Complying with CUSMA: What Canadian exporters, importers need to know

Complying with CUSMA: What Canadian exporters, importers need to know

In an ever-changing trade environment, the Canada-United States-Mexico Agreement (CUSMA) may provide some stability—and welcome tariff exemptions—for Canadian exporters. By understanding CUSMA requirements, you can ensure compliance, avoid tariffs and help build resiliency in uncertain times.

How CUSMA compliance helps avoid IEEPA tariffs

In March 2025, the U.S. introduced new tariffs under the International Emergency Economic Powers Act (IEEPA), adding a 25% tariff on most Canadian goods and 10% on energy products, including potash. Tariffs were later exempted on goods compliant under CUSMA, creating valuable opportunities for Canadian businesses:

• Tariff savings: Goods that meet CUSMA rules qualify for duty-free, or reduced tariff rates.
• Streamlined documentation: Simplified border procedures reduce delays and paperwork errors.
• Market access stability: More predictable trade terms support greater operational consistency and resilience.

Despite these benefits, in 2024 the U.S. Census Bureau reported that only 38% of Canadian exports by value took advantage of the agreement. For some businesses, the tariff savings were relatively small and often didn’t justify the additional paperwork or sourcing adjustments required.

Before IEEPA, Canada enjoyed “most favoured nation” (MFN) status with the U.S., which ensured low to no tariff rates under World Trade Organization (WTO) rules. This allowed Canadian exporters to trade with the U.S. without needing to align with CUSMA rules. After the new tariffs under IEEPA, however, the MFN status is no longer enough to avoid these additional duties. This makes CUSMA compliance essential for Canadian companies.

Not complying with CUSMA doesn’t just mean missing out on savings; it can also lead to penalties, export delays and damage to your company’s reputation.

How to determine CUSMA rules of origin for your products

Rules of origin are the criteria needed to determine the country source of a product, or service, destined for export. They allow customs officials to decide whether goods are entitled to preferential tariff treatment under the applicable free trade agreement (FTA). These rules also ensure that FTA benefits aren’t extended to goods exported from non-FTA countries. The definition of “origin” can differ substantially between FTAs, depending on the negotiations between the countries involved.

CUSMA outlines general rules of origin in Chapter 4 of the agreement. Depending on the sector, these rules can be straightforward. For example:

• A Canadian company makes two flavours of potato chips: Sea salt and barbecue. The ingredients include potatoes, canola oil and, depending on the flavour, sea salt or barbecue spice. The potatoes and spices are Canadian products, while the oil and sea salt are imported from the U.S. The chips are fried, seasoned and packaged in Canada. Because they’re considered goods wholly obtained, or produced, within North America, they qualify for CUSMA preferential treatment.

More product-specific rules are found in Annex 4-B of Chapter 4. These rules depend on the product’s harmonized system (HS) code), which is an international numbering system used to classify all traded goods. These rules are complex and can vary significantly, depending on the product and how it’s transformed. For example:

• A Canadian bakery makes cookies using both local and imported ingredients. To qualify for preferential tariffs under CUSMA (Criterion B), the imported ingredients need to go through a significant transformation (and change their HS code) during the baking process. This is known as the tariff shift rule.
  • If the bakery imports flour (HS code in Chapter 11) and turns it into cookies (HS code in Chapter 19) the cookies qualify for CUSMA because the ingredients have been significantly transformed and changed HS codes.
  • If the bakery imports cookie mix (also classified in Chapter 19) and turns it into cookies, they wouldn’t qualify for lower tariffs because there isn’t a significant change in classification.

For product-specific rules of origin, it’s best to consult with a customs broker who can provide guidance that’s tailored to your product and the latest regulations.

Made in Canada vs. Product of Canada

In addition to rules of origin, businesses have to understand labelling requirements under Canadian regulations:

• Made in Canada: At least 51% of the total direct costs of producing the good must happen in Canada.
• Product of Canada: Almost all (at least 98%) of the production costs must come from work, or materials, in Canada.

The Competition Bureau of Canada has more information about Made in Canada and Product of Canada claims.

While these labels show Canadian origin, they don’t guarantee that your product qualifies for CUSMA’s tariff exemptions. To ensure your product meets the rules of origin, you can use the tariff shift method above or calculate the regional value content (RVC).

How to calculate regional value content

Under CUSMA, RVC rules require that a product include a certain percentage of materials or labour, from Canada, the U.S., or Mexico. This added value can come from the cost of materials, or skilled labour, sourced from these countries. 

The International Trade Administration (ITA) has more information and detailed examples of how to calculate RVC.

Why you need a certification of origin for CUSMA compliance

A certification of origin verifies that your product was made, processed or significantly transformed in Canada, the U.S., or Mexico. To claim preferential tariff treatment under CUSMA, you must have a valid certification for any imported shipments valued above the low- value shipment (LVS) threshold set by the importing country. For example, in Canada, the LVS threshold is $3,300. 

Format: While there’s no single template, a certification of origin must include specific data elements such as certifier details, detailed product description and applicable rule of origin, e.g. Criterion B. More information can be found in Annex 5-A of the origin procedures chapter of the CUSMA agreement.

Tip: You can include the declaration in your commercial invoices, make it a separate file, or submit it digitally with an e-signature.

Preparation of the certification: The exporter, producer, or importer can complete the certification. This flexibility allows you to choose the best option for your business.

Tip: To reduce errors, consult with trade professionals or customs brokers, who can help you prepare accurate documentation.

Tools and resources for CUSMA compliance

Managing compliance with the rules of origin, especially in sectors, like automotive, can be technical and complex. You can be penalized for making a false or incorrect claim for preferential CUSMA treatment and tariff exemptions on customs import documentation. Here are tools and resources that can help you avoid costly errors:

• The Canada Tariff Finder is a free online tool that provides custom tariff information for countries that have an FTA with Canada.
• The Canada Border Services Agency (CBSA) offers examples of valid certificates and certifications forms and detailed guidance for exporters.
• The Trade Commissioner Service (TCS) provides information on CUSMA compliance. Through Service Canada, TCS has also established a dedicated support line at 1-833-760-1167 to answer common questions about CUSMA compliance, including rules of origin and exporter eligibility.
• The Canadian Society of Customs Brokers has a list of customs brokers who can help you determine if your goods are compliant and assist in filling out a certificate of origin. Many Canadian brokerage companies also offer services for the U.S. and Mexico.
• The International Trade Administration has detailed guides on qualifying products for preferential tariff treatment.

Practical tips for CUSMA compliance

• Maintain accurate records: Keep detailed records of materials, components and production processes. Accurate documentation will help you prove compliance during audits.
• Verify supplier compliance: Regularly check that your suppliers comply with CUSMA to ensure all parts of your supply chain meet the necessary standards.
• Conduct regular internal audits: Review your business’ CUSMA policies and procedures to identify and fix compliance issues before they become problematic.
• Prepare for customs audits: Organize all necessary documentation and records to facilitate customs audits such as origin verification audits.
• Train staff on CUSMA requirements: Ensure employees are knowledgeable about CUSMA requirements to help maintain compliance and avoid costly mistakes.