USMCA: Negotiation Preparations

The United States-Mexico-Canada Agreement (USMCA) is a trilateral free trade agreement that went into effect on July 1, 2020, as a replacement for its predecessor, the North American Free Trade Agreement (NAFTA). (See https://www.congress.gov/crs-product/R48787). The three involved governments are preparing to initiate the first formal joint review in July 2026 as part of the sixth anniversary of the agreement entering into effect. Under Article 34.7 of USMCA, the nations must assess how the pact is functioning and decided if they would like to continue the Agreement for a new 16-year term. If any party decides not to extend the term of the agreement, the commission must conduct a joint review every year for the remainder of the 16-year agreement until a consensus is reached for renewal, or USMCA is terminated. (See https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/34_Final_Provisions.pdf). 

Since the beginning of the second Trump administration, the U.S. has entered bilateral trade negotiations with both Mexico and Canada to address new IEEPA tariffs and new section 232 tariffs. These negotiations have been ongoing and set the stage for the upcoming USMCA review; this joint review in not a full renegotiation but offers an opportunity for potential changes to key provisions based on political, industry, and economic priorities. The agreement itself requires a joint review for possible extension or adjustment of terms, and governments are actively soliciting comments from industry inputs as part of the review process. 

The U.S. Trade Representative (USTR) issued a notice in September 2025, seeking public comments regarding the operation and implementation of USMCA, any issues with compliance, recommendations for specific action, factors affecting investment climates, and strategies to strengthen the trilateral agreement. (See https://www.federalregister.gov/d/2025-18010). An indicator that some industries may be more affected by this upcoming review is the USTR’s issuance of an additional request for public comments on the USMCA’s effects on the automotive industry specifically. (See https://www.federalregister.gov/d/2025-22105). It is expected that the USTR will publish the office’s response to the note and comment period by the end of this month. The USMCA’s joint review presents a pivotal risk-management event for companies with North American supply chains.  

Some concerns addressed by Ambassador Greer in a speech to the House Ways and Means and Senate Finance Committee included recommendation areas the USTR intends to highlight for the President throughout this review process. Examples of concerns raised though public comments included:

• Concerns related to dairy market access in Canada and Canada’s export of dairy products,
• Whether review should place restrictions on US imports of seasonal produce,
• Whether US should reinstate mandatory country-of-origin labeling for beef, and
• A desire to maintain duty-free environment under USMCA along with strong provisions to ensure sanitary and phytosanitary measures are based in science. 

(See Ambassador Jamieson Greer Opening Statement).

Rules of Origin

Changes to rules of origin standards are essential for supply chain management. Rules of origin were mentioned as an area of high concern with industry participants as they want to ensure that USMCA nations are the primary beneficiaries of the agreement’s preferential tariff treatment. Some concerns exist about current rules of origin for downstream products that contain specialty metals in addition to requests for stricter automotive rules of origin to encourage sourcing critical minerals in North America. Participants also highlighted the economic security issues created by these perceived lax rules of origin. 

Those who participated in the public comment process expressed concerns about foreign firms using Mexico to evade US tariffs, circumvent trade enforcement measures, and exploit gains in agreements rules of origin.  Any changes or stricter enforcement in this area, such as higher content requirements, new verification standards, or increased scrutiny of non-North American components, could raise compliance risks and costs for manufacturers. Controversy is expected in this area as a response to the second Trump administration’s continued use of tariffs as an integral tool for international policy.

Labor and Environmental Enforcement

Labor obligations are another area that received many comments. USMCA implemented stricter labor provisions compared to NAFTA, which received praise from some industries, highlighting the Rapid Response Mechanism (RRM) in the USCMA and suggested additional funding to support labor rights in Mexico. However, not all commentors agreed with this perspective. For example, the US Chamber of Commerce recommended establishing a new express procedure to notify companies subject to an RRM petition. Another suggestion was to create a tool similar to RRM for environmental concerns. 

During the review, governments may reinforce labor and environmental enforcement mechanisms, raising expectations for documentation, compliance, and supply chain transparency. This increases regulatory risk for companies, particularly those sourcing manufacturing and assembly across borders.

Customs and Trade Facilitation

Ongoing updates to customs procedures under USMCA already affect cross-border operations. New changes to advance rulings, origin verification, and electronic documentation requirements will increase burdens on companies participating in the international trade, even when tariff provisions remain unchanged. A certainty reiterated by Ambassador Greer is that the United States will insist on changes to the agreement via continued negotiations with Canada and Mexico. The USTR will advise the President to keep the country’s options open to negotiations that resolve identified issues but will only recommend renewal if resolutions can be achieved. Some issues need to be addressed on a bilateral basis but require trilateral solutions that can be easily facilitated during this review period. 

How to Prepare

The biggest risk for businesses is uncertainty and compliance disruption. Companies can prepare for the USMCA review as a structured risk-management and supply-chain planning exercise. One thing company’s can consider is mapping their USMCA exposure with detailed assessments of relevant products. They should know which products rely on USMCA preferences and where the product sourcing stands in comparison to thresholds. Another important calculation is the share of revenue from items excluded from tariffs with USMCA, and critical suppliers and facilities that form the basis for the product’s claim under USCMA. Understanding exposure will help prioritize supply chain strategies and compliance investments.

To assist with this process, companies should review their supplier contracts and verify the data from the supplier certifications and documentation. Having readily available country-of-origin documentation in addition to audit support systems can assist with preparing an evaluation of the businesses’ exposure to USMCA changes. Focusing on complete and accurate sources of origin data is integral to preparations for changes in compliance standards.

Companies can also prepare by running scenario analyses to see what would happen if requirements were to change. Stress testing the rules of origin an organization relies on by seeing what would happen if regional content requirements increased, whether alternate North American suppliers can meet the company’s needs, and the impact of potential interpretive changes to customs authorities – can reveal vulnerabilities. The automotive industry’s concern about meeting possible new content requirements underscores how sensitive supply chains are to these rules. Based on these analyses, companies can develop contingency scenarios that include corresponding sourcing and financial, and operational strategies. Each scenario should be linked to  clear sourcing, financial, and operational responses to support supply chain resilience.

Overall, the 2026 USMCA joint review is more than just a governmental check-in; it represents part of a broader redefinition of trade policy in North America. Trade agreements are increasingly shaped by political considerations and industrial strategy, not just tariff schedules. Compliance costs are rising as enforcement expectations increase, and traceability is poised to become central to competitive supply chains. Industry leaders across the three involved nations are contributing to the assessment of the pact’s success. Decisions made during the joint review will influence how companies plan production, source inputs and comply with evolving standards across North America. Businesses prepared for possible changes to compliance frameworks will be better positioned to manage risk in this increasingly complex regulatory landscape.