The USMCA replaced NAFTA on July 1, 2020, and the first mistake importers make with it is treating origin as a fact about where the goods were made. It is not. Origin is a legal determination under Chapter 4 of the agreement, applied through General Note 11 of the Harmonized Tariff Schedule, and a good that was assembled in Mexico from Chinese parts may or may not originate in the region depending on what the parts are and what happened to them. The label says where it was finished. The rule says whether it qualifies.
There are three pathways to origination: wholly obtained or produced in the region, produced entirely from originating materials, or produced with non-originating materials that satisfy the product-specific rule of origin in Annex 4-B. The third pathway is the one almost every manufacturer uses, and it runs on two tools: the tariff shift and regional value content.
The tariff shift rule requires that every non-originating material undergo a specified change in tariff classification during production. The required shift varies by product: some rules demand a change at the chapter level, the first two digits, while others require only a subheading change, the first six digits. The classic failure is electronics assembled in Mexico from Chinese circuit boards: both the input and the finished product sit in HTS Chapter 85, so no tariff shift occurs, and the product has to meet a regional value content requirement instead, or it does not qualify at all.
The de minimis rule softens the edge. Non-originating materials that do not meet the tariff shift requirement may still qualify if their total value is no more than 10 percent of the transaction value, or 10 percent of the net cost, and 7 percent for textiles in chapters 50 through 63. It is a small allowance, and importers who lean on it without measuring it are the ones who fail the audit.
Regional value content measures the North American share of a good's value, and the agreement provides two formulas. The transaction value method divides the transaction value minus the value of non-originating materials by the transaction value, and the threshold is usually 60 percent. The net cost method divides the net cost minus the value of non-originating materials by the net cost, and the threshold is usually 50 percent. Net cost is the total cost of the good minus sales promotion, royalties, shipping and packing costs, and non-allowable interest charges, and it is mandatory in certain situations, including related-party transactions and all automotive goods.
Automotive goods have the strictest rules in the agreement. Passenger vehicles and light trucks need 75 percent regional value content under the net cost method, 70 percent of the steel and 70 percent of the aluminum must be melted and poured in North America, and the labor value content requirement ties a share of vehicle cost to workers earning at least 16 dollars per hour: 40 percent for passenger vehicles, 45 percent for light trucks. The agreement also faces its joint review on July 1, 2026, the sixth anniversary of entry into force, which is why the rules deserve a fresh look now rather than after the review. For the entry mechanics that sit under the origin claim, apparel HTS classification by fiber content shows how the code is decided first, and broker versus self-filing covers who certifies the claim.
Keep the certificate and the supporting records for at least five years, because a post-entry audit can ask for them long after the shipment cleared. The certificate is a claim, and the records are the proof that the claim was true when you made it.
It must originate in the region under Chapter 4: wholly obtained, produced entirely from originating materials, or produced with non-originating materials that satisfy the product-specific rule in Annex 4-B, through a tariff shift, regional value content, or both.
A change in tariff classification caused by North American production. The product-specific rule sets the level: a chapter change, a heading change, or a subheading change. If the input and the finished good share a classification, no shift occurs and the product must meet a value content test instead.
Two formulas. Transaction value method: the transaction value minus non-originating materials, divided by transaction value, usually 60 percent. Net cost method: the net cost minus non-originating materials, divided by net cost, usually 50 percent. Automotive goods need 75 percent under net cost.
No. Origin is a legal determination under the agreement's rules, not a marking claim. A good assembled in Mexico from non-originating parts qualifies only if the parts meet the tariff shift or value content test for that product's classification.