The Crucial Role of Compliance in Nearshoring: Ensuring USMCA Qualification

As companies increasingly consider nearshoring to mitigate risks, streamline operations, and leverage trade agreements, compliance becomes a vital component of the strategy. Moving manufacturing to a neighboring country like Mexico may seem like a straightforward path to qualify goods for the United States-Mexico-Canada Agreement (USMCA). However, the reality is more complex. Engineering and sourcing decisions significantly impact whether a product qualifies for preferential treatment under USMCA. It's not just about location; it's about meeting specific criteria.

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‍The Nuances of USMCA Qualification

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The USMCA offers substantial benefits, including reduced tariffs and streamlined customs procedures, but to take advantage of these benefits, products must meet stringent rules of origin requirements. These rules dictate that a certain percentage of a product's value must originate from within the USMCA region. Simply shifting manufacturing operations to Mexico doesn't automatically ensure compliance. The materials, components, and processes used in production all play a crucial role in determining eligibility.

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For instance, a product with a high percentage of non-originating materials may not qualify for preferential treatment, even if assembled in Mexico. This is where engineering and sourcing decisions come in to play. Every component's origin, the manufacturing processes used, and the product's final composition must be carefully considered and documented. Engineering teams need to design products with compliance in mind, ensuring that enough value-added processes occur within the region. Sourcing teams must carefully select suppliers and materials that align with USMCA requirements.

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The Role of a USMCA Qualification Tool

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In an ideal nearshoring strategy, engineering and sourcing teams have access to a robust USMCA qualification tool, like Kendrick Trade's online platform. Such a tool allows teams to input different component and sourcing scenarios to evaluate their impact on USMCA qualification. By running various configurations through the model, companies can identify the most cost-effective and compliant options, ensuring they maximize the benefits of the agreement.

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For example, a sourcing team can use the tool to determine if changing a specific component's supplier would alter the product's qualification status. Engineering teams can explore different material options, weighing the cost against the potential tariff savings under USMCA. This proactive approach helps companies avoid costly mistakes, such as selecting anon-compliant component that could disqualify the entire product.

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Integrating Compliance Early and Often

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To fully leverage the benefits of nearshoring and USMCA, compliance should be integrated into the decision-making process from the outset. Engaging compliance experts early ensures that all aspects of the product design and supply chain are evaluated for USMCA eligibility. This collaborative approach prevents last-minute surprises and ensures that products are designed and sourced with compliance in mind.

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Additionally, continuous monitoring and reevaluation are essential as trade policies and regulations can change. A USMCA qualification tool can provide real-time updates and insights, helping companies stay compliant amidst evolving trade landscapes.

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Conclusion

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Nearshoring presents a valuable opportunity for companies tooptimize their supply chains and benefit from trade agreements like USMCA.However, achieving compliance requires careful planning and consideration ofengineering and sourcing decisions. By engaging compliance experts andutilizing tools like Kendrick Trade's USMCA qualification platform, companiescan confidently navigate the complexities of trade regulations and maximizetheir benefits. Remember, it's not just about moving manufacturing; it's aboutensuring every component and process aligns with the rules, making compliance a critical element of your nearshoring strategy.

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