engagement and cooperation with stakeholder input and a public
submission process whereby members of the public can seek
review of claims that a Party is not meeting its obligations
under the labor chapter.
Annex on Worker Representation in Collective Bargaining in
Mexico. This annex commits Mexico to specific legislative
actions as part of its constitutional labor reforms in order to
provide for the effective recognition of the right to
collective bargaining. Required actions include legislation
that requires majority worker support--through the exercise of
a personal, free, and secret vote of workers--to elect union
leadership, challenge existing bargaining representatives, and
register a new collective bargaining agreement. On May 1, 2019,
Mexico approved comprehensive labor reform legislation to
implement the requirements of this Annex.
CHAPTER TWENTY-FOUR: ENVIRONMENT
Chapter Twenty-Four and its annexes set out the Parties'
commitments and undertakings regarding environmental
protections. These provisions are subject to the same dispute
settlement mechanism as other chapters.
The chapter includes obligations to combat trafficking in
wildlife, timber, and fish, including by enhancing the
effectiveness of customs inspections and strengthening law
enforcement networks to stem such trafficking. The Parties
agreed to affirm their existing and future commitments under
listed Multilateral Environmental Agreements. The Parties also
agree to prohibit some of the most harmful fisheries subsidies,
such as those that benefit vessels or operators involved in
illegal, unreported, and unregulated (IUU) fishing. The chapter
also includes new protections for marine species, such as
prohibitions on shark-finning and the killing of great whales
for commercial purposes. There are also first-ever articles to
improve air quality, prevent and reduce marine litter, support
sustainable forest management, and ensure appropriate
procedures for environmental impact assessments. The chapter
also includes public participation provisions, including a
streamlined mechanism for public submissions asserting a
failure by one or more Parties to effectively enforce their
environmental laws.
Agreement on Environmental Cooperation. The Parties also
agree to support implementation of the chapter's commitments by
continuing their longstanding history of environmental
cooperation under a modernized Commission for Environmental
Cooperation, as outlined in the new Agreement on Environmental
Cooperation (ECA) among the Governments of the United States of
America, the United Mexican States, and Canada. The ECA will
take effect upon entry into force of the USMCA and provide a
platform for environmental cooperation in such areas as
environmental governance, pollution, conservation of biological
diversity, and sustainable management of natural resources.
CHAPTER TWENTY-FIVE: SMALL AND MEDIUM-SIZED ENTERPRISES
Chapter Twenty-Five includes provisions to promote
cooperation between the Parties to enhance commercial
opportunities for Small and Medium-Sized Enterprises (SMEs).
This new chapter recognizes the fundamental role of SMEs in
maintaining dynamism and competitiveness in the economies of
each Party. It aims to promote SME trade and investment
opportunities among the Parties and establishes information
sharing tools on the provisions of the Agreement as well as
other information useful for SMEs doing business in North
American markets. The chapter also creates a Committee on SME
Issues comprised of government officials from each Party.
SME Dialogue. In addition, the SME Chapter launches a new
framework for an ongoing SME Dialogue, which will be open to
participation by SMEs, including those owned by diverse and
under-represented groups. The goal of the SME Dialogue is to
have participants provide views and information to government
officials on the implementation and further modernization of
the Agreement, in order to help SMEs benefit from the Agreement
and to further enhance cooperation between the Parties. The
chapter also highlights provisions across the Agreement that
benefit SMEs.
CHAPTER TWENTY-SIX: COMPETITIVENESS
Chapter Twenty-Six establishes a Committee on
Competitiveness that will discuss and develop cooperative
activities to promote regional economic growth in North America
and facilitate regional trade and investment.
CHAPTER TWENTY-SEVEN: ANTICORRUPTION
Chapter Twenty-Seven contains disciplines to prevent and
combat bribery and corruption in international trade. It
requires Parties to criminalize acts of corruption, both with
respect to their own government officials, and to their own
nationals' interactions with foreign government officials.
Provisions in the chapter require Parties to provide
appropriate sanctions for violations of anticorruption laws;
disallow the tax deductibility of bribes; require companies to
maintain accurate books and records; and to establish codes of
conduct and develop other tools to promote high ethical
standards among government officials. The chapter also provides
notable whistleblower protections.
The chapter also includes provisions that promote honesty
and integrity among public officials and encourage Parties to
take appropriate measures to engage civil society and the
private sector. Finally, the chapter provides for strong
cooperation among the Parties in the enforcement of
anticorruption laws.
CHAPTER TWENTY-EIGHT: GOOD REGULATORY PRACTICES
Chapter Twenty-Eight sets out specific obligations with
respect to good regulatory practices, that is, good governance
procedures that governments apply to promote transparency and
accountability when developing and implementing regulations.
The chapter makes clear that no provision prevents governments
from pursuing public policy objectives with respect to health,
safety, or the environment. Provisions in this chapter relate
to the planning, design, issuance, implementation, and review
of the Parties' respective regulations concerning trade in
goods, services, and investment.
This chapter includes commitments relating to central
coordination; publication of annual plans of expected
regulations; public consultations on draft texts of
regulations; evidence-based analysis and explanations of the
scientific or technical basis for new regulations; other
provisions concerning evidence-based decision-making (such as
parameters for conducting regulatory impact assessments and
retrospective reviews); and techniques for encouraging
regulatory compatibility and regulatory cooperation.
This chapter also includes extensive transparency
requirements to publish key information online, including draft
regulations (notice and comment) and final regulations, annual
regulatory agendas, and descriptions of regulatory agencies'
functions and legal authorities; applicable forms used by
regulatory agencies; fees associated with licensing,
inspection, audits, etc.; and judicial or administrative
procedures available to challenge regulations.
Finally, the chapter includes provisions on expert advisory
groups, information quality, and public suggestions for
improvements to regulations, consideration of effects on small
businesses, and other elements of evidence-based decision
making in the development and implementation of regulations.
The chapter also contains a non-comprehensive list of useful
alignment practices that support regulatory compatibility and
cooperation.
CHAPTER TWENTY-NINE: PUBLICATION AND ADMINISTRATION
Chapter Twenty-Nine requires each Party to ensure that its
laws, regulations, procedures, and administrative rulings of
general application are publicly available. To the extent
possible, proposed measures are required to be published in
advance for public comment, and be available online. It also
provides for due process rights for stakeholders regarding
administrative proceedings, including prompt review of any
administrative action through independent and impartial
judicial or administrative tribunals or procedures.
The chapter also includes a new commitment to compile laws
and regulations of general application at the central level of
government on those freely accessible websites that are
identified in an annex to the chapter. This new element
strengthens the commitments of the Parties to ensure that any
exporter, service supplier, investor, or other interested
person in each country has access to the relevant laws and
regulations.
CHAPTER THIRTY: ADMINISTRATIVE AND INSTITUTIONAL PROVISIONS
Chapter Thirty establishes a Free Trade Commission
(``Commission'') to oversee the implementation of the
Agreement. The Commission is composed of government
representatives of each Party at the level of Ministers or
their designees. The Commission will operate by consensus. In
addition, the chapter provides for Agreement Coordinators to
facilitate communications between the Parties. Finally, the
chapter provides for a Secretariat, comprised of National
Sections. The Secretariat's main function is to provide
administrative assistance to dispute settlement panels.
CHAPTER THIRTY-ONE: DISPUTE SETTLEMENT
Chapter Thirty-One sets out detailed procedures for the
resolution of disputes between the Parties for any matter
arising under the Agreement (with only a few exceptions). The
chapter provides for a two-step process comprising
consultations and review by a panel. The disputing Parties
shall file all documents relating to the dispute
electronically. Chapter procedures emphasize amicable
settlements, relying wherever possible on bilateral cooperation
and consultations. When disputes arise under provisions common
to the Agreement and other agreements (e.g., the WTO
agreements), the complaining government may choose a forum for
resolving the matter that is set forth in any valid agreement
between the Parties. The selected forum will be the exclusive
venue for resolving the dispute.
Consultations. A Party may request consultations with
another Party on an actual or proposed measure that it believes
to be inconsistent with obligations of the Agreement. If the
Parties fail to resolve the issue within a certain time period,
the complaining Party may request establishment of a panel.
Panel Procedures. Parties agree to maintain a roster of
panelists to objectively assess the dispute. The panel report
is due no later than 150 days from the date of the appointment
of the last panelist. If the panel finds that the responding
Party has failed to comply with its obligations or caused
nullification or impairment, the Parties shall attempt to agree
on a resolution of the dispute.
Suspension of Benefits. If the disputing Parties are unable
to agree on resolution of the dispute, the complaining Party
may suspend the application to the responding Party of benefits
of equivalent effect to the non-conformity or the nullification
or impairment until such time as the dispute is resolved. The
panel may be convened again to determine if the suspension is
excessive or if the responding Party has eliminated the non-
conformity or nullification or impairment.
The chapter also provides for the maintenance of the
Advisory Committee on Private Commercial Disputes, to
encourage, facilitate, and promote the use of arbitration,
mediation, online dispute resolution and other procedures for
the prevention and resolution of international commercial
disputes between private parties.
The chapter also provides for a Facility-Specific, Rapid
Response Labor Mechanism to ensure remediation of a denial of
rights, as defined in the chapter.
CHAPTER THIRTY-TWO: EXCEPTIONS AND GENERAL PROVISIONS
Chapter Thirty-Two provides for the following exceptions
and provisions that apply Agreement-wide or to various
chapters.
General Exceptions. Chapter Thirty-Two incorporates the
GATT Article XX exceptions with respect to goods-related
obligations and OATS Article XIV exceptions with respect to
services-related obligations.
Essential Security. This chapter provides for a self-
judging Agreement-wide exception for actions a Party considers
to be in its essential security interest.
Taxation Measures. This chapter circumscribes the
obligations that apply with respect to a Party's taxation
measures.
Temporary Safeguard Measures. Chapter Thirty-Two provides
for an exception allowing a Party to adopt or maintain
restrictive measures with regard to payments or transfers
relating to the movements of capital in the event or threat of
serious balance of payments and external financial
difficulties. Among other things, any such measure must not be
inconsistent with national treatment and Most Favored Nation
obligations of the Investment, Services, and Financial Services
chapters; be consistent with the Articles of Agreement of the
International Monetary Fund; avoid unnecessary damage to the
commercial, economic and financial interests of another Party;
not be inconsistent with the Expropriation obligation of the
Investment Chapter; and be temporary and be phased out
progressively.
Indigenous Peoples Rights. This chapter provides that
nothing in the Agreement precludes a Party from adopting or
maintaining measures it deems necessary to fulfill legal
obligations to indigenous peoples, as long as those measures
are not used as a means of arbitrary or unjustified
discrimination against persons of the other Parties or as
disguised restrictions on trade or investment.
Cultural Industries. This chapter provides that the
Agreement does not apply to a measure adopted or maintained by
Canada with respect to a cultural industry, and provides
reciprocal flexibility for the United States and Mexico with
respect to Canada. Should a Party take a measure that would be
inconsistent with the Agreement but for this exception, other
Parties may take a measure of equivalent commercial effect.
