As you have undoubtedly seen by now, last night, an agreement was reached on a revised trade agreement that will replace NAFTA. The new agreement will be called the United States-Mexico-Canada Agreement (“USMCA”). The USMCA contains new provisions that were not in NAFTA (e.g., digital trade, data storage location requirements, etc.) and changes to others (e.g., agriculture, financial services, de minimis, certain rules of origin, such as autos, investor protections, trade remedies, etc.). There are also side letters on how products of Canada and of Mexico will be treated, if the United States proceeds to impose additional duties on autos and auto parts (or other products) under Section 232. There is a great deal in the revised agreement and all companies with meaningful NAFTA (or now, USMC) activity should be reviewing the proposed text to determine how it impacts their operations. The text of the agreement is available here.
That said, the agreement has a long way to go before it comes into effect.
As indicated below, the unofficial deadline to get a deal done was last night. The deadline was based on the fact that President Pena Nieto leaves office December 1st. Under U.S. law, President Trump has to publish the text of any agreement 60 days before signing. Therefore, if the goal was to have the agreement signed before President Nieto leaves office, the text had to be published by September 30th.
Signing the agreement, however, is not the end of the process. The agreement must be ratified by each of the three countries. In the United States, that process (which includes a study by the U.S. International Trade Commission on the potential economic impact and consideration by both the House and Senate) will take meaningful time (i.e., months). As a result, USMCA implementing legislation will not be considered until well after the first of the year.
In addition, given the mid-term elections in a few weeks and the resulting uncertainty over the composition of the next Congress, it is not clear whether the agreement will have the votes necessary for passage.
It should be an interesting next few months. Again, our recommendation is that all companies with meaningful cross-border activity with Canada and/or Mexico review the text and start planning for the alternatives (i.e., a new USMCA, an old NAFTA, or possibly no agreement at all).
If you have any questions, or if you would like to discuss these issues further, please let us know.