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 all US tariff surcharges — including Section 122, Section 232, and any other authority. 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. 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 21.7% (MFN + bilateral 18%) for the same electronics from Vietnam, and 45.3% (MFN + S122 + S301) for Chinese 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 all tariff surcharges in effect in 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 S122, and zero S232 (even for steel and aluminum, if qualifying under USMCA). The same $5 million in components from a European supplier would incur $750,000 in S122 duties. From a Chinese supplier, the same components might face $1.5-2.5 million in combined MFN + S122 + S301 duties. 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 face a 35% rate — the combined Section 122 plus an additional Canada-specific policy tariff on non-qualifying goods. This is significantly higher than the standard 15% S122 rate faced by most other countries. For practical purposes: non-qualifying Canadian goods pay MFN + 35%. Mexico similarly does not have a separate bilateral deal. Non-qualifying Mexican goods face MFN + S122. For goods subject to Section 232 (steel, aluminum, autos), non-qualifying Mexican goods pay the S232 rate instead of S122. The key practical scenario: Chinese goods transshipped through Mexico (a practice CBP specifically targets) do not qualify for USMCA treatment and face full MFN + S122 + S301 tariffs as if sourced directly from China. 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 + S122 tariff treatment. The tariff on non-qualifying goods (15% for Mexico, 35% for Canada) is a significant incentive to invest in USMCA compliance.