U.S. legislation concerns foreign trade zones, merchandise processing fee refunds, other items under USMCA

U.S. legislation concerns foreign trade zones

U.S. Customs and Border Protection (CBP) issued a notice concerning updates made by recently enacted legislation in the United States to the trade agreement between the United States, Mexico, and Canada (the trade agreement referred to by CBP as “USMCA”).

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Read CSMS #45309245 (December 29, 2020)

  • Consolidated Appropriations Act, 2021: The recently enacted legislation includes updates to the USMCA’s treatment of goods entered through foreign trade zones (FTZ) and merchandise processing fee refunds on post-importation claims (i.e., 520(d) and reconciliation claims). The changes are retroactively effective from July 1, 2020.
    • Foreign trade zones:  Under NAFTA, non-originating goods used in production processes in FTZs could not qualify as originating as a result of that processing. Specifically, the special rule applicable to FTZs prohibited non-originating goods used in production processes within FTZs from ever qualifying as originating goods even if all conditions under the general rules were otherwise satisfied. Initially, this prohibition was not incorporated into the USMCA implementing legislation (Pub. L. No. 116-113 (January 29, 2020)). The Consolidated Appropriations Act, 2021 now applies this FTZ rule with regard to USMCA preferential treatments claims.    
    • Merchandise processing fees: The Consolidated Appropriations Act, 2021 authorizes CBP to refund merchandise processing fees for post-importation claims (i.e., 520(d) and reconciliation claims) for USMCA preferential treatment.
  • End of restrained enforcement: CBP elected to exercise a period of restrained enforcement, from July 1, 2020, through December 31, 2020, on USMCA preferential treatment claims in order to provide sufficient time to adjust to the new requirements of the USMCA agreement, and in consideration of the business process changes necessary to achieve full compliance. Notice of the restrained enforcement period was included in CBP’s USMCA implementation instructions (June 30, 2020). This period of restrained enforcement will conclude on December 31, 2020.
  • Automobiles—additional time for verifications: While the USMCA’s restrained enforcement period will end on December 31, 2020, CBP also announced in its USMCA implementing instructions that with regard to automotive goods for the period from July 1, 2020, to June 30, 2021, CBP may allow additional time to respond to a verification. Automotive goods are defined as all goods under Harmonized Tariff Schedule of the United States (HTSUS) headings 87.01 through 87.08, and certain other miscellaneous headings. The USMCA does not distinguish between new and used automotive goods. All importers seeking USMCA preferential treatment for automotive goods must meet the USMCA's automotive rules of origin provisions.


For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich
Partner and Global Practice Leader
T: 312-665-1022
E: dzuvich@kpmg.com

John L. McLoughlin
Principal and East Coast Leader
T: 267-256-2614
E: jlmcloughlin@kpmg.com

Andy Siciliano
Partner and National Practice Leader
T: 631-425-6057
E: asiciliano@kpmg.com

Steve Brotherton
Principal and Global Export and Sanctions Leader
T: 415-963-7861
E: sbrotherton@kpmg.com

Luis (Lou) Abad
Principal, Washington National Tax
T: 212-954-3094
E: labad@kpmg.com

Irina Vaysfeld
Principal
T: 212-872-2973
E: ivaysfeld@kpmg.com

Amie Ahanchian
Principal
T: 202-533-3247
E: aahanchian@kpmg.com

Christopher Young
Principal
T: 312-665-3229
E: christopheryoung@kpmg.com

Gisele Belotto
Managing Director
T: 305-913-2779
E: gbelotto@kpmg.com

George Zaharatos
Principal
T: 404-222-3292
E: gzaharatos@kpmg.com

Andy Doornaert
Managing Director
T: 313-230-3080
E: adoornaert@kpmg.com

Jessica Libby
Managing Director
T: 612-305-5533
E: jlibby@kpmg.com

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