USMCA Rules of Origin: De Minimis as an Alternative To Qualify for Tariff Preferences
The United States–Mexico–Canada Agreement’s (USMCA) de minimis provision allows a small percentage of outside-of-North America originating inputs that do not meet the applicable tariff shift, to be used in a qualifying USMCA good.
USCMA increased the de minimis threshold from NAFTA’s 7%, to 10%. This is, through the current de minimis provision, a good shall be considered USMCA originating even when it fails to qualify as such under the relevant Rule of Origin, as long as the value of all non-originating (outside-of-North America) materials used in the production of the good do not exceed 10% of either the Transaction Value or the total cost of the end product.
Goods that were not eligible under NAFTA at 7%, may now qualify for USMCA tariff preferences under the 10% allowance. Producers may evaluate the replacement of certain USMCA-originating materials with non-originating materials as an alternative to reduce costs and still continue qualifying for preferential treatment under the de minimis rule.
Goods must still satisfy all regional content requirements (i.e. labor) and all other applicable regulations, to qualify as originating. Still, hey, you have a 10% “free pass” that you may use in your now very strict regional-content calculations, have you taken a look to see if you may benefit from it?
Please note that we are not referring to the express (courier) shipments, at times also referred as de minimis shipments, that benefit from reduced or no duties and taxes, in a nutshell, US$800 for goods coming into the United States, US$117 with no customs duties and US$50 for tax benefits in goods coming into Mexico, and C$150 with no customs duties and C$40 for tax benefits in goods coming into Canada.
