USMCA Origin Rules: What Qualifies and What Doesn't

The United States-Mexico-Canada Agreement (USMCA) entered into force on 1 July 2020, replacing NAFTA. While the high-level structure is similar to NAFTA, the rules of origin are tighter in key sectors (automotive especially) and the certification process is simpler. By 2026, the staged thresholds for automotive are fully in effect.

For an importer claiming USMCA preference, the qualification analysis happens upstream (at the producer or exporter) and the importer simply claims the preference and retains the supporting certification. But the importer is liable for any incorrect claim under 19 USC 1592, with penalty exposure up to four times the lost duty for negligence and far higher for fraud.

This guide explains the qualification pathways, the major product-specific rules, the automotive requirements, and the certification process.

Three pathways to qualify

USMCA Article 4.2 defines an originating good as one of:

1. Wholly obtained or produced

The good was wholly obtained or produced entirely in the territory of one or more USMCA parties. Examples:

• Plants and plant products grown in the US, Mexico, or Canada.
• Live animals born and raised in the territory.
• Goods obtained from live animals (milk, eggs, wool) in the territory.
• Minerals extracted from the territory.
• Fish caught by qualifying vessels.
• Goods produced exclusively from the above.

This pathway covers most raw agricultural and mineral products.

2. Produced entirely from originating materials

The good is produced entirely in USMCA territory exclusively from materials that are themselves originating.

This is the easiest case for complex products: if every input is itself originating, the output is originating.

3. Tariff shift and/or RVC

The good is produced in USMCA territory using non-originating materials, provided each non-originating material:

• Undergoes the applicable change in tariff classification (CTH at heading level, CTSH at subheading level, etc.) set out in the Annex 4-B product-specific rules, and
• (Where required) meets the regional value content threshold.

This is the dominant pathway for manufactured goods.

Product-specific rules: where to look

USMCA Annex 4-B specifies the product-specific rule for each HTS subheading. The text of each rule says either "CTH" (change of tariff heading), "CTSH" (change of tariff subheading), or a specific tariff-shift description ("a change to subheading 8519.20 from any other heading except heading 8521 through 8527"). Many rules add an RVC requirement.

Example: HTS 8528.72 (LED TV monitor). The PSRO rule (paraphrased): change to heading 8528 from any other heading, or change from any other subheading provided there is RVC of 60 percent transaction value or 50 percent net cost.

To check qualification, you need to:

1. Identify the HTS of the final good.
2. Identify the HTS of each non-originating input.
3. Check if the input HTS is excluded from the tariff shift (some rules say "except heading X").
4. If RVC is part of the rule, calculate it.

RVC calculation

Two methods:

Transaction value method

RVC = ((Transaction Value - Value of Non-Originating Materials) / Transaction Value) x 100

Threshold: typically 60 percent. Transaction value is the price actually paid or payable for the good, adjusted per USMCA Article 4.5.

Net cost method

RVC = ((Net Cost - Value of Non-Originating Materials) / Net Cost) x 100

Threshold: typically 50 percent. Net cost is the total cost minus sales promotion, royalties, shipping and packing, and non-allowable interest costs.

Automotive: net cost method only, with higher thresholds (see below).

The de minimis rule

Non-originating materials valued at less than:

• 10 percent of the transaction value (most goods)
• 7 percent of the transaction value (textiles in chapters 50-63)

do not need to meet the tariff shift requirement. This lets producers absorb small non-originating inputs without disqualifying the good. Important nuance: even small non-originating materials still count in the RVC calculation; de minimis only excuses the tariff shift, not the RVC.

Automotive: the toughest rules

USMCA significantly tightened the automotive rules of origin compared to NAFTA, with staged thresholds completing in 2025-26.

Regional value content for vehicles

For passenger vehicles and light trucks (HTS 8703.10 to 8703.90):

• 75 percent RVC under the net cost method by 1 July 2025 (now in effect).