Disclosure of Information. This chapter provides that
nothing in the Agreement requires a Party to furnish or allow
access to information, the disclosure of which would be
contrary to its law or would impede law enforcement, or
otherwise be contrary to the public interest, or which would
prejudice the legitimate commercial interests of particular
enterprises, public or private.
Personal Information Protection and Access to Information.
This chapter requires each Party to have a legal framework to
provide for the protection of personal information. The Parties
shall endeavor to adopt non-discriminatory practices in
protecting natural persons from personal information protection
violations and to foster cooperation in this area. In addition,
this chapter requires each Party to maintain a legal framework
that allows natural persons to obtain access to records held by
the central level of government, subject to reasonable terms
and limitations.
Non-market Country Free Trade Agreement (FTA). This chapter
requires that any Party intending to negotiate an FTA with a
non-market country must inform the other Parties and provide
information and an opportunity to review the text. It provides
that entry into such an agreement by one Party allows for the
other Parties to terminate the USMCA and replace the USMCA with
an agreement as between them. A non-market economy country is
defined as a country that at least one Party has determined to
be a non-market economy for purposes of its trade remedy laws
and is a country with which no Party has a signed free trade
agreement.
Specific Provision for Mexico. This provision provides
that, with respect to the obligations in the Cross-Border Trade
in Services, Investment, State-Owned Enterprises and Designated
Monopolies, and Market Access for Goods Chapters, Mexico may
only adopt measures consistent with the least restrictive
measures it may adopt under its other trade and investment
agreements.
CHAPTER THIRTY-THREE: MACROECONOMIC POLICIES AND EXCHANGE RATE MATTERS
Chapter Thirty-Three includes policy commitments to achieve
and maintain market-driven exchange rates and refrain from
competitive devaluations to gain an unfair trade advantage. The
chapter also contains transparency and reporting requirements
on intervention and foreign exchange reserves, which reinforce
accountability by providing rapid information to assess whether
commitments are being met. Key obligations in the chapter are
subject to dispute settlement. The chapter also creates a
Macroeconomic Committee to monitor implementation.
CHAPTER THIRTY-FOUR: FINAL PROVISIONS
Chapter Thirty-Four contains provisions regarding the
transition from NAFTA 1994, amendments to the Agreement, the
languages in which the Agreement is authentic, withdrawal, and
entry into force.
Review and Term Extension. Chapter Thirty-Four sets the
term of the USMCA at 16 years, with the possibility of
extensions. The Commission is required to review the operation
of the Agreement every six years. At the end of each such
review, each Party, through its head of government, must
confirm whether it wishes to extend the term of the Agreement
for another 16 years (that is, if this is done at the 6th
anniversary, the Agreement term will then be 22 years). If this
does not occur, the Commission will meet to review the
Agreement every year until agreement to extend is reached, or
the term expires. At any point when the Parties decide to
extend the Agreement for another 16-year period, the Commission
will continue conducting reviews every six years.
E. General Description of the Bill to Implement the Agreement
Sec. 1. Short Title and Table of Contents
This section contains the short title of the Act, which may
be cited as the ``United States-Mexico-Canada Agreement
Implementation Act.'' It also sets forth the table of contents
for the bill.
Sec. 2. Definitions
This section defines various terms used throughout the
bill, including ``appropriate congressional committee,''
``HTS,'' ``identical goods,'' ``NAFTA,'' ``preferential tariff
treatment,'' ``USMCA,'' ``USMCA Country,'' ``International
Trade Commission,'' and ``Trade Representative.''
TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO, THE USMCA
Sec. 101: Approval and Entry Into Force of the USMCA
In Section 101(a), Congress approves the Protocol Replacing
the North American Free Trade Agreement with the Agreement
between the United States of America, the United Mexican
States, and Canada, the USMCA attached as an Annex to the
Protocol, as amended by the Protocol of Amendment to the
Agreement between the United States of America, the United
Mexican States, and Canada, and the Statement of Administrative
Action.
Section 101(b) provides for the USMCA to enter into force
with respect to Canada and Mexico not earlier than 30 days
after the date on which the President submits to Congress the
written notice required by section 106(a)(1)(G) of the
Bipartisan Congressional Trade Priorities and Accountability
Act of 2015 (TPA 2015). The notice must include the date on
which the USMCA will enter into force.
Sec. 102: Relationship of the USMCA to United States and State Law
Section 102(a) provides that U.S. law prevails in the case
of a conflict with the USMCA.
Section 102(b) provides that no state law or its
application can be declared invalid on the ground that it is
inconsistent with USMCA other than the United States.
Section 102(c) states that no person other than the United
States shall have any cause of action or defense under the
USMCA or may challenge any action brought under any provision
of law that the action or inaction of an instrumentality of the
United States is inconsistent with the USMCA.
Sec. 103: Implementing Actions in Anticipation of Entry Into Force;
Initial Regulations; Tariff Proclamation Authority
Section 103(a) provides the President may proclaim such
actions, and other U.S. Government officers may issue such
regulations, as are necessary to ensure the appropriate
implementation of any provision of the legislation that is to
take effect on the date of entry into force of the Agreement.
The effective date of such actions and regulations may not be
earlier than the date of entry into force of the USMCA. Where
proclaimed actions are not subject to consultation and layover
requirements under the bill, proclamations generally may not
take effect earlier than 15 days after their publication.
Section 103(b) provides that initial regulations necessary
or appropriate to carry out actions under the bill and
Statement of Administrative Action must, to the maximum extent
feasible, be issued within one year of entry into force of the
USMCA or, where a provision takes effect on a later date,
within one year of the effective date of the provision.
Section 103(c) authorizes the President to proclaim:
modifications or continuations of any duty;
(ii) continuation of duty-free or excise treatment; or
(iii) additional duties that the President determines
to be necessary or appropriate to carry out or apply
USMCA;
subject to the consultation and layover
provisions in Section 104, such modifications or
continuations of any duty or duty-free or excise
treatment as the President determines to be necessary
or appropriate to maintain the general level of
reciprocal and mutually advantageous concessions
provided for the USMCA; and
rules of origin to implement the USMCA
Section 103(c) also provides that in implementing the tariff-
rate quotas set forth in the Schedule of the United States to
Annex 2-B of the USMCA, the President shall take such actions
as may be necessary to ensure that imports of agricultural
goods do not disrupt the orderly marketing of agricultural
goods in the United States.
The Committee expects robust consultation regarding the use
of proclamation authority to implement this agreement, both on
tariff and non-tariff issues.
Sec. 104: Consultation and Layover Provisions for, and Effective Date
of, Proclaimed Actions
Section 104 establishes requirements for the proclamation
of actions that are subject to consultation and layover
provisions under the Act. Specifically, the President may
proclaim such action only after: (1) obtaining advice from the
appropriate private sector advisory committees and the USITC,
which shall hold a public hearing on the proposed action before
providing advice regarding the proposed action; (2) submitting
a report to the appropriate congressional committees concerning
the reasons for the action; and (3) providing a 60-day layover
period (starting after the President has both obtained the
required advice and provided the required report). The proposed
action cannot take effect until after the expiration of the 60-
day period and after the President has consulted with the
appropriate congressional committees regarding the proposed
action.
Sec. 105: Administration of Dispute Settlement Proceedings
Section 105(a) authorizes the President to establish or
designate within the U.S. Department of Commerce a United
States Section of the Secretariat established under Chapter 30
of the USMCA. This section also provides that the U.S. Section
of the Secretariat is not subject to the Freedom of Information
Act.
Section 105(b) authorizes $2 million to the Department of
Commerce for each fiscal year after fiscal year 2020 for the
establishment and operations of the section and for payment of
the U.S. share of expenses of panels established under Chapter
31 of the USMCA, including under Annex 31-A relating to the
Facility-Specific Rapid Response Labor Mechanism, binational
panels and extraordinary challenge committees convened under
NAFTA for matters covered by Article 34.1 of the USMCA. The
provision also provides for the reimbursement of expenses
incurred in dispute settlement proceedings under Chapter 10 of
the USMCA, Chapter 31 of USMCA, or under Chapter 19 of NAFTA if
the Canadian or Mexican Section of the Secretariat provides
funds to the U.S. Section during any fiscal year as
reimbursement for their expenses in connection with dispute
settlement proceedings.
Sec. 106: Trade Representative Authority
Section 106 provides that if a USMCA country does not enact
implementing legislation, the Trade Representative is
authorized to enter into negotiations with the other country
that has signed the USMCA to consider how the applicable
provisions of the USMCA can come into force.
Sec. 107: Effective Date
Section 107 provides that sections 1 through 3 of Title 1
(other than section 103(c)) shall take effect on the date of
the enactment of the USMCA Implementation Act. Section 103(c)
shall take effect on the date on which the USMCA enters into
force.
TITLE II--CUSTOMS PROVISIONS
Sec. 201: Exclusion of Originating Goods of USMCA Countries From
Special Agriculture Safeguard Authority
Section 201 amends the Uruguay Round Agreements Act to
implement an exclusion of originating goods of USMCA from
special agricultural safeguard authority.
Sec. 202: Rules of Origin
Section 202 implements the rules of origin set out in
Chapter 4 of the USMCA.
Section 202(a) contains 31 definitions for the terms used
in this section. Among the terms that are defined are
``Aquaculture,'' Customs Valuation Agreement,'' ``Fungible Good
or Fungible Material,'' ``Transaction Value,'' and ``Value.''
Section 202(b) explains the application and interpretation
of this section, such as indication that ``tariff
classification'' means the basis for any tariff classification
in the HTS.
Section 202(c) establishes how a good from Canada or Mexico
may qualify as an ``originating good'' and therefore be
eligible for preferential tariff treatment when it is imported
into the United States.
Sec. 202A: Special Rules for Automotive Goods
Section 202A of S. 3052 implements the specific provisions
related to the rules of origin for automotive goods in the
Appendix to Annex 4-B of the USMCA.
Section 202A(a) defines the following terms used in this
section: ``Alternative Staging Regime Period,'' ``Automotive
Appendix,'' ``Automotive Good,'' Automotive Rules of Origin,''
``Commission,'' ``Covered Vehicle,'' ``Interagency Committee,''
``Passenger Vehicle, Light Truck, Heavy Truck,'' and ``USMCA
Country.''
Section 202A(b) directs the President not later than 30
days after the enactment of the bill to establish an
interagency committee led by the Trade Representative with
participation by other relevant agencies, including the United
States Department of Commerce, Customs and Border Protection,
the Department of Labor, the International Trade Commission,
and any other members determined to be necessary by the Trade
Representative to provide advice on the implementation,
enforcement, and modification of the automotive rules of
origin. Additionally, the interagency committee will review the
operation of the agreement with respect to trade in automotive
goods, including the economic effects of the rules on the U.S.
economy, workers, and consumers, and the impact of new
technology on such rules of origin.
Section 202A(c) lays out the certification requirements for
the new labor value content and steel and aluminum purchase
rules for producers of passenger vehicles, light trucks, and
heavy trucks. Article 6 of the Appendix to Annex 4-B of USMCA
includes requirements that at least 70 percent of a vehicle
producer's purchases of steel by value and at least 70 percent
of a vehicle producer's purchases of aluminum by value are of
originating goods. Article 7 of the Appendix requires that
vehicle producers source a certain share of content from North
American plants or facilities that on average pay direct
production workers at least $16 per hour, known as the labor
value content requirement. Section 202A(c) also requires the
Secretary of the Treasury, in consultation with the Secretary
of Labor, to prescribe regulations to carry out this
subsection.
