United States Trade Representative Robert Lighthizer notified Congress that President Trump intends to renegotiate the North American Free Trade Agreement (NAFTA). The notification informs Congress that negotiations will begin as soon as practicable, but no earlier than 90 days from the date of the notice (May 18, 2017). You can read the notification here. Although the notice does not provide specifics on what will be renegotiated, prior statements give guidance on what changes we could see.
Recent guidance highlights numerous possible changes that could impact brokers and importers in significant ways. Some of the most significant possibilities highlighted are an alteration of the NAFTA rules of origin, increased enforcement of antidumping/countervailing duties and intellectual property rights, and the possibility of “safeguard mechanisms” (i.e. increased duties) if imports from NAFTA countries are a substantial cause or threat of serious injury.
Many of these proposals stem from a draft letter of proposed changes to NAFTA by Stephen Vaughn, the then Acting United States Trade Representative. A summary of some of the changes that may impact your practices most significantly include:
- Addressing textile imports and exports within NAFTA.
- Reducing or eliminating non-tariff barriers to U.S. agricultural exports.
- Additional enforcement measures within the U.S. and other NAFTA countries including preventing antidumping and countervailing duty evasion and transshipment, and strengthening intellectual property rights enforcement.
Perhaps most significantly, the letter indicates the possibility that the NAFTA rules of origin could change. The letter states it will:
“Seek rules of origin that ensure that the Agreement supports production and jobs in the United States, procedures for applying these rules, and provisions to address circumvention that ensure that preferential duty rates under the agreement apply only to goods eligible to receive such treatment, without creating unnecessary obstacles to trade.”
Finally, the letter notes the possibility of a:
“safeguard mechanism to allow temporary revocation of tariff preferences, if increased imports from NAFTA countries are a substantial cause of serious injury or threat of serious injury to the domestic industry.”
Though not stated in the letter, we believe there is likely to be a significant increase in the number of NAFTA verifications conducted. We urge you to stay current on any changes to trade laws and prepare for increased enforcement.