Companies in Mexico and Canada have the choice of using the North American Free Trade Agreement (CUSMA/ T-MEC) or CPTPP. Both have their advantages and importers have to choose either shipment at the time of import.
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CUSMA /T-MEC Explained
CUSMA /T-MEC is the United States-Mexico-Canada Agreement. It replaced the North American Free Trade Agreement (NAFTA) and includes updated provisions on trade in goods and services, intellectual property, labor and the environment, among other areas.
CPTPP Explained
CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) is a trade agreement signed by 11 countries in the Pacific Rim region, including Canada and Mexico. It also contains provisions on trade in goods and services, intellectual property, and other areas, but is not specific to the relationship between Canada, the US, and Mexico.
Just being shipped between Mexico and Canada does not qualify as origin goods under a free trade agreement. The country of origin for the purposes of trade agreements refers to where the goods were manufactured (or, in the case of agriculture raised or grown).
In terms of shipping, CUSMA and CPTPP have different rules of origin and tariffs that are applied when shipping products between Canada, the US and Mexico. As CUSMA is a trilateral agreement between these countries, it has specific provisions for trade between these countries, whereas CPTPP is a multilateral agreement that covers trade between multiple countries in the Pacific region, so the rules and tariffs may be different from those in CUSMA.
The rules of origin of Canadian Free Trade Agreements fall into two categories: General rules and category specific rules of origin (CSRO).
The rules of origin in CUSMA and CPTPP are different in terms of the criteria used to determine whether a product qualifies for preferential treatment under the agreements.
In CUSMA, the rules of origin are used to determine whether a product qualifies for duty-free or reduced-tariff treatment when traded between the United States, Mexico, and Canada. These rules specify the minimum percentage of the product that must originate from one or more of the CUSMA countries in order to qualify for the preferential treatment. Additionally, CUSMA has specific rules for automotive products, which requires that they have at least 75% North American content and that a certain percentage of the content be made by workers earning at least $16 an hour.
In CPTPP, the rules of origin are used to determine whether a product qualifies for duty-free or reduced-tariff treatment when traded between the 11 countries that are party to the agreement. These rules specify the minimum percentage of the product that must originate from one or more of the CPTPP countries in order to qualify for the preferential treatment. Additionally, CPTPP also has specific rules for automotive products, which requires that they have at least 45% regional value content.
CUSMA rules of origin are generally viewed as more stringent than those of CPTPP.
A shipper can confirm compliance with the rules of origin under CUSMA/ CPTPP and CPTPP either by self certifying or consulting with a trade specialist and regulators. Records must be kept as both trade agreements empowers customs authorities of each country in order to verify that the imported goods comply with the applicable rules of origin. Authorities have the right to demand the necessary documentation and conduct audits.
Just shipping from Mexico does not grant Mexican origin status. Read more: Understanding the difference of shipped from versus country of origin.
Only only free trade agreement can be claimed and must be done so at the time of import. The request for preferential duty free import must include a certification of origin referencing the applicable trade agreement. Useful information on certificate of origin.
Keep in mind the origin rules can be complex and often require extensive review by industry specialists and regulators.
Note for shipments to Mexico: Mexico only accepts the ‘Importer’ as the Certifier
Benefit from Canada's free trade agreements: What you need to know.
Regardless of free trade agreement, the rules of valuation are fairly universal. Verify you are declarating the correct value for import to Canada.
After establishing the value and other information, the next step is to review the international shipping options export and import to Canada.
When choosing a shipping method, consider the size and weight of your freight, the time frame in which you need it to arrive, and shipment characteristics.