Section 202A(d) requires the Trade Representative, in
consultation with the interagency committee established in
section 202A(b), to publish the requirements for producers of
covered vehicles to request a transition to meet the USMCA
requirements under an alternative staging regime, as described
in Article 8 of the Appendix to Annex 4-B of the USMCA. The
Trade Representative will request a detailed and credible plan
which describes the actions the producer intends to take to
bring production of the passenger vehicles or light trucks into
compliance with the requirements\11\ set forth in USMCA from a
producer that seeks to use the alternative staging regime for
more than 10 percent of the producer's total production of
passenger vehicles or light trucks in USMCA countries.
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\11\See Articles 2 through 7 of the Appendix to Annex 4-B of the
USMCA.
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Per subsection (d), the Trade Representative shall issue
that determination to each producer in writing not later than
120 days after receiving a request of a producer for the
alternative staging regime. The Trade Representative shall
maintain a public list of the producers whose covered vehicles
have been authorized to use the alternative staging regime, and
provide the appropriate congressional committees with a summary
of requests for the alternative staging regime. The remainder
of the section addresses modification of alternative staging
plans and treatment of producers unable to meet the
requirements of the alternative staging regime.
Section 202A(e) permits the Secretary of the Treasury, in
conjunction with the Secretary of Labor, to conduct a
verification of whether a covered vehicle complies with the
labor value content requirements. This subsection also includes
protections for individuals who disclose or cooperate with a
federal agency with respect to a verification. Importers may
not request accelerated disposition of any protests regarding
decisions by Customs and Border Protection regarding labor
value content requirements.
Section 202(f) authorizes the Secretary of Labor to
establish or designate an office within the Department of Labor
to carry out the provisions of this section for which the
Department is responsible.
Section 202A(g) requires the Trade Representative, in
consultation with the interagency committee, to conduct a
biennial review of the operation of the USMCA with respect to
trade in automotive goods to ensure the Agreement's provisions
remain relevant in light of new technology and changes in the
content, production processes, and character of automotive
goods. In addition, the USITC shall submit to Congress a report
on the economic effects of the automotive rules of origin on
the U.S. economy. Finally, the Comptroller General of the
United States shall submit to the congressional committees a
report assessing the effectiveness of the interagency
coordination on the implementation, enforcement, and
verification of the automotive rules of origin. For all of
these reports, subsection (g) requires that the relevant agency
solicit information from the public, allow for the public to
submit comments, and to make the reports publicly available on
the internet.
Sec. 203: Merchandise Processing Fee
Section 203 eliminates the Merchandise Processing Fee on
originating goods from USMCA countries.
Sec. 204: Disclosure of Incorrect Information; False Certifications of
Origin; Denial of Preferential Treatment
Section 204 prohibits the imposition of a penalty upon
importers who make an invalid claim for preferential tariff
treatment under the agreement if the importer acts promptly and
voluntarily to correct the error and pays any duties owed. The
section also makes it unlawful for a person to certify falsely,
by fraud, gross negligence, or negligence that a good exported
from the United States is an originating good.
Sec. 205: Reliquidation of Entries
Section 205 ensures that Customs and Border Protection is
authorized to reliquidate an entry to refund any excess duties
paid on a good qualifying under the rules of origin for which
no claim for preferential tariff treatment was made at the time
of importation if the importer so requests, within one year
after the date of importation.
Sec. 206: Recordkeeping Requirements
Section 206(a) amends section 508 of the Tariff Act of 1930
by defining the terms ``USMCA; USMCA country'' and ``USMCA
certification of origin''; provides that a U.S. exporter or
producer that issues a USMCA certification of origin must make,
keep, and, if requested, render for examination and inspection
a copy of the certification and such records and supporting
documents; and, requires that the exporter or producer keep
these records and supporting documents for five years from the
date it issues the certification.
Section 206(b) provides that the amendments take effect on
the date on which the USMCA enters into force and apply with
respect to a good entered, or exported from the United States,
on or after that date. Section 206 also provides that goods
entered or exported from the United States before the USMCA
enters into force will be provided NAFTA treatment.
Sec. 207: Actions Regarding Verification of Claims Under the USMCA
Sections 207(a) through (c) provide that the Secretary of
Treasury may conduct a verification of whether a good is an
originating good under Section 202 or 202A of the bill, and
describe the determination and actions that may be taken in
response. These subsections also provide that if the Secretary
of Treasury conducts a verification, the President may direct
the Secretary to release the good only upon payment of duties
of security and, deny or withhold preferential tariff treatment
in the case of certain determinations.
Section 207(d) provides that the Secretary shall interpret
the requirements of this section in a manner to avoid and
prevent circumvention of USMCA's requirements.
Sec. 208: Drawback
This section has been transferred from section 203 of the
NAFTA Implementation Act to the USMCA Implementation Act by
operation of Section 501 of the USMCA Implementation Act.
Sec. 209: Other Amendments to the Tariff Act of 1930
Section 209 makes conforming amendments to sections 304,
509, and 628 of the Tariff Act of 1930 concerning the country
of origin marking and the examination of books and witnesses.
It also amends section 628 of the Tariff Act of 1930 by
authorizing Customs and Border Protection to exchange
information with any government agency of a USMCA country.
The amendments take effect on the date on which the USMCA
enters into force and apply with respect to a good entered, or
exported from the United States, on or after that date. Section
209 also provides that goods entered or exported from the
United States before the USMCA enters into force will be
provided NAFTA treatment.
Sec. 210: Regulations
Section 210 directs the Secretary of Treasury to prescribe
regulations necessary to carry out the provisions of Title II,
except with respect to the labor value content determinations
under section 202A, which will be prescribed by the Secretary
of Labor.
TITLE III--APPLICATION OF USMCA TO SECTORS AND SERVICES
SUBTITLE A--RELIEF FROM INJURY CAUSED BY IMPORT COMPETITION
This subtitle has been transferred from section 311 of the
NAFTA Implementation Act to the USMCA Implementation Act by
operation of section 502 of the USMCA Implementation Act.
SUBTITLE B--TEMPORARY ENTRY OF BUSINESS PERSONS
This subtitle has been transferred from section 341 of the
NAFTA Implementation Act to the USMCA Implementation Act by
operation of section 503 of the USMCA Implementation Act.
SUBTITLE C--UNITED STATES-MEXICO CROSS-BORDER LONG-HAUL TRUCKING
SERVICES
This subtitle creates a mechanism to address material harm
to the U.S. long-haul trucking industry on account of increased
competition from Mexican operators.
Sec. 321: Definitions
Section 321 defines 14 terms that are used in this
subtitle, including ``Border Commercial Zone,'' ``Cargo
Originating in Mexico,'' ``Change in Circumstances,'' and
``Commercial Motor Vehicle.''
Sec. 322: Investigations and Determinations by Commission
Section 322(a) provides that upon filing of a petition by
an interested party, or at the request of the President or the
Trade Representative, or upon the resolution of the Committee
on Ways and Means of the House of Representatives or the
Committee on Finance of the Senate, the USITC shall initiate an
investigation. The investigation will consider whether there is
material harm or a threat thereof on account of (1) a request
by a person of Mexico to receive a grant of authority that is
pending as of the date of the filing of the petition; (2) a
person of Mexico who has received a grant of authority on or
after the date of entry into force of the USMCA and retains
such grant of authority; or (3) a person of Mexico who has
received a grant of authority before the date of entry into
force of the USMCA and retains such grant of authority because
there has been a change in circumstances.
Section 322(b) and (c) concern respectively the USITC's
transmission of the petition to the Trade Representative and
Secretary of Transportation, and the USITC's notice of the
investigation and holding of a hearing.
Section 322(d) establishes the factors that the USITC will
consider in making its determination, including the volume and
tonnage of merchandise transported and working conditions.
Section 322(e) provides that the Secretary of Homeland
Security will provide assistance at the request of the USITC,
including on information regarding commercial motor vehicles
entering or exiting the United States.
Section 322(f) provides that the USITC shall promulgate
regulations to provide access to confidential business
information under a protective order.
Section 322(g) provides that the USITC shall issue its
determination in 120 days of initiation except in extraordinary
cases, in which case the USITC shall have 150 days.
Section 322(h) provides that certain provisions in the
Tariff Act of 1930 are to be utilized in the case of a divided
vote by the USITC.
Sec. 323: Commission Recommendations and Report
Section 323 requires the USITC to issue a report within 60
days of making its determination under section 322. The report
shall include an explanation of its determination and, if the
determination is affirmative, recommendations for action to
address the material harm. The report shall also include any
additional and dissenting views. The USITC is required to
promptly make the report public and to publish a summary in the
Federal Register.
Under section 323(b), only those members of the USITC that
agreed to the affirmative determination may vote on the
recommendation.
Sec. 324: Action by the President With Respect to Affirmative
Determination
If the President receives an affirmative determination,
section 324 requires the President to issue an order to the
Department of Transportation (DOT) directing the relief to be
carried out. The order must be issued within 30 days of the
date on which the President receives the USITC's report.
Section 324(b) provides that the President is not required
to provide relief if the President determines that it is not in
the national economic interest of the United States or it would
cause serious harm to the national security of the United
States.
Section 324(c) also provides for the type of relief that
the President is authorized to provide. The President is
authorized to deny new grants of authority to provide cross-
border trucking services, revoke, restrict, or limit existing
grants of authority, and place a cap on the number of grants of
authority issued on an annual basis.
Section 324(d) provides that the relief may not last longer
than two years, but such relief can be extended for an
additional four years if the USITC finds that an extension is
necessary to remedy or prevent material harm. If the President
determines that an extension is necessary, then the President
may extend the relief for an additional four years.
Sec. 325: Confidential Business Information
Section 325 ensures that the USITC protects confidential
business information that it receives during the course of any
investigation.
Sec. 326: Conforming Amendments
Section 326 makes certain conforming amendments to
provisions in Title 49 to ensure they do not limit DOT's
ability to carry out the actions authorized by this subtitle.
Sec. 327: Survey of Operating Authorities
Section 327 requires DOT to conduct a survey of all
existing and pending grants of operating authority to Mexican-
domiciled motor carriers. DOT shall complete this report within
180 days of the date on which USMCA enters into force. The
report shall be delivered to the Trade Representative, USITC,
the Committee on Ways and Means, the Senate Finance Committee,
the House Transportation and Infrastructure Committee, and the
Senate Committee on Commerce, Science, and Transportation.
TITLE IV--ANTIDUMPING AND COUNTERVAILING DUTIES
SUBTITLE A--PREVENTING DUTY EVASION
Sec. 401: Cooperation on Duty Evasion
Section 401 provides that the Commissioner of Customs and
Border Protection to take into consideration that Canada and
Mexico are USMCA Parties for purposes of trade enforcement and
compliance assessment activities relating to evasion of
antidumping and countervailing duties
SUBTITLE B--DISPUTE SETTLEMENT
This subtitle has been transferred from sections 401-408 of
the NAFTA Implementation Act to the USMCA Implementation Act by
operation of section 504 of the USMCA Implementation Act.
