---
title: Leverage CUSMA rules of origin for lower import tariffs
description: Benefit from lower tariffs and duty-free trade by complying with CUSMA rules of origin that determine the goods that qualify for reduced or zero tariffs.
image: https://blog.coleintl.com/hubfs/Website/Blog%20Images/CUSMA_111176565_s.jpg
---

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# Leverage CUSMA rules of origin for lower import tariffs

 Published: June 9,2021

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CUSMA rules of origin outline a path for importers to benefit from the Canada-U.S.-Mexico Agreement (CUSMA) that facilitates free trade. Businesses can leverage these rules can reduce costs, ensure compliance, and streamline importing processes.

## What are CUSMA rules of origin?

CUSMA rules of origin help to determine whether imported goods between Canada, the U.S., and Mexico qualify for reduced taxes or zero tariffs. To qualify for lower tariffs, imported goods must meet a variety of criteria, including proof that the goods originate from the CUSMA free trade region.

Typically, either the finished product or the materials used to produce the product must originate from Canada, the U.S., or Mexico. If the import originates outside the CUSMA free trade zone, they still might qualify for reduced duties. Goods that undergo substantial transformation in one of the CUSMA countries can qualify for reduced tariffs, even if they were sourced outside of North America.

Making sure your goods comply with regulations for CUSMA rules of origin is a significant part of securing reduced tariff rates or even eliminating them altogether.

## What are the benefits of CUSMA rules of origin?

Successfully complying with the rules of origin outlined in CUSMA regulations enables access to a variety of business benefits, such as:

1\. Reduced import duties

Goods that qualify under CUSMA can qualify for lower or zero tariffs, making North American imports much more cost effective compared to trade with nations that apply import taxes and duties.

2\. Simplified trade rules

A simplified set of agreed-upon trade rules and procedures, shared among CUSMA nations, helps to facilitate smoother compliance, transportation, and customs processes.

3\. Regional sourcing

CUSMA intends to encourage sourcing from North American allies. This has the effect of shortening supply chains and improving reliability when industry-critical materials and parts.

4\. Clarity and stability

A clear set of trade guidelines between Canada, the U.S., and Mexico help to establish predictability for importers and a consistent path to benefit from free trade.

5\. Improved competitiveness

Achieving cost savings through duty-free goods can enhance an importer’s ability to thrive in a competitive market, especially compared to companies that can’t access CUSMA benefits.

## What determines compliance for CUSMA rules of origin?

Canadian law outlines the complete set of regulations for CUSMA, including the rules of origin for imports that qualify for lower or zero tariffs. Some of key aspects of complying with CUSMA regulations include:

### Accurate tariff classification

The starting point for determining whether your goods qualify under CUSMA is accurate tariff classification. The wrong classification can not only cost you money in the form of unnecessary duties but can also create compliance risks.

### Originating materials vs non-originating materials

After applying the correct tariff classification, you need to determine whether the goods are created using originating materials or non-originating materials. A bill of materials (BOM) is an essential source of information for a detailed list of raw materials and components used to manufacture your imported products.

Originating materials are sourced from the CUSMA region and comply with free trade requirements. Non-originating materials are sourced from outside the CUSMA region, or they don’t qualify under the criteria of the free trade agreement. Imported goods with non-originating materials can still qualify for reduced tariffs if the product undergoes a significant transformation in a CUSMA nation, before the product moves across the Canada, U.S., or Mexico border.

### Regional value content and tariff shifts

If your product has non-originating materials, CUSMA has other pathways to qualify for reduced tariffs.

Tariff shift – A tariff shift is a process where a non-originating material undergoes a transformation that shifts the tariff classification of the product. Tariff shifts can help importers qualify by lowering the requirement for originating materials, or changing a non-originating material into one that originates from a CUSMA nation. 

Regional value content (RVC) calculations – Importers have two different ways of calculating the required percentage for originating content: the transaction value method and the net cost method. To qualify as an originating good, the RVC must be 60% or more using the transaction value method, and 50% or more if using the net cost method.

The good news is that businesses can choose the RVC method that benefits them the most. The challenge revolves around the complexity of calculating different value methods and ensuring that all criteria are met.

## Reduce duties and import costs with seamless CUSMA compliance 

Complying with CUSMA regulations and keeping detailed import records are essential to access the benefits of this trade agreement. Maintaining accurate, complete, and up-to-date documentation ensures you’re ready to answer customs audits or inquiries without disrupting business as usual.

Partnering with a trusted customs broker can simplify compliance processes and optimize the benefits of CUSMA and other free trade agreements. [Connect](https://info.coleintl.com/customs-brokerage-question-3) with one of Cole's experienced customs leaders today.

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