CUSMA Explained: What It Still Exempts in 2026, and What It Doesn't
CUSMA-qualifying goods skip the 10% US Section 301 tariff, but not Section 232 or Section 338. How it works, what it covers, what it doesn't and what the July 2026 review changed.
This guide was first written in April 2026, when Section 122 was in force. It now covers the Section 301 tariff that replaced Section 122 on July 24, 2026, the Section 338 tariffs and bans on Canadian goods, and the outcome of the July 1, 2026 review. The rules of origin thresholds have also been corrected.
The Canada-United States-Mexico Agreement (CUSMA, known as USMCA in the US) replaced NAFTA and has been in effect since July 2020. Whether a Canadian export qualifies under it decides whether it pays the 10% US Section 301 tariff. It doesn't decide everything: several US tariffs apply whether or not goods qualify.
Penn Wharton Budget Model estimates that 80.2% of US imports from Canada and Mexico combined claimed USMCA treatment in July 2026. That is the share of imports claiming the agreement, not a measure of tariff relief: Section 338 tariffs apply to listed Canadian goods regardless.
What CUSMA Does
CUSMA creates a duty-free zone for goods that meet North American rules of origin. CUSMA-qualifying Canadian goods are exempt from the 10% Section 301 forced-labor tariff that replaced Section 122 on July 24, 2026 (USTR). Canadian crude oil, natural gas and potash are exempt from it whether or not they claim CUSMA.
Rules of Origin: How Goods Qualify
A product doesn't qualify for CUSMA simply because it ships from Canada. It must meet the rule of origin for its tariff classification. The core mechanisms:
- Regional Value Content (RVC): where a product's rule requires it, generally at least 60% (transaction value method) or 50% (net cost method) North American content; vehicles and core auto parts have higher thresholds.
- Tariff Shift: Substantial transformation in North America: materials from outside the region must be classified under a different tariff heading than the finished product.
- Auto-specific rules: 75% RVC for passenger vehicles and light trucks, with requirements for core parts, labour value content and 70% of steel and aluminum purchased in North America.
Meeting rules of origin requires documentation: a certification of origin and records showing compliance. Customs agencies on both sides audit these claims.
What CUSMA Protects, and What It Doesn't
Section 232's 50% on steel and aluminum mill products applies to every country with no CUSMA exemption. Products made from steel or aluminum pay 25%, and since June 8, 2026 CUSMA-qualifying Canadian ones pay it only on their non-US content (at least 15%). Section 338's 50% tariffs and bans apply regardless of CUSMA.
The Bottom Line for Canadian Businesses
If your goods qualify under CUSMA: You're exempt from Section 301 (10%). CUSMA-qualifying vehicles pay the 25% Section 232 auto tariff only on their non-US content, and qualifying parts pay nothing. But you're NOT exempt from Section 232 tariffs on steel and aluminum mill products (50%) or lumber (10%), or from Section 338 (50% and bans).
If your goods don't qualify: You pay the 10% Section 301 tariff. Section 232 goods are exempt from it but pay their own rate (50% on steel and aluminum mill products). Goods on two of the three Section 338 lists that also pay Section 232 now pay both: up to 75% on some steel and aluminum structural products.
Priority for every Canadian exporter: Confirm CUSMA qualification for all US-bound shipments, and check whether your products are on a Section 338 list.
The July 2026 Review
At the July 1, 2026 joint review the US did not agree to renew CUSMA for another 16 years (USTR), so the agreement moves to annual reviews and can run to 2036. Earlier, on March 18, USTR Jamieson Greer said “Canada is behind on this” compared with Mexico.
Each annual review can bring changes to rules of origin. Stricter rules would mean fewer Canadian goods qualify, and more exports pay the 10% Section 301 tariff.
How to Verify CUSMA Eligibility
- Identify the HS (Harmonized System) tariff code for your product.
- Check product-specific rules of origin in CUSMA Annex 4-B.
- Calculate your regional value content if your product's rule requires it (generally 60% transaction value or 50% net cost; check Annex 4-B).
- Prepare your certification of origin; self-certification is accepted under CUSMA.
- Maintain records for at least five years. Both CBSA and CBP audit CUSMA claims.
IEEPA refunds: the Supreme Court ruled the IEEPA tariffs unlawful on February 20, 2026. Importers of record claim refunds through CBP's CAPE portal: as of September 11, 2026 about $134.7 billion in claims had been accepted and about $122 billion sent to Treasury. Phase 3 opens October 6, 2026 for court plaintiffs only. If your US buyer was the importer, the refund goes to them.