SUBTITLE C--CONFORMING AMENDMENTS
Overview: Sections 421-424 make conforming amendments to
the Tariff Act of 1930 related to judicial review in anti-
dumping and countervailing duty cases, disclosure of
proprietary information under protective orders, and the Court
of International Trade. These amendments reflect that the
binational panel system under Chapter 19 of NAFTA now operates
through Chapter 10 of USMCA.
Sec. 421: Judicial Review in Antidumping Duty and Countervailing Duty
Cases
Section 421 makes conforming changes to Section 516A of the
Tariff Act of 1930.
Sec. 422: Conforming Amendments to Other Provisions of the Tariff Act
of 1930.
Section 422 makes conforming changes to Section 777(f) of
the Tariff Act of 1930.
Sec. 423: Conforming Amendments to Title 28, United States Code
Section 423 makes conforming changes to Chapter 95 of Title
28.
SUBTITLE D--GENERAL PROVISIONS
Sec. 431: Effect of Termination of USMCA Country Status
Section 431 provides that, on the date on which a country
ceases to be a USMCA country, the provisions of Title IV of the
USMCA Implementation Act will cease to have effect with respect
to that country. Section 431 also provides that if on the date
on which a country ceases to be a USMCA country (1) an
investigation or enforcement proceeding concerning the
violation of a protective order issued under section 7777(f) of
the Tariff Act of 1930 or an undertaking of the government of
that country is pending, the investigation or proceeding shall
continue and sanctions may continue to be imposed; or (2) a
binational panel or extraordinary review is pending or has been
requested with respect to a determination that involves a class
or kind of merchandise, such determination shall be reviewable
and the time limits for commencing an action shall not begin to
run until the date on which USMCA ceases to be in force with
respect to that country.
Sec. 432: Effective Date
Section 432 shall take effect on the date that the USMCA
enters into force but shall not apply to any final
determination or any binational panel review under the NAFTA,
or any extraordinary challenge arising out of any such review,
that was commenced before the date on which the USMCA enters
into force.
TITLE V--TRANSFER PROVISIONS AND OTHER AMENDMENTS
Sec. 501: Drawback
Section 501 transfers section 203 of the NAFTA
Implementation Act to section 208 of the USMCA Implementation
Act, and amends section 203 of the NAFTA Implementation Act to
provide exceptions to the limitation on drawback implemented in
the NAFTA for certain goods traded between the Parties to the
Agreement.
Sec. 502: Relief From Injury Caused by Import Competition
Section 502 transfers section 311 of the NAFTA
Implementation Act to subtitle A, title III of the USMCA
Implementation Act and re-designates it as section 301 without
substantive change.
Sec. 503: Temporary Entry
Section 503 transfers section 341 of the NAFTA
Implementation Act to subtitle B, title III of the USMCA
Implementation Act and re-designates it as section 311 without
substantive change.
Sec. 504: Dispute Settlement in Antidumping and Countervailing Duty
Cases
Section 504 transfers sections 401, 402, 403, 404, 405,
406, 407, and 408 of the NAFTA Implementation Act to subtitle
B, title IV of the USMCA Implementation Act and re-designates
them as sections 411, 412, 413, 414, 415, 416, 416, 417, and
418 without substantive change. Section 504(k)(1) also provides
for an effective date that is the date on which the USMCA
enters into force, and a transition period for antidumping and
countervailing duty cases decided before USMCA enters into
force and cases that are appealed to a binational NAFTA panel
before the USMCA enters into force. In addition, Section
504(k)(2) provides that the relevant provisions in the NAFTA
Implementation Act will continue to apply to such to cases.
Sec. 505: Government Procurement
Section 505(a) amends Section 301 of the Trade Act of 1974
to provide the President authority to modify discriminatory
purchasing requirements.
Section 505(b) implements U.S. obligations under Chapter 13
of USMCA by amending the definition of ``eligible product'' in
section 308(4)(A) of the Trade Agreements Act. As amended,
section 308(4)(A) will provide that ``eligible product'' means
a product or service of Mexico that is covered under the USMCA
for procurement by the United States. This amended definition,
coupled with the President's exercise of his waiver authority
under section 301(a) of the Trade Agreements Act, will allow
U.S. government entities covered by the USMCA to purchase, on
non-discriminatory terms, covered products and services from
Mexico for procurements that fall above the thresholds
established under the USMCA.
Sec. 506: Action Affecting United States Cultural Industries
Section 506 makes a conforming change to Section 182(f) of
the Trade Act of 1974 to maintain the treatment provided to
Canada regarding cultural industries once the USMCA enters into
force by exempting certain measures adopted or maintained by
Canada with respect to a cultural industry from a number of
obligations under the USMCA. It also allows the United States
or Mexico to take a measure of equivalent commercial effect in
response.
Sec. 507: Regulatory Treatment of Uranium Purchases
Section 508 amends the Energy Policy Act of 1992 to strike
the ``North American Free Trade Agreement'' and insert the
``USMCA.''
Sec. 508: Report on Amendments to Existing Law
Section 508 requires the Trade Representative not less than
180 days after the bill's enactment to provide a report setting
forth any technical or conforming amendments to other laws that
may be necessary to carry out the USMCA Implementation Act. The
report is submitted to the Committee on Finance of the Senate
and the Committee on Ways and Means of the House of
Representatives.
TITLE VI--TRANSITION TO AND EXTENSION OF USMCA
SUBTITLE A--TRANSITIONAL PROVISIONS
Sec. 601: Repeal of the North American Implementation Act
Section 601 repeals the NAFTA Implementation Act effective
on the date on which the USMCA enters into force.
Sec. 602: Continued Suspension of the United States-Canada Free Trade
Agreement
Section 602 continues the suspension of the U.S.-Canada
Free Trade Agreement and provisions of the Canada-U.S. Free
Trade Agreement Implementation Act.
SUBTITLE B--JOINT REVIEWS REGARDING EXTENSION OF THE USMCA
Overview: Article 34.7 of the USMCA provides a mechanism
for the Parties to conduct a joint review of the Agreement on
the sixth anniversary of its entry into force, and for annual
reviews thereafter, if a Party does not confirm it wishes to
extend the term of the Agreement at such joint review. Section
611 concerns U.S. participation in the joint review mechanism.
Sec. 611: Participation in joint reviews with Canada and Mexico
regarding extension of the term of the USMCA and other action
regarding the USMCA
Section 611(a) provides that the President shall consult
with the appropriate congressional committees and stakeholders
with respect to the Joint Review Mechanism.
Section 611(b) provides that at least 270 days prior to a
joint review, the Trade Representative shall seek public
comment and hold a hearing prior to participating in a joint
review. At least 180 days prior to the joint review, the Trade
Representative shall report to the appropriate congressional
committees an assessment regarding the operation of USMCA, the
precise recommendation to be proposed at the review, the
position of the United States on whether to extend the term of
USMCA, and whether any prior attempts have been made to resolve
any concerns that underlie the U.S. recommendation or position.
Section 611(c)-(d) provides that the Trade Representative
shall report and consult with the appropriate congressional
committees after a lack of agreement on extending the term of
USMCA or after a joint review has taken place.
Section 611(e) contains definitions for terms used in this
section.
SUBTITLE C--TERMINATION OF THE USMCA
Sec. 621: Termination of USMCA
Section 621(a) provides that during any period in which a
country ceases to be a USMCA country, the USMCA Implementation
Act and any amendments made through the act shall cease to have
effect with respect to that country.
Section 621(b) provides that on the date on which the USMCA
ceases to be in force with respect to the United States, the
USMCA Implementation Act and any amendments made through the
act shall cease to have effect.
TITLE VII--LABOR MONITORING AND ENFORCEMENT
Overview: This title includes provisions that cover the
labor commitments in USMCA, including those secured in the
Protocol of Amendment to the Agreement Between the United
States of America, the United Mexican States, and Canada that
was signed on December 10, 2019 in Mexico City.
Sec. 701: Definitions
Section 701 defines ``labor attache,'' ``labor
obligations,'' and ``Mexico's labor reform.''
SUBTITLE A--INTERAGENCY LABOR COMMITTEE FOR MONITORING AND ENFORCEMENT
Sec. 711: Interagency Labor Committee for Monitoring and Enforcement
Section 711(a) requires the President to establish the
Interagency Labor Committee for Monitoring and Enforcement
(Interagency Labor Committee) within 90 days of the enactment
of the USMCA Implementation Act. The Interagency Labor
Committee will be responsible for monitoring compliance with
the USMCA labor obligations, including the implementation of
Mexico's labor reforms, and requesting that the Trade
Representative take enforcement actions.
Section 711(b) provides that the Interagency Labor
Committee will be co-chaired by the Trade Representative and
the Secretary of Labor, and shall include representatives from
other agencies with relevant expertise.
Section 711(c) provides that the Interagency Labor
Committee will meet once every 90 days for the five years
following the enactment of the USMCA Implementation Act, and
once every 180 days thereafter.
Section 711(d) provides that notwithstanding any other
provision of law, the members of the Interagency Labor
Committee may exchange information in order to carry out the
title.
Sec. 712: Duties
Section 712 establishes that the Interagency Labor
Committee's duties include: coordinating the U.S. government's
monitoring of the USMCA labor obligations, establishing an
ongoing dialogue with the Government of Mexico regarding
Mexico's implementation of labor reforms and compliance with
USMCA, coordinating with the International Labor Organization
and Government of Canada, and identifying priority capacity
building activities in Mexico to be funded by the United
States.
Section 713: Enforcement Priorities
Section 713 requires the Interagency Labor Committee to
review the list of priority sectors under Annex 31-A of the
USMCA, and to suggest additional sectors to USTR. The
Interagency Labor Committee is also required to establish and
annually update a list of priority subsectors for enforcement.
Sec. 714: Assessments
Section 714(a) requires the Interagency Labor Committee to
complete biannual assessments of Mexico's compliance with the
USMCA labor obligations in Annex 23-A. These assessments are
for a 10-year period beginning on the date of the USMCA
Implementation Act's enactment.
Section 714(b) provides that 5 years after USMCA
Implementation Act's enactment, the Interagency Labor Committee
may consult with the appropriate congressional committees and,
with their approval, modify the frequency of assessments to an
annual basis.
Section 714(c) provides that the assessments shall include
a review regarding whether Mexico has provided adequate funding
to enforce its labor reform, whether legal challenges to
Mexico's labor reform have succeeded in Mexican courts, and
whether Mexico has implemented various aspects of its reform
consistent with the timeline announced by Mexico in a September
2019 policy statement.
Sec. 715: Recommendation for Enforcement Action
Section 715(a) requires the Interagency Labor Committee to
recommend enforcements actions to the Trade Representative if
it determines that a USMCA country has failed to meet its labor
obligations.
Section 715(b) provides the Trade Representative must
determine whether to initiate an enforcement action within 60
days of receiving a recommendation. If the Trade
Representative's determination is negative, the Trade
Representative is required to submit a report to the Committee
on Ways and Means and the Senate Finance Committee regarding
any negative determination.
