USMCA Exemption Under Section 122
The February 20, 2026 Presidential Proclamation imposing a temporary import surcharge under Section 122 of the Trade Act of 1974 exempts goods from Canada (HTSUS 9903.03.07) and Mexico (HTSUS 9903.03.08) that enter duty-free under the USMCA. Goods from Canada or Mexico that do not qualify for USMCA preferential treatment remain subject to the surcharge.
Under Article 34.7, the U.S., Canada, and Mexico must conduct a joint review of the USMCA by July 1, 2026. If all three parties agree to renew, the agreement continues for another 16 years with the next review in 2032. If any party declines, the USMCA enters a 10-year sunset period and expires on July 1, 2036.
Review Process to Date
September 17, 2025: USTR opened a public comment period on the Joint Review via Federal Register Notice.
November 2025: USTR received over 1,500 written comments and 170 hearing requests.
December 3–5, 2025: USTR held public hearings, expanded from one day to three to accommodate demand.
January 2, 2026: USTR report to Congress due, including its assessment of USMCA performance and recommendations for the review.
Topics Under Review
Automotive rules of origin: The U.S. International Trade Commission has opened a formal review. Topics include regional content thresholds, labor value content requirements, and EV/battery supply chain treatment.
Labor enforcement: Application and scope of the Rapid Response Labor Mechanism (RRM) in Mexico.
China-related investment: Chinese manufacturing and investment presence in Mexico, particularly in EV, battery, and critical mineral supply chains.
Digital trade: Canada’s digital services tax and related provisions.
Energy and regulatory matters: Energy policy commitments and Mexico’s recent judicial and regulatory reforms.
Verify USMCA eligibility for all goods crossing the Canada and Mexico borders to confirm the Section 122 exemption applies.
Maintain origin documentation to substantiate USMCA qualification, particularly for automotive, steel, aluminum, and agriculture products.
Monitor the Joint Review for potential changes to rules of origin, labor requirements, and sector-specific provisions that may affect duty obligations and supply chain planning.
How Alba Can Support
Alba can help identify USMCA eligibility through our Trade team. For any questions, contact us: TradeServiceRequests@albawheelsup.com.
