It was March 4 when the US imposed tariffs of 25% on Canadian goods and 10% on Canadian energy exports (and Canada implemented its own countermeasures); however, it was on March 7 that tariffs were paused for items that qualify for duty-free preferential treatment under the Canada-United States-Mexico Agreement (CUSMA, or USMCA). According to the Government of Canada’s website:
For the vast majority of goods (over 98% of tariff lines and over 99.9% of bilateral trade between Canada and the US), traders can claim preference under CUSMA if they meet the Agreement’s rules of origin.
Understanding CUSMA’s rules of origin is paramount for determining if your goods qualify for this exception. There are two rule of origin classifications: general, and product-specific rules (PSROs). The general rule applies to items such as vegetables or minerals that are wholly produced in Canada (and, conversely, for goods wholly produced in the US). PSROs cover goods that have been manufactured using imported materials (or a combination of imported/North American materials) that can be considered ‘originating’ if they meet certain criteria, such as:
- A change where the final good is classified differently that the materials used to make the item (i.e., a North American-made table that was produced with imported oak),
- A value requirement, where a certain percentage of value was added in North America, and
- A process requirement, where the good must undergo a specified process in North America (i.e., a shirt that was cut and sewn on this continent).
Compliant products will require a certificate of origin to benefit from duty-free tariff treatment. Traders can consult the Harmonized Commodity Description and Coding System (HS) to view the rule that corresponds with their product’s own HS code. Licensed customs brokers are also a good resource for determining which goods meet these rules of origin. However, the final decision on a good’s classification and tariff treatment will rest with the border agencies for Canada and the US.
We’re tracking the tariff dispute on our website; check it (and our LinkedIn and X feeds) for regular updates.
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