CUSMA Explained: Your Guide to Duty-Free North American Trade in 2026
CUSMA exempts ~88% of Canadian exports from US tariffs. Learn how it works, what it covers, what it doesn't and why the July 2026 review matters.
In the middle of the most aggressive tariff environment in modern history, one trade agreement is keeping the majority of Canadian exports flowing duty-free into the United States: CUSMA.
The Canada-United States-Mexico Agreement (CUSMA — known as USMCA in the US) is the successor to NAFTA, in effect since July 2020. In 2026, it has become the single most important factor determining whether a Canadian export pays tariffs or ships free. Approximately 88% of Canadian exports now claim CUSMA exemption.
What CUSMA Does
At its core, CUSMA creates a duty-free zone for goods that meet North American "rules of origin" requirements. In practical terms, CUSMA-qualifying Canadian goods are currently exempt from Section 122 — the 10% tariff on most imports globally, in effect since February 2026 after the Supreme Court struck down the earlier IEEPA tariffs.
Rules of Origin — How Goods Qualify
A product doesn't qualify for CUSMA simply because it ships from Canada. It must meet rules of origin that vary by product category. The core mechanisms:
- Regional Value Content (RVC): 75% (transaction value method) or 65% (net cost method) North American content.
- Tariff Shift: Substantial transformation in North America — raw materials classified under a different tariff heading than the finished product.
- Auto-specific rules: 75% RVC with specific requirements for engines, transmissions and steel/aluminum.
Meeting rules of origin requires documentation. You need a CUSMA certificate of origin and records demonstrating compliance. Customs agencies on both sides audit these claims.
What CUSMA Protects — and What It Doesn't
Section 232 tariffs on steel (50%) and aluminum (50%) apply globally, to all sources, with no trade agreement exemptions of any kind. Canadian steel and aluminum exports to the US pay 50% regardless of CUSMA status.
The Bottom Line for Canadian Businesses
If your goods qualify under CUSMA: You're exempt from Section 122 (10%). You may be exempt from Section 232 auto tariffs if your vehicle has sufficient US content. But you're NOT exempt from Section 232 metals tariffs (50%) or lumber tariffs (10%).
If your goods don't qualify: You face Section 122 (10%) plus whatever sector-specific tariffs apply. For steel-intensive products, the combined rate can reach 50–60%.
Priority for every Canadian exporter: Ensure CUSMA compliance for all US-bound shipments.
The July 2026 Trilateral Review
CUSMA includes a scheduled trilateral review on July 1