Status quo for recyclers as U.S., Mexico and Canada reach USMCA trade deal
ISRI expects some provisions to make cross-border trade a little easier
Late Sunday night, September 30, U.S. and Canadian trade negotiators reached a deal on a new "U.S. Mexico Canada Agreement" (USMCA) to replace the existing North American Free Trade Agreement (NAFTA). Although some details still require additional negotiations, and the final agreement needs to go through a number of legally-required procedures in the United States (in addition to parliamentary ratification in all three countries), all three governments are hailing the deal as a break-through modernization of the 24 year old NAFTA.
According to a statement issued to members by the Institute of Scrap Recycling Industries (ISRI), for recyclers, the new agreement upholds the status quo for the most part. Although the organization also statees that it expects that some of the provisions will make cross-border trade a little easier, due to slightly modified rules of origin classification for scrap. There is also enhanced legal language to recognize ISRI Specifications (though not explicitly mentioned) as a guideline for materials. Notably, U.S. 232 steel and aluminum tariffs remain in place with negotiations to come separately.
For Customs clearances, the USMCA provides more detailed guidelines for the three governments to cooperate in ways that allow for improved border-crossings, such as information sharing, law enforcement collaboration, procedures for adjudicating disputes, etc. The USMCA especially enhances collaboration between governments to prevent illegal transshipment by outside parties, such as to circumvent import restrictions.
Although ISRI Specifications are not specifically identified as a standard for traded scrap commodities, the agreement in fact mentions no specific standards or standards bodies as preferred guidelines, stating "The Parties recognize the important role that international standards, guides, and recommendations can play in supporting greater regulatory alignment, good regulatory practices and reducing unnecessary barriers to trade." ISRI has stated that they are confident that ISRI Specifications, therefore, are acknowledged as the guidelines for scrap. Furthermore, the agreement calls on the governments to be transparent in rule-making, and if there is a proposal that could lead to a refusal of certain standards/guidelines, governments are required to consult with industry.
For Rules of Origin, waste and scrap maintain the same origin classification as in NAFTA, in that scrap materials are considered "originating" in North America if processed in one of the three countries (whether collected in North America or collected elsewhere and imported for processing) as well as derived from used goods collected in one of the three countries for purposes of extracting raw materials. According to ISRI, this is beneficial for manufacturing customers that produce goods from scrap commodities processed in North America as they will be able to include scrap as part of the new 60% transaction value (or 50% of cost) cumulation threshold for duty-free trade within North America.
As for timing, under trade promotion authority, the Administration has given Congress its thirty days' notice as required before the agreement can be signed. Signing, though, does not mean the agreement goes into effect. It still requires parliamentary approval in all three countries before it enters into force, and the agreement is expected to be heavily debated.
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