USMCA Explained: How to Get 0% Tariffs from Canada & Mexico

The United States-Mexico-Canada Agreement (USMCA) entered into force on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA) that had governed North American trade since 1994. USMCA is the most consequential trade agreement for US importers in 2026 because USMCA-qualifying goods from Canada and Mexico are exempt from every US tariff surcharge except Section 338 — including Section 122, Section 232, and any other authority, but not the Section 338 duty that reaches annexed non-Section-232 Canadian goods from August 19, 2026. The USMCA covers virtually all goods traded between the three countries. For goods that meet the rules of origin, the tariff rate is 0% — not a reduced rate, but complete duty-free treatment, with Section 338 the single exception for Canadian goods on an annex from August 19, 2026. This represents a dramatic advantage over goods from any other country. A US importer sourcing electronics from Mexico and qualifying under USMCA pays zero tariff versus 14% (MFN 1.5% + forced-labor Section 301 12.5%, since Vietnam is on the covered list) for the same electronics from Vietnam, and 39% (MFN 1.5% + China-punitive S301 25% + forced-labor Section 301 12.5%) for Chinese List 3 electronics. The agreement went through protracted renegotiation from 2017-2020. The Trump administration sought tighter rules of origin for autos (raising the automotive content threshold from NAFTA's 62.5% to USMCA's 75%) and new provisions on currency manipulation, labor rights, digital trade, and dairy market access. The result is a modernized agreement with stricter content requirements than NAFTA, but one that still provides powerful preferential access. The USMCA is subject to a joint review in 2026. The three parties — the US, Canada, and Mexico — can agree to extend it or renegotiate specific provisions. There is currently no indication that the 0% qualifying rate will be altered in the 2026 review, as it is the foundational element of the agreement.

For goods that qualify under USMCA, the tariff rate is 0%. This applies on top of MFN rates — USMCA treatment replaces, not reduces, the MFN rate. A product with a 5% MFN rate that qualifies under USMCA pays 0%, not 5% less S122 and other adjustments. The 0% rate explicitly overrides every tariff surcharge in effect in 2026 except Section 338, the Canada-only duty that survives a USMCA preference claim from August 19, 2026. The USMCA exemption language covers "all additional duties" imposed after USMCA's effective date, which courts have interpreted to include Section 122 and Section 232. This is why USMCA is sometimes called a "tariff shield" — it protects qualifying goods from the accumulation of surcharges that affects all other sourcing countries. The dollar impact of the 0% rate is substantial. A manufacturer sourcing $5 million in components from USMCA-qualifying Mexican suppliers pays zero tariff, zero Section 122 (moot since it lapsed to 0% on July 24, 2026), and zero S232 (even for steel and aluminum, if qualifying under USMCA) — and is also excluded from the forced-labor Section 301 duty that now applies to many other origins. The same $5 million in components from a European supplier tells a different story, though a less dramatic one than it did a year ago. The 15% EU reciprocal country rate was a line inside the Executive Order 14257 reciprocal tariff, and Executive Order 14389 ended that tariff on February 20, 2026; it is no longer collected and CBP is refunding it. What remains is the forced-labor Section 301 duty, and because the EU sits on the conditional tier at a 10% ceiling computed net of MFN, a representative near-zero-MFN component carries $500,000 on this order. Combined, the European supplier's goods face roughly 10%, against zero for the qualifying Mexican supplier. The gap used to be 25 points; it is now 10. From a Chinese supplier, the same components now face roughly $1.6-2.6 million in combined MFN + China-punitive S301 + forced-labor Section 301 duties — up modestly from the pre-cliff range, since the 12.5% forced-labor duty is larger than the Section 122 line it replaced. The MPF still applies to USMCA goods, capped at $651.50 per entry. This is the one fee that USMCA treatment does not eliminate. For ocean shipments, HMF at 0.125% also applies. But these fees are trivial compared to the tariff elimination. The 0% rate has driven a significant shift in US supply chain decisions since 2018, and especially since 2025 when Section 232 rates were raised. Mexico has become the top US goods import partner, surpassing China in 2023 for the first time in two decades.