Sec. 716: Petition Process
Section 716(a) provides that the Interagency Labor
Committee shall establish procedures for submissions from the
public regarding a failure to comply with the USMCA labor
obligations.
Section 716(b) provides that if the Interagency Labor
Committee receives a petition requesting an enforcement action
under Annex 31-A, the Interagency Labor Committee shall
determine whether there is sufficient, credible information to
request an enforcement action. If its determination is
negative, it shall certify this determination to the Committee
on Ways and Means, the Senate Finance Committee, and the
petitioner. If the Interagency Labor Committee's determination
is affirmative, the Trade Representative is required within 60
days to make a determination regarding whether to request the
establishment of a rapid response labor panel under Annex 31-A.
If the Trade Representative's determination is negative, the
Trade Representative is required to certify its determination
and provide information regarding any remediation plan to the
Ways and Means and Finance Committees.
Section 716(c) also establishes a petition process for
allegations of non-compliance with the USMCA labor obligations
not related to Annex 31-A.
Sec. 717: Hotline
Section 717 requires the Interagency Labor Committee to
establish a web-based hotline to receive confidential
information regarding labor issues among USMCA countries from
interested parties.
Sec. 718: Reports
Section 718(a) requires the Interagency Labor Committee to
submit a biannual report for the first five years after the
USMCA Implementation Act is enacted. The report shall include a
description of the Interagency Labor Committee's staffing and
capacity building activities, Mexico's compliance with its
labor reform, including budgetary commitments, a summary of
petitions filed under section 716, the results of the
Interagency Labor Committee's assessments under section 714,
and any determinations made by the Independent Mexico Labor
Expert Board.
Section 718(b) provides that five years after the bill's
enactment, the Trade Representative and the Secretary of Labor
shall consult with the Committee on Ways and Means and the
Senate Finance Committee regarding whether the report could be
submitted on an annual, instead of biannual, basis.
Section 718(c) requires the Interagency Labor Committee to
complete a five-year comprehensive assessment of Mexico's
implementation of its labor reform. The assessment shall
include a strategic plan and recommendations regarding areas of
concern for purposes of the joint review conducted pursuant to
Article 34.7 of the USMCA.
Sec. 719: Consultations on Appointment and Funding of Rapid Response
Labor Panelists
Section 719 requires the Interagency Labor Committee to
consult with the Labor Advisory Committee, the Committee on
Ways and Means, and the Senate Finance Committee regarding the
selection of rapid response labor panelists under Annex 31-A.
This section also requires the United States, in consultation
with Mexico, to provide adequate funding for such panelists.
SUBTITLE B--MEXICO LABOR ATTACHES
Sec. 721: Establishment
Section 721 requires the Secretary of Labor to hire five
labor attaches that will be detailed or assigned to work on
behalf of the U.S. government in Mexico.
Sec. 722: Duties
Section 722 establishes the duties for the labor attaches,
which include assisting the Interagency Labor Committee in its
monitoring efforts and submitting quarterly reports on Mexico's
compliance with its labor obligations.
Sec. 723: Status
Section 723 provides that the labor attaches shall remain
employees or officers of the United States for purposes of
allowances, privileges, rights, seniority, and other benefits.
SUBTITLE C--INDEPENDENT MEXICO LABOR EXPERT BOARD
Sec. 731: Establishment
Section 731 establishes the Independent Mexico Labor Expert
Board (``Expert Board''), which is responsible for monitoring
and evaluating Mexico's compliance with its labor obligations
and advising the Interagency Labor Committee regarding capacity
building activities in Mexico.
Sec. 732: Membership; Term
Section 732(a) provides for the selection of the membership
of the Expert Board (12 members). The Labor Advisory Committee
will appoint four members. The Speaker, House Minority Leader,
Senate Majority Leader, and Senate Minority Leader will each
appoint two members.
Section 732(b) provides that the members of the Expert
Board will serve an initial term of six years.
Section 732(c) provides that if a majority of the Expert
Board determines that Mexico is not in full compliance with its
labor obligation, the Expert Board's term will extend for four
years, and a new board will be selected in accordance with
subsection (a).
Sec. 733: Funding
Section 733 requires the United States to provide necessary
funding to support the work of the Expert Board.
Sec. 734: Reports
Section 734 requires the Board to submit an annual report
to the Interagency Labor Committee, the Committee on Ways and
Means and the Senate Finance Committee that will contain an
assessment of Mexico's labor reform implementation efforts and
how labor law are generally enforced in Mexico. The Board's
reports may contain a determination that Mexico is not in
compliance with its labor obligations.
SUBTITLE D--FORCED LABOR
Sec. 741: Forced Labor Enforcement Task Force
Section 741(a) requires the President to establish a Forced
Labor Enforcement Task Force (Task Force) within 90 days of the
enactment of the USMCA Implementation Act to monitor the
enforcement of the prohibition on importation of goods made by
or with forced labor under section 307 of the Tariff Act of
1930.
Section 741(b) provides that the Task Force will be chaired
by the Secretary of Homeland Security and will be comprised of
the Trade Representative, Department of Labor, and other
agencies that the President determines appropriate. The Task
Force shall meet on a quarterly basis.
Sec. 742: Timeline Required
Section 742(a) requires the Task Force to establish
timelines for responding to petitions alleging that goods are
being imported by or with forced or child labor.
Section 742(b) provides the Task Force shall consult with
the Committee on Ways and Means and the Senate Finance
Committee in establishing the timelines.
Section 742(c) provides that the Task Force shall submit
the timelines in a report to the Committee on Ways and Means
and the Senate Finance Committee and make it publicly
available.
Sec. 743: Reports Required
Section 743 requires the Task Force to submit a biannual
report to the Committee on Ways and Means and the Senate
Finance Committee regarding enforcement of the prohibition on
importation of goods made by or with forced labor under section
307 of the Tariff Act of 1930, including the number of
instances merchandise was denied entry under the provision in
the preceding 180 day period. The report shall also include a
description of actions taken and an enforcement plan regarding
goods included in the DOL's ``Finding on the Worst Forms of
Child Labor'' and ``List of Goods Produced by Child Labor or
Forced Labor'' reports
Sec. 744: Duties Related to Mexico
Section 744 requires the Task Force to develop an
enforcement plan regarding goods made by or with forced labor
in Mexico. The Task Force is also required to report to the
Interagency Labor Committee regarding its enforcement of child
and forced labor in Mexico.
SUBTITLE E--ENFORCEMENT UNDER RAPID RESPONSE LABOR MECHANISM
Sec. 751: Transmission of Reports
Section 751 requires that reports issued by a rapid
response labor panel under Annex 31-A of the USMCA be
immediately submitted to the appropriate congressional
committees, the Labor Advisory Committee, and, as appropriate,
to the petitioner. The Trade Representative is also required to
make reports issued by a rapid response labor panel to the
public in a timely manner.
Sec. 752: Suspension of Liquidation
Section 752(a) provides the Trade Representative may direct
the Secretary of the Treasury to suspend liquidation of entries
of goods from a covered facility that is subject to a review
under Annex 31-A of the USMCA.
Section 752(b) provides that liquidation shall resume if
the rapid response labor panel has determined that there was
not a denial of rights at the facility, a course of remediation
has been completed at the facility, or the denial of rights at
the facility has been otherwise remedied.
Sec. 753: Final Remedies
Section 753(a) provides that if a rapid response labor
panel has found a denial of rights at a facility, the Trade
Representative may, in consultation with the appropriate
congressional committees, direct the Secretary of the Treasury
to deny entry to goods, apply duties from which liquidation had
been suspended, or any other remedy available under Annex 31-A
of the USMCA.
Section 753(b) provides that the Trade Representative shall
promptly notify the Treasury Secretary if the denial of rights
has been remedied.
TITLE VIII--ENVIRONMENT MONITORING AND ENFORCEMENT
Sec. 801: Definitions
Section 801 defines ``environmental law'' and
``environmental obligations.''
SUBTITLE A--INTERAGENCY ENVIRONMENT COMMITTEE FOR MONITORING AND
ENFORCEMENT
Sec. 811: Establishment
Section 811(a) provides that the President shall establish
an Interagency Environment Committee for Monitoring and
Enforcement (Interagency Environment Committee) to coordinate
U.S. efforts to monitor and enforce environmental obligations.
Section 811(b) provides that membership of the committee
includes the Trade Representative who serves as chairperson,
and representatives from the National Oceanic and Atmospheric
Administration (NOAA), the U.S. Fish and Wildlife Service, the
U.S. Forest Service, the Environmental Protection Agency,
Animal and Plant Health Inspection Service (APHIS), U.S.
Customs and Border Protection (CBP), the Department of State,
the Department of Justice, the Department of Treasury, and the
U.S. Agency for International Development (USAID)--and any
other agencies the President determines to be appropriate.
Section 811(c) provides that notwithstanding any other
provision of law, the members of the Interagency Environment
Committee may exchange information for purposes of carrying out
this subtitle.
Sec. 812: Assessment
Section 812(a) provides for the Interagency Environment
Committee to carry out an assessment of the environmental laws
and policies of USMCA countries to determine if such laws and
policies are sufficient to implement their environmental
obligations and identify any gaps and key priority areas for
continued assessment and monitoring, technical assistance and
capacity building, and enhanced cooperation.
Section 812(b) provides that the assessment should include
the environmental laws and policies of the USMCA countries with
respect to which enhanced cooperation should be carried out.
Section 812(c) provides that not later than 90 days after
the date on which the Interagency Environment Committee is
established, or the date on which the USMCA enters into force
(whichever being earlier), the Interagency Environment
Committee must submit a report containing the assessment under
subsection (a) to the appropriate congressional committees and
the Trade and Environment Policy Advisory Committee.
Section 812(d) provides that the assessment must be updated
after five years of the agreement being in force.
Sec. 813: Monitoring Actions
Section 813(a) provides that the Interagency Environment
Committee will undertake monitoring actions related to
implementation of the USMCA environment obligations.
Section 813(b) provides for the Interagency Environment
Committee to review public submissions filed pursuant to
Article 24.27 (Submissions on Enforcement Matters) and factual
records prepared by the Secretariat of the Commission for
Environmental Cooperation. Based on the findings, it may
request enforcement actions under Section 814.
Section 813(c) provides for the Interagency Environment
Committee to review reports provided by U.S. environment
attaches in Mexico, and assess the efforts of Mexico to comply
with its environmental obligations.
Section 813(d) provides that the United States can request
verification of particular shipments from Mexico under the
Environment Cooperation and Customs Verification Agreement
between the United States and Mexico.
Sec. 814: Enforcement Actions
Section 814 provides that the Interagency Environment
Committee may request the Trade Representative to request
consultations under the Environment or Dispute Settlement
Chapter of the USMCA or may request the heads of other federal
agencies identified in Section 815 to initiate monitoring or
enforcement actions.
Sec. 815: Other Monitoring and Enforcement Actions
Section 815 describes other existing U.S. government
authorities that enforce U.S. environmental laws. For example,
Section 815 identifies the Secretary of Commerce as having
authority to take appropriate monitoring and enforcement
actions under the Magnuson-Stevens Fishery Conservation and
Management Act, and the Secretary of the Interior as having
authority to take such action with respect to the Migratory
Bird Treaty Act.
