Understanding USMCA Rules of Origin & Their Impact on Tariffs

With the latest tariff adjustments, goods that meet the USMCA (U.S.-Mexico-Canada Agreement) rules of origin will not be subject to the new 25% tariffs. However, those that do not qualify will face the full tariff rate.

What Are USMCA Rules of Origin?

Think of these as the “made in North America” rules. USMCA replaced NAFTA and set new standards to ensure that only products with enough North American content qualify for duty-free trade.

Key Rules of Origin Under USMCA:

1. Regional Value Content (RVC) Requirement

• A certain percentage of a product’s value must come from North America.
• Example: Cars must have 75% North American content (up from NAFTA’s 62.5%).

2. Tariff Shift Rule

• If parts from outside North America are used, the final product must be significantly transformed in a USMCA country to qualify.
• Example: A car part made with Chinese steel but fully processed in Mexico might still qualify.

3. Specific Product Rules

• Some industries (e.g., textiles, chemicals, electronics) have additional origin criteria.

4. Labor Value Content Requirement (Automotive Industry Only)

• 40-45% of a vehicle’s value must come from workers earning at least $16/hour.

Industry-Specific Impact of USMCA Rules

Electronics Industry

Fashion Industry

Personal Care Industry

Key Takeaways

• Where you assemble a product isn’t enough – If the core materials aren’t North American, it won’t qualify.
• Raw materials matter – Products with key components from outside the region face full tariffs.
• Sourcing smartly can save money – Using North American ingredients can mean duty-free trade under USMCA.

Impact of the New White House Tariff Announcement

• ✅ If a product qualifies under USMCA, it avoids the 25% tariff.
• ❌ If it doesn’t meet USMCA rules, it is subject to the full tariff.
• ⚠️ Companies will need to prove USMCA compliance using certificates of origin and detailed supply chain documentation.

How to Prove USMCA Compliance

To avoid tariffs, companies must prove their products meet USMCA’s origin rules with detailed documentation.

USMCA Certificate of Origin – Your Golden Ticket

A USMCA Certificate of Origin must be provided by the exporter, producer, or importer to claim duty-free status. It must include:

✔ Exporter Information (name, address, contact details)

✔ Product Description & HS Code (first 6 digits)

✔ Origin Criterion (how the product qualifies under USMCA)

✔ Certification Statement & Signature (affirming compliance)

Other Documents You May Need

U.S. Customs and Border Protection (CBP) might ask for:

✔ Bill of Materials (BOM) – Showing where each component comes from.

✔ Supplier Declarations – Proof that materials are North American.

✔ Manufacturing Process Records – Evidence of substantial transformation.

✔ Shipping & Import Records – To confirm product details.

How CBP Verifies USMCA Compliance

CBP won’t just take your word for it. They may:

• ✅ Request more documents to verify claims.
• ✅ Audit companies (importers & suppliers) for compliance.
• ✅ Inspect shipments to ensure details match records.

If a product fails verification, CBP may:

• ❌ Deny duty-free benefits and apply full tariffs.
• ❌ Issue penalties for incorrect or misleading claims.

Final Thoughts

Businesses need to adjust their supply chains, double-check compliance, and educate customers on duty-free trade options. Those who act early will have a competitive edge as tariffs reshape global trade.

Navigating US tariff changes can be overwhelming. For a broader perspective on the latest developments and their impact on e-commerce, check out my article 2025 US Tariffs Saga for E-commerce: Explained: https://www.linkedin.com/pulse/2025-us-tariffs-saga-e-commerce-explained-grigory-shchichko-23g8f/