USMCA duty-free treatment is not automatic for all goods from Canada and Mexico. The goods must meet USMCA rules of origin — requirements specifying that a sufficient portion of the product's value and production occurred within the USMCA region (US, Canada, and Mexico collectively). Rules of origin have two general components: regional value content (RVC) thresholds and tariff shift requirements. Regional value content measures what percentage of the product's value originates in the USMCA region. Tariff shift requires that inputs sourced from outside USMCA (such as Chinese-made components) undergo a sufficient manufacturing transformation within USMCA territory to change their HTS tariff classification. The general RVC threshold under USMCA is 60% using the net cost method or 50% using the transaction value method for most manufactured goods. For automobiles and auto parts, the threshold is 75%, with additional requirements around steel and aluminum content (70% North American steel and aluminum required by value) and labor value content (45% of auto content must come from high-wage North American workers at $16/hour minimum). For companies with global supply chains, meeting USMCA rules of origin requires careful tracking of component sourcing. A Mexican electronics assembly facility that uses primarily Chinese-sourced components (circuit boards, displays, processors) may not qualify for USMCA treatment if those components haven't been sufficiently transformed or if the regional value content is below the threshold. Simply assembling imported components in Mexico does not automatically confer USMCA origin.

To claim USMCA duty-free treatment, the importer must have a valid certification of origin. Under USMCA, the certification can be provided by the exporter, producer, or importer — not just the exporter as was required under NAFTA. This flexibility allows US importers who have sufficient knowledge of their supplier's production process to self-certify. The certification must include specific data elements required by USMCA Article 5.2: the certifier's name and address, the goods covered (HTS code, description, quantity), the USMCA origin criterion being claimed, the signature of the authorized person, and the date. The certification can be provided on a commercial invoice or as a separate document, and can cover a single shipment or blanket multiple shipments for up to one year. The USMCA origin criterion must be specified: "A" for goods wholly obtained or produced in USMCA territory; "B" for goods meeting specific tariff classification change rules; "C" for goods meeting regional value content thresholds; "D" for non-originating materials used in production meeting de minimis rules (not to exceed 10% of transaction value); or "E" for goods imported as sets meeting the set rules. Record-keeping requirements: importers must retain USMCA certifications and supporting documentation for five years from the date of importation. CBP conducts verification audits of USMCA claims, and incorrect claims result in back-duty liability plus potential penalties of up to 40% of the unpaid duties. Working with a customs attorney to establish USMCA compliance procedures is advisable for importers making large volume claims.

Goods from Canada or Mexico that do not qualify for USMCA treatment are subject to the same tariff stacking as goods from any other country — but with one important difference. The standard tariff rate for non-USMCA-qualifying goods from Canada and Mexico is affected by the bilateral deal framework. Non-qualifying Canadian goods no longer face Section 122 — it lapsed to 0% on July 24, 2026. But Canada is on the forced-labor Section 301 flat-10% tier, so non-qualifying goods still pay the same 10% headline number as before, just under a different legal citation: a forced-labor Section 301 duty, not Section 122. The IEEPA-fentanyl 35% surcharge that previously applied to non-USMCA Canadian goods was struck down by the Supreme Court on February 20, 2026 and was replaced first by Section 122 (effective February 24, 2026, per CBP CSMS #67844987) and then, after Section 122's July 24, 2026 lapse, by the forced-labor Section 301 duty. For practical purposes: non-qualifying Canadian goods pay MFN + 10% forced-labor Section 301. Mexico similarly does not have a separate bilateral deal, and is also on the forced-labor flat-10% tier. Non-qualifying Mexican goods face MFN + 10% forced-labor Section 301 — the same headline number Section 122 used to charge, now under a new citation since the July 24, 2026 lapse. For goods subject to Section 232 (steel, aluminum, autos), non-qualifying Mexican goods pay the S232 rate instead — S232-covered goods are excluded from the forced-labor duty the same way they were excluded from Section 122. The key practical scenario: Chinese goods transshipped through Mexico (a practice CBP specifically targets) do not qualify for USMCA treatment and, since their true country of origin is China, face the full China treatment as if sourced directly — MFN + China-punitive Section 301 + the 12.5% forced-labor Section 301 duty (China's own tier, not Mexico's 10%, since origin governs regardless of transshipment point). Section 122 itself lapsed to 0% on July 24, 2026 and no longer contributes to this calculation. CBP uses country-of-origin marking rules and customs audits to identify transshipment. The penalty for false claims of USMCA origin is substantial. Legitimate non-qualifying goods: a Mexican manufacturer using primarily third-country components that do not meet USMCA RVC thresholds may need to choose between investing in regional supply chain development to qualify for USMCA, or accepting the MFN + forced-labor Section 301 tariff treatment. The tariff on non-qualifying goods (MFN + 10% forced-labor Section 301 for Mexico — typically 10-15% total depending on product; the same 10% forced-labor rate for non-USMCA Canada, under the same citation since Section 122 lapsed July 24, 2026) is a significant incentive to invest in USMCA compliance.