For other vehicles (heavy trucks):

• 70 percent RVC by 1 July 2025 (in effect).

For core auto parts (engines, transmissions, axles, suspensions, steering systems, advanced batteries):

• 75 percent RVC by 1 July 2025.

For principal parts:

• 65 to 70 percent RVC depending on category.

For complementary parts:

• 65 percent RVC.

Labor value content

Automotive light vehicles must satisfy LVC requirements:

• 40 percent of the vehicle's value must come from labor earning at least 16 USD per hour on average, of which:
  • 25 to 27 percentage points from high-wage materials and manufacturing.
  • 10 percentage points from high-wage technology expenditures.
  • 5 percentage points from high-wage assembly expenditures.

For trucks, the LVC threshold is 45 percent.

Steel and aluminum purchasing

For light vehicles:

• 70 percent of steel purchases (by value) must originate in USMCA territory, and
• 70 percent of aluminum purchases must originate in USMCA territory.

The 2025 amendment introduced melt-and-pour origin tracking for steel: USMCA-origin steel must be melted and poured in North America, not just rolled or further processed.

These layered requirements make automotive qualification operationally complex. Major OEMs run dedicated compliance teams whose only job is calculating and certifying these rules.

Textile and apparel: yarn-forward

USMCA continued the yarn-forward rule from NAFTA for most textile and apparel categories: the yarn and fabric must originate in the USMCA region for the finished garment to qualify.

Exceptions and short-supply provisions allow non-originating yarn or fabric to be used in limited cases where the input is not commercially available in the region.

Certification

USMCA dropped the formal certificate of origin form. The certifier issues a free-form statement (in any format, on the commercial invoice, separate document, electronic) that includes nine specified data elements per USMCA Article 5.2:

1. Certifier identity (importer, exporter, or producer).
2. Certifier name, address, contact.
3. Exporter name and address (if different).
4. Producer name and address (if different).
5. Importer name and address.
6. Description of the goods.
7. HTS classification.
8. Origin criterion (one of A, B, C, D).
9. Blanket period (if covering multiple shipments).

The certifier signs, dates, and provides the certification to the importer. The importer keeps it on file.

Importer claim and recordkeeping

The importer claims preference on the entry summary by including the appropriate USMCA indicator (SPI code "S" or following current CBP guidance). The importer must keep the supporting certification and underlying records for five years.

CBP can verify by:

• Written request for records.
• Direct request to the producer or exporter in Canada or Mexico.
• Verification visit (less common).

A failed verification leads to denial of preference for past entries (with retroactive duty assessments) and potentially penalties.

Audit triggers

CBP focuses verification efforts on:

• High-volume importers claiming USMCA on chapter 84, 85, 87 categories.
• Automotive vehicles and core parts (LVC and steel purchasing claims).
• Textile and apparel with yarn-forward claims.
• Goods imported from Asian-affiliate producers based in Mexico (transshipment risk).
• Goods where the importer's customs broker is also the only entity holding the certification.

Best practice: keep certification, bill of materials, supplier declarations, and calculation worksheets organized and retrievable per shipment.

How the calculator handles USMCA

The LandedFees calculator for USMCA origin/destination combinations:

1. Asks if the goods qualify as USMCA-originating.
2. If yes: applies 0 percent MFN (where USMCA preference is the zero rate) and 0 percent Section 122.
3. If no: applies MFN HTS plus 15 percent Section 122.
4. For automotive HTS, surfaces the LVC and steel purchasing requirements with a worksheet helper.

Related guides

• Calculate Import Duty: Mexico to USA
• Calculate Import Duty: Canada to USA
• FTA Preferences: Saving 5-25% on Duty
• What is Section 122? The 2026 Reciprocal Tariff Explained
• Steel HS Codes Under Section 232
• How to Read a Commercial Invoice for Customs

Run a USMCA-aware calculation in the calculator.