Sec. 816: Report to Congress
Section 816 provides that no later than one year after the
USMCA enters into force, and annually for the next four years,
and biennially thereafter, the Trade Representative will report
to the appropriate congressional committees on steps that the
Parties have taken to implement and enforce the USMCA
environment commitments, and additional actions that may need
to be taken with respect to USMCA countries that might be
failing to implement their environmental obligations.
Sec. 817: Regulations
Section 817 provides that the head of any Federal agency
described in this subtitle, in consultation with the
Interagency Environment Committee, may prescribe such
regulations as are necessary.
SUBTITLE B--OTHER MATTERS
Sec. 821: Border Water Infrastructure Improvement Authority
Section 821(a) provides for the EPA, in coordination with
other relevant agencies, to carry out the planning, design,
construction, and operation and maintenance of high priority
treatment works, to treat wastewater, nonpoint sources of
pollution and related matters resulting from international
transboundary water flows originating in Mexico.
Section 821(b) also requires the EPA report to Congress
annually on the activities carried out under this subsection.
Sec. 822: Detail of Personnel to Office of the United States Trade
Representative
Section 822 provides that EPA, NOAA, and FWS may detail one
employee to USTR to be assigned to United States Embassy in
Mexico.
SUBTITLE C--NORTH AMERICAN DEVELOPMENT BANK
Sec. 831. General Capital Increase
Section 831 authorizes a capital increase for an additional
150,000 shares in the North American Development Bank.
Sec. 832: Policy Goals
Section 832 provides for the Secretary of the Treasury to
direct the representatives of the United States to the Board of
Directors of the NAD Bank to give preference to the financing
of projects related to environmental infrastructure relating to
water pollution, wastewater treatment, water conservation,
municipal solid waste, storm water drainage, non-point
pollution, and related matters.
Sec. 833: Efficiencies and Streamlining
Section 833 provides for the Secretary of the Treasury to
direct the representatives of the United States to the Board of
Directors of the NADBank to require the NADBank to develop and
implement efficiency improvements to streamline the project
certification process.
Sec. 834: Performance Measures
Section 834(a) provides for the Secretary of the Treasury
to direct the representatives of the United States to the Board
of Directors of the NADBank to require the NADBank to develop
and annually update performance measures that align with the
NADBank's mission and provided added value to the region.
Section 834(b) provides that the Secretary of Treasury
shall submit a report on progress in imposing the performance
measures in this section.
TITLE IX--USMCA SUPPLEMENTAL APPROPRIATIONS ACT, 2019
This title appropriates $843 million to implement, monitor,
and enforce USMCA's labor and environment obligations, and to
recapitalize the North American Development Bank (NADB).
NADB funding is $215 million;
Labor related funding is $240 million; and
Environment related funding is $388 million.
F. Vote of the Committee in Reporting the Bill
In compliance with section 133 of the Legislative
Reorganization Act of 1946, the Committee states that on
January 7, 2020, H.R. 5430 was ordered favorably reported,
without amendment, by a roll call vote of 25 ayes, 3 nays.
Ayes: Grassley, Crapo, Roberts, Enzi, Cornyn, Thune, Burr
(proxy), Portman, Scott, Lankford, Daines, Young, Sasse, Wyden,
Stabenow, Cantwell, Menendez, Carper, Cardin (proxy), Brown,
Bennet, Casey, Warner, Hassan, and Cortez Masto. Nays: Toomey,
Cassidy, and Whitehouse.
II. BUDGETARY IMPACT OF THE BILL
The relevant analysis by the Congressional Budget Office
(CBO) regarding the USMCA Implementation Act are reprinted
below.
III. REGULATORY IMPACT OF THE BILL AND OTHER MATTERS
Pursuant to the requirements of paragraph 11(b) of rule
XXVI of the Standing Rules of the Senate, the Committee states
that the bill will not significantly regulate any individuals
or businesses, will not affect the personal privacy of
individuals, and will result in no significant additional
paperwork.
The following information is provided in accordance with
section 423 of the Unfunded Mandates Reform Act of 1995
(``UMRA'') (Pub. L. No. 104-04). The Committee has reviewed the
provisions of H.R. 5430 as approved by the Committee on January
7, 2020. The Committee has determined that the bill does not
impose a Federal intergovernmental mandate on State, local, or
tribal governments. The Committee has determined that the bill
does not contain Federal mandates on the private sector.
IV. ADDITIONAL VIEWS
ADDITIONAL VIEWS OF RANKING MEMBER RON WYDEN, SENATOR SHERROD BROWN,
AND SENATOR TOM CARPER
While we appreciate the collaborative work of Chairman
Grassley to develop a consensus report, a number of items in
this report deserve further elaboration.
LEGACY OF NAFTA
Signed in 1994, NAFTA integrated three significant
economies through reduced tariffs and non-tariff barriers that
benefited many businesses and farmers in the United States,
Mexico, and Canada. However, the effects of NAFTA were not
uniformly positive for all businesses and workers in the United
States as trade flows shifted to take advantage of lower
tariffs, lower wages, and in some cases, lower regulatory
standards. As time passed, it became clear that NAFTA's broken
dispute settlement mechanisms, unenforceable labor and
environmental standards, and lax auto rules of origin were not
sufficient to protect American workers. In addition, as noted
above, NAFTA was simply outdated insofar as it did not cover
digital trade and other elements of the modern economy. For
these reasons, it was appropriate to reconsider our trading
relationship with Canada and Mexico and bring NAFTA into the
21st century.
NEGOTIATIONS OF USMCA
With regard to the USMCA negotiation process, we would
emphasize that while the resulting agreement was broadly
supported in the House of Representatives and the Senate, the
process of developing an agreement, which contained the right
balance of enforceable trade rules, often failed to adhere to
the spirit of TPA 2015 to promote transparency and
collaboration with Congress, which has the Constitutional
authority over the United States' trade with foreign countries.
Consultation and access to text are critical for ensuring
Congress, and ultimately the public, understands and agrees
with the Administration's negotiating positions. The Agreement
as initially negotiated by the Administration failed to garner
sufficient support to pass Congress. We commend the work of the
House Democrats' Trade Working Group to ensure USMCA could
receive broad bipartisan support. Canada and Mexico are two of
the most important trading partners for the United States.
Ultimately, the provisions negotiated by the House Democrats'
Trade Working Group reflect that fact, as well as the need to
support workers, consumers, businesses, and farmers in all
three regions.
USMCA OBLIGATIONS
Given the close and unique trading relationship in North
America, we appreciate the innovative rules needed to ensure
that both businesses and workers succeed under the new USMCA.
AUTO RULES OF ORIGIN
In particular, the automobile rules of origin contain a
number of new provisions focused on strengthening U.S.
manufacturing and ensuring a robust and resilient industry. We
continue to be concerned about the level of specificity
provided to auto companies seeking to comply with these rules
and the transition plans being put in place to allow for
eventual compliance. Once rules are negotiated, it is critical
that the information be provided to all relevant members of the
industry, including workers and their union representatives,
regarding what is needed to comply and when compliance is
mandatory. We will continue to work with the Administration to
ensure there is sufficient transparency and meaningful
compliance with the new auto rules of origin.
LABOR AND ENVIRONMENT
The NAFTA renegotiation benefited from 20 years of trading
experience and a strong understanding of the U.S.-Mexico-Canada
trading environment and the ways that NAFTA had failed to
safeguard the interests of the United States. Chief among these
was an absence of enforceable labor and environmental
obligations. Further, the close proximity and trade
relationship among NAFTA countries necessitated a new approach
to these issues and a commitment on the part of the United
States to hold Mexico and Canada to new, high standards on
labor and the environment.
With respect to labor, USMCA introduces the innovative
rapid response mechanism designed by Senator Brown, Ranking
Member Wyden, and others to address certain labor violations at
the factory level, recognizing the persistence of exploitative
labor practices in Mexico. Neither American nor Mexican workers
can wait for state-to-state dispute resolution, and instead
need new tools to quickly and effectively crack down on bad
actors. In addition, the USMCA Implementation Act dedicates
resources to labor enforcement and technical assistance to hold
Mexico and employers operating in the country accountable for
complying with the obligations and to support reforms required
by the Agreement.
Furthermore, we support the inclusion of significant
funding for monitoring and enforcement of both labor and
environmental obligations and view this funding as critical to
implementation of the Agreement. The appropriations included in
the bill will ensure that our government has the resources it
needs to hold our trading partners accountable under USMCA. The
funds are directed towards activities such as monitoring
Mexico's implementation and enforcement of its labor laws;
combating forced and child labor; ensuring compliance with
Lacey Act prohibitions on trade in illegally taken wildlife and
illegally harvested timber; combating illegal, unreported, and
unregulated (IUU) fishing; engaging in environmental dispute
settlement; and other priorities that will ensure full
implementation of USMCA, promote a level playing field for U.S.
workers, and help protect the North American ecosystem.
ADDITIONAL VIEWS OF SENATOR PATRICK TOOMEY
NAFTA was a groundbreaking free trade deal that eliminated
almost all tariffs on products traded between the United
States, Mexico, and Canada. The deal fundamentally reshaped
North American economic relations, encouraging cooperation and
integration between the three party countries.
The American economy benefitted enormously from NAFTA.
Regional tradegrew from roughly $290 billion in 1993 to more
than $1.1 trillion in 2016.\12\ U.S. exports to Mexico alone
grew fivefold. The Office of the U.S. Trade Representative
(USTR) estimated by 2007 that NAFTA provided to the average
family of four nearly $350 to $930 in annual benefits.\13\
Thanks to NAFTA, Canada and Mexico are the two largest
destinations for U.S. exports, and American industry has
flourished.\14\ GDP has grown significantly, with NAFTA being
responsible for several billion dollars of added growth per
year since implementation.
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\12\Figure 2. U.S. Merchandise Trade with NAFTA Partners: 1993-
2016. CRS, The North American Free Trade Agreement (NAFTA), https://
www.fas.org/sgp/crs/row/R42965.pdf.
\13\USTR, NAFTA: An Annual Tax Cut and Income Gain for American
Families, https://ustr.gov/sites/default/files/
Quantification%20of%20NAFTA%20Benefits.pdf.
\14\Council on Foreign Relations, NAFTA and the USMCA: Weighing the
Impact of North American Trade, https://www.cfr.org/backgrounder/
naftas-economic-impact.
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NAFTA also created high-paying jobs in diverse industries
across the United States. An estimated fourteen million U.S.
jobs rely on trade with Canada or Mexico,\15\ and these export-
related jobs pay on average 15 to 20 percent more than jobs
focused only on domestic production.\16\ It was under NAFTA
that the United States consistently set new records as the
world's number one manufacturer and, in 2019, achieved the
lowest unemployment rate in 50 years.\17\
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\15\U.S. Chamber of Commerce, https://www.uschamber.com/sites/
default/files/the_facts_on_nafta_-_2017.pdf.
\16\Foreign Affairs, NAFTA's Economic Upsides: The View From the
United States, https://www.foreignaffairs.com/articles/canada/2013-12-
06/naftas-economic-upsides.
\17\Figure 2, Selected Countries' Shares of Global Manufacturing
Value Added. CRS, U.S. Manufacturing in International Perspective,
https://fas.org/sgp/crs/misc/R42135.pdf.
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NAFTA was a free, fair, and reciprocal trade agreement.
That being said, NAFTA was due for a modernization. USMCA made
some modest, constructive changes to NAFTA, such as in the
areas of digital trade, dairy market access, and dispute
settlement panel formation. Unfortunately, USMCA also made
several large policy changes that were contrary to the
objectives set forth by Congress under the Bipartisan
Congressional Trade Priorities and Accountability Act of 2015
(TPA 2015). These trade-restrictive policy changes should not
be considered precedent for future trade deals.
RULES OF ORIGIN
Primarily through increased Rules of Origin (ROO)
requirements that are designed to diminish Mexico's competitive
advantage in auto production, USMCA replaced NAFTA's
reciprocal, free trade in autos and auto parts with a complex
system of quotas and potential tariffs. These shortsighted
regulations will hurt the economies of both Mexico and the
United States. Besides increasing costs for American consumers
and increasing complexity and cost of production for U.S.-based
manufacturers, the new ROO provisions make U.S. auto production
less competitive globally. Companies will likely respond by
selecting suppliers in, and/or moving some production to, lower
cost countries. The ROO provisions also negatively impact other
areas of the U.S. economy. In fact, the U.S. International
Trade Commission report on USMCA noted ``the trade
restrictiveness of ROO is inversely related to its positive
impact on the U.S. economy.'' Most concerning of these many
changes was USMCA's requirement that at least 40% of the value
of an automobile be produced in a factory where workers earn on
average $16 per hour, an arbitrary wage mandate that will
further inflate costs of production. These managed trade
provisions, which hurt the U.S. economy and run counter to the
spirit of a free trade agreement, should not be included in
future trade deals.
MELTED AND POURED
The Protocol of Amendment added a requirement that steel
and aluminum be initially melted in North America (melted and
poured) in order to qualify for preferential status under
USMCA. This melt and pour requirement is to be phased in over
seven years (for steel) and ten years (for aluminum) after
USMCA's entry into force. Since this change was announced only
several days prior to Congress taking up the implementing bill,
the USITC was not able to formally evaluate the economic and
downstream effects of this provision; however, by its nature,
it will create ``winners and losers'' within the U.S. steel and
aluminum industries, pitting steel and aluminum producers
against steel- and aluminum-using manufacturers. Steel and
aluminum producers and users are both a source of high-paying
manufacturing jobs. This provision is unnecessary, costly, and
should not be included in future trade deals.
LABOR
USMCA's protocol of amendment added in extensive labor
provisions forcing U.S. taxpayers to pay $45 million a year to
compel Mexico to facilitate unionization across their country.
For the first time in a trade agreement, allegations of a
violation of a foreign country's labor laws will be assumed to
have conferred an unfair trade advantage to Canada and Mexico,
``affecting trade or investment between the Parties, unless the
responding Party demonstrates otherwise.''\18\ Violations of
Mexico's labor laws (as adjudicated by the ``rapid response''
panels) lead to tariffs and even embargoes on goods, at least
until the facility adjudicated to have been in violation agrees
to cede to the union's demands. Additionally, the various
committees and panels formed by USMCA to monitor the
implementation and enforcement of Mexico's labor reform all
must provide justification for any decision not to impose
tariffs, but are rarely if ever required to justify their
decision to impose tariffs, creating a clear bias in favor of
restricting trade. All of these provisions risk upsetting the
careful balance struck between labor considerations and
expanding market access in TPA 2015's negotiating objectives.
Future free trade agreements should focus on increasing free
trade, not advancing the political agenda of organized labor.
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\18\USMCA, Chapter 23--Labor; https://ustr.gov/sites/default/files/
files/agreements/FTA/USMCA/Text/23-Labor.pdf.
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ADDITIONAL VIEWS OF SENATORS PATRICK TOOMEY AND BILL CASSIDY
Though USMCA made several beneficial modernizations to
NAFTA, its passage was fraught with process fouls, none of
which should be considered precedent for future trade deals.
Article I, Section 8 of the United States constitution
unambiguously assigns to Congress the responsibility for
regulating commerce and foreign trade.
Since the Trade Act of 1974, Congress has delegated some of
its responsibility through the use of special rules and
procedures to facilitate consideration of trade agreements,
most recently through Trade Promotion Authority, in the
Bipartisan Congressional Trade Priorities and Accountability
Act of 2015 (TPA 2015). However, TPA's delegation of
negotiating power is not a reassignment of constitutional
responsibility to the executive branch; instead it is a
procedural matter, ``enabling the President to negotiate
reciprocal reductions of nontariff barriers while maintaining
Congressional authority over changes to U.S. law'' (S. Rept.
114-42). Congress additionally retains the power to make the
final decision as to whether to approve the negotiated
agreement. To ensure a swift process, members agreed to curtail
their own ability to debate and amend the implementing
legislation as well as its corresponding trade agreement.
However, these self-imposed restrictions and delegation of
power to the executive branch are conditioned upon the
President's fulfilling certain statutory requirements and
obligations in negotiating trade agreements. These requirements
and obligations serve the purpose of maintaining Congress's
constitutional role overseeing trade policy, ensuring that
Congress is consulted on the direction of the agreement and
kept updated on the negotiation's proceedings.
In USMCA, the administration did not meet all of these TPA
obligations. Firstly, as the Committee Report notes, the
provisions of an FTA are typically settled and agreed upon
several months prior to Congressional consideration, allowing
the administration and Members of the relevant congressional
committees to have time to thoroughly consider the final text
of the FTA and to discuss what legislative and administrative
actions would be necessary for implementation.
In the case of USMCA, the timeline of consideration
violated TPA requirements and thus did not provide sufficient
time for consideration of the final text of the agreement.
USMCA was originally ``signed'' on November 30, 2018, and the
``text of the agreement'' for that version of the agreement was
submitted to Congress on May 30, 2019. However, on June 13,
2019, House Speaker Nancy Pelosi appointed a Working Group of
House Democrats to conduct confidential negotiations with the
administration regarding changes to USMCA required to secure
their support. On December 10, 2019, the House Democrats' Trade
Working Group and the administration reached a deal that
secured Democratic support. This deal included changes that
altered the final text of USMCA. New provisions, including on
labor, environment, and rules of origin were added. Other
sections, like intellectual property protection for biologics,
were struck entirely from the deal. These changes requested by
the House Democrats' Working group were so extensive that they
required a new final text to be re-signed by all party
countries, on December 10, 2019 in Mexico City. The
implementing bill, which included provisions to implement the
new sections of USMCA as approved by the three parties on
December 10, was sent by the administration to Congress three
days later on December 13, 2019.
Section 106 (a)(1)(D)(ii) of TPA 2015 requires that any
agreement shall enter into force if and only if the President,
at least 30 days before submitting the implementing bill,
submits to Congress a copy of the final, legal text of the
agreement. In USMCA, the final text of the Agreement was signed
on December 10, 2019 and yet on December 13, 2019, President
Trump transmitted to Congress the implementing legislation--a
mere three days later, instead of the 30 days required under
TPA 2015.
There is a strong rationale and legislative history behind
this provision in TPA 2015. The 30-day requirement was newly
added in TPA 2015, in order to ``help ensure that Congress is
given adequate time and documentation to fully understand a
trade agreement subject to this bill and inform the
consideration of legislation to implement that agreement'' (S.
Rept. 114-42). Trade authority is a delegated power, and the
consultation, notification, and reporting requirements of TPA
are designed to achieve greater transparency in trade
negotiations and to maintain the role of Congress in shaping
trade policy. This lack of regard for TPA rules and timing
procedures should not be considered precedent for future trade
deals. The TPA timeline should be adhered to in order to grant
fast-track status to future trade deals.
A second administration violation of TPA was USMCA's
addition of an Appropriations title to the implementing
legislation, granting $843 million in discretionary
appropriations to support the changes to U.S. law made within
the implementing bill. The Senate's ``fast track'' procedures
allow qualified trade agreements to bypass rule XXII--an
abrogation of members' right to unlimited debate and
amendments--only because there are both procedural protections
and strict limits on the content permitted in a trade
agreement. Sec. 103(b)(3)(B)(ii) of TPA 2015 states that only
provisions strictly necessary or appropriate to implement the
final trade agreement are permitted in the implementing bill, a
provision that is intended to prevent extraneous legislative
provisions from `hitching a ride' on the parliamentary
privilege attached to implementing bills. The Senate Committee
report accompanying TPA 2015 further explains the intention
behind this provision, stating ``the trade authorities
procedures should apply only to those provisions in an
implementing bill that are strictly necessary or appropriate to
implement the underlying agreement, as stated in the Senate
Finance and House Ways and Means Committee reports accompanying
the Trade Act of 2002. . . . As has been recognized in the
past, to apply the procedures more broadly would encroach on
Congress's constitutional authority to legislate.''
Yet Title IX of the USMCA implementing bill (``USMCA
Supplemental Appropriations Act of 2019'') directly
appropriates funds, which is neither strictly necessary nor
appropriate to implement the underlying agreement. As noted
above, TPA 2015 gives authority only to make changes in
existing laws or new statutory authority required to implement
the agreement--it does not permit provisions on new budget
authority. Appropriations are done by Congress through specific
appropriation legislation that authorizes the relevant agencies
to make payments from the federal Treasury and provide budget
authority to an agency for specified purposes. Under the
standing rules of the House and Senate, funding must be
authorized through legislative committees prior to being
appropriated through appropriations committees.
A review of the CBO cost estimates for each of the 16 most
recent trade bills (dating back to the US-Israel Trade Act of
1985) shows that none of associated implementing bills
appropriated funds. Though some had spending effects, those
resulted from changes to existing authorities--not new
appropriations within an implementing bill. There is one
example--the Central America-Dominican Republic Free Trade
Agreement (CAFTA-DR)--in which funds were appropriated to
achieve the terms of the trade agreement, but these
appropriations were done through a separate appropriations
agreement (the Foreign Operations Appropriations Bill)--not in
the implementing bill itself. The CAFTA-DR agreement authorized
appropriations, but did not directly appropriate funds.
Additionally, Title IX of the USMCA implementing bill
(``USMCA Supplemental Appropriations Act of 2019'')
inappropriately designates appropriated funds as ``emergency''
funding, again violating the ``strictly necessary or
appropriate'' standard required for expedited consideration.
Emergency funding is intended for purposes that are sudden,
urgent, unforeseen, and not permanent. The funding provided in
the USMCA implementing legislation fails all of these criteria.
Designating funds for these purposes as emergency funds is not
appropriate within an implementing bill, and is also not
strictly necessary for achieving the terms of USMCA.
Appropriating within an implementing bill, and especially
giving inappropriate emergency designation to appropriated
funds, should not be considered precedent for future trade
deals.
ADDITIONAL VIEWS OF SENATOR TIM SCOTT
The Administration sought a renegotiation of the original
NAFTA agreement to modernize the agreement and address some of
its perceived deficiencies. To this end, a critical goal was
the creation of a new, more stringent set of origin rules
governing motor vehicle trade throughout the region.
Throughout the USMCA negotiations and after, the entire
U.S. auto industry worked diligently with USTR to understand
these new rules, which depart in significant ways from the
NAFTA rules and from any other FTA previously negotiated. The
complexity and stringency of these rules led several automakers
to signal they would require more than the three-year timeframe
for full implementation and compliance, and these companies
have submitted alternative staging requests for an additional
two years in which to fully comply. Following the submission of
these requests (and the completion of the Uniform Regulations),
USTR staff made it known that a critical rule involving core
parts would be applied differently than the industry had
earlier been led to believe.
For months prior to this reinterpretation, automakers were
told by USTR staff that ``core parts'' determined to be
originating using any of the approaches allowed under the rules
governing such parts would be considered originating for the
purpose of calculating the finished vehicle regional value
content (RVC). Based on this interpretation, automakers began
making investment decisions and supply chain adjustments, and
taking other necessary compliance steps. However, after the
July 1, 2020 USMCA entry into force date, without formal notice
to the industry and contrary to the understanding of the
industry and our USMCA trading partners, USTR suddenly insisted
that two of the approaches allowed for the purpose of
calculating ``core parts'' value--the key parts calculation and
the super core calculation--could not be used to support claims
that such parts were originating when calculating the finished
vehicle RVC.
Once negotiated, the success of agreements like this rests
on industry's access to reliable and consistent information as
well as decision-making processes that provide as much
transparency as possible. Simply put, moving the goalposts on
such a vital set of calculations now jeopardizes American
competitiveness and risks countless jobs and future
opportunities for hard-working Americans in the process.
ADDITIONAL VIEWS OF SENATORS TODD YOUNG, RICHARD BURR, AND PATRICK
TOOMEY
USMCA as originally negotiated by the Administration
included groundbreaking provisions to support America's
innovators in the biopharmaceutical industry. Importantly, it
obliged the Parties to provide 10 years of protection for test
and other data for biologic medicines which would have resulted
in higher international standards, adequate protections for
innovators, and utmost regard for consumers. The United States
provides 12 years of protection pursuant to the Biologics Price
Competition and Innovation Act, which had broad bipartisan
support. A 10-year period of protection was already a
compromise among those who wanted USMCA to reflect the twelve-
year period of such protection required in U.S. law--consistent
with Trade Promotion Authority's dictate that the provisions of
any trade agreement governing intellectual property rights that
is entered into by the United States reflect a standard of
protection similar to that found in United States law--and
those who sought a shorter term.
Certain critics in Congress and in the stakeholder
community argued that including any mandated minimum period of
research data protection for biologic medicines in a trade
agreement would limit U.S. policy flexibility. They argued the
United States would not have the freedom to reduce the period
of such protection in the United States from the current twelve
years to below the ten-year period mandated in the USMCA. To
respond to this criticism, USTR proposed to the House
Democrats' Trade Working Group a proposal that would have
preserved U.S. policy flexibility. This proposal was for a so-
called ``ratchet'' mechanism in which the minimum period for
research data protection for biologic medicines mandated in the
USMCA would automatically be reduced to whatever period the
United States changed its law to require if that period were
below ten years.
Regrettably, the House Democrats' Trade Working Group
rejected this proposal that would have preserved U.S. policy
flexibility, and raised the intellectual property protection of
our two most important trading partners closer to our own.
Ultimately, the Administration agreed to remove the provision
entirely from the USMCA, despite support for the provision
among many. That change satisfied the expediency of politics at
the expense of good long-term policy for U.S. innovators and
reduced the overall benefit of the USMCA for the United States.
Removing the biologics provision is a severe blow to
America's highly innovative biotechnology industry. An
astounding 71% of all biologic medicines being developed come
from small, emerging biotech companies. Emerging companies are
responsible for more than half of biologic drugs under
development. Nearly half of the total global pipeline of new
medicines is comprised of biologic medicines. They are some of
the most innovative and promising for patients, including
patients with Alzheimer's, cancer, and rare debilitating
diseases. These medicines are also some of the most difficult
and costly to develop. On average, it costs $2.6 billion to
develop a new medicine and the total investment in research and
development related to emerging cures and treatments was $71.4
billion in 2017. USMCA as originally negotiated reflected these
intensive cost factors impacting consumer access. The
researchers innovating these medicines cannot succeed without
strong, global intellectual property standards.
The unfortunate impact of eliminating this provision is the
precedent it sets in other major markets, including China, and
the message it sends to free-riders throughout the world that
America will not stand by its pre-eminent biopharmaceutical
industry and its life-saving innovations. The USMCA should not
set the standard for future trade agreements in this important
respect.
ADDITIONAL VIEWS OF SENATORS ROBERT MENENDEZ AND MARK R. WARNER
This report must take note of the inappropriate and
unprecedented manner in which President Trump treated our
partners, Canada and Mexico, during the USMCA negotiations.
In 2018, President Trump imposed tariffs on steel and
aluminum imports from several countries, including Canada and
Mexico, claiming that imports from these countries posed a
threat to national security. Canada is a critical ally, a key
partner in defense and intelligence activities, and a country
with which the United States shares an interconnected defense
industrial base. Canadian officials were rightly outraged by
President Trump's labeling of Canada as a national security
threat. That action has taken a severe toll on U.S.-Canada
relations.
In May 2019, President Trump announced via Twitter a tariff
on goods imported from Mexico that would increase steadily
unless Mexico stopped the flow of migrants into the United
States. President Trump then extended his demands against
Mexico beyond immigration, insisting Mexico stop an
``invasion'' of drug dealers and cartels. Although President
Trump did not follow through on his threat, that behavior was
insulting to Mexico and made the United States a less reliable
trading partner in the eyes of many nations. In addition, the
President's past insistence that Mexico pay for a border wall,
aggressive rhetoric on migration, and insults against Mexicans
have made it more difficult for the United States and Mexico to
work constructively to address common threats.
President Trump failed to treat Canada and Mexico with
dignity and respect throughout the negotiating process. That
behavior may make it harder for the United States to reach
agreement with our trading partners on future enforcement
disputes that may arise under USMCA. While the President may
claim that these actions helped secure a better trade deal,
most members of the Committee know this to be false. This
agreement was concluded in spite of, not because of, the
President's ill-conceived tactics. They should not be repeated.
ADDITIONAL VIEWS OF SENATORS TOM CARPER, BEN CARDIN, AND SHELDON
WHITEHOUSE
Certain elements of this report related to USMCA's
Environment Chapter and the USMCA Implementation Act require
further elaboration. First and foremost, we are disappointed
that USMCA does not explicitly speak to climate change, one of
the most pressing issues facing the world today. It is our view
that American domestic and foreign policy must aggressively
address climate change through actions including recommitting
the United States to the Paris Agreement and ratifying the
Kigali Amendment to the Montreal Protocol, and our FTAs should
reflect such an approach.
In addition, it is our view that the USMCA Implementation
Act's appropriations for monitoring and enforcement of our
trading partners' environmental commitments under USMCA are
both necessary and appropriate to implement the Agreement. In
our view, future implementing bills should follow the precedent
set by the USMCA Implementation Act and provide the resources
necessary to ensure that the environmental obligations in our
trade agreements can be fully carried out.
We also strongly support the improvements in USMCA over
NAFTA--particularly language in the Protocol of Amendment that
(1) creates a presumption that violations of USMCA
environmental obligations affect trade and investment and (2)
closes a loophole carried over from NAFTA that would have
prevented environmental enforcement by allowing Parties to
block dispute settlement panels. These improvements ensure that
the Parties' obligations under USMCA's Environment Chapter,
including commitments under seven multilateral environmental
agreements, can be fully enforced.
Finally, we wish to highlight the importance of new
environmental monitoring and enforcement bodies and mechanisms
created by the USMCA Implementation Act. These include the new
Interagency Environment Committee that oversees implementation
of USMCA's environmental obligations; a new mechanism to
trigger environmental reviews that gives stakeholders an
expanded role in environmental enforcement matters; the
establishment of environment-focused attaches in Mexico City;
and additional reporting requirements to better assess the
status of Mexico's environmental laws and regulations. In
conjunction with the dedicated funds for environmental
monitoring and enforcement, these new mechanisms will help
ensure that those that violate the USMCA's environmental rules
can be held accountable. We are closely watching how this and
future Administrations use these tools and hope they can serve
as a model for other trading relationships.
ADDITIONAL VIEWS OF SENATOR BEN CARDIN
I want to expand on one important modernization in USMCA.
The Agreement included the first-ever standalone chapter on
small and medium-sized enterprises (SMEs). While previous trade
agreements have included provisions on market access for SMEs,
the inclusion of a standalone chapter is an essential
improvement to our trade agreements and should be considered as
a model going forward. Furthermore, the SME chapter explicitly
includes language to ensure promotion of SMEs owned by diverse
and under-represented groups, including women, indigenous
people, youth and minorities. It is critical this chapter's
provisions on diverse and under-represented groups be carried
out under the terms of the Agreement.
ADDITIONAL VIEWS OF SENATOR MARK R. WARNER
Robust trading relationships improve our nation's economy,
and I'm optimistic that this trade agreement will help American
farmers, ports, manufacturers, retailers, and workers. Overall,
I'm confident that the Agreement will provide the consistency
and stability the business community needs.
However, I want to note that I have serious concerns with
the inclusion of safe harbor language modeled on Section 230 of
the Communications Decency Act (Section 230). Section 230
represents a 1990s approach to internet policy--one that failed
to foresee the structure, business models, and market
concentration of today's internet platforms. Congress has begun
an important, bipartisan debate about whether Section 230 is
working as intended, and many--including prominent civil rights
groups--believe that Section 230 has allowed internet
intermediaries to ignore the misuse of their platforms by bad
actors, even as they're repeatedly used to harm consumers,
suppress voting, and facilitate racial and gender
discrimination. Congress amended Section 230 for the first time
in 2018. Just two years later, over a dozen bills have been
introduced to amend this 1996 law. These efforts include
proposals from bipartisan members of Congress, the Department
of Commerce's National Telecommunications and Information
Administration, and the Department of Justice. The Chairs of
both the Senate Commerce Committee and the Senate Judiciary
Committee have sponsored bills amending Section 230. In the
United States House of Representatives, the Chair and Ranking
Member of the committee of jurisdiction have expressed serious
reservations with including Section 230 in our trade
agreements.
Within the context of this robust and active debate,
including safe harbor provisions similar to Section 230 of the
Communications Decency Act into our trade agreements--which has
not been done in a single free trade agreement since the law
was first enacted in 1996--was a mistake. Congress has begun a
serious review of the underlying premises of Section 230 in
light of substantive changes in how consumers interact with
technology, ever-wider interpretations of the immunity the law
confers by courts, and clear abuses of the law by platforms. It
is my hope that USTR recognizes this ongoing and widespread
legislative effort and refrains from negotiating for the
inclusion of intermediary safe harbor provisions in future
agreements, at least until Congress is able to build an
effective policy framework for these 21st century problems.
V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the Committee, it is necessary in order
to expedite the business of the Senate, to dispense with the
requirements of paragraph 12 of rule XXVI of the Standing Rules
of the Senate (relating to the showing of changes in existing
law made by the bill as reported by the Committee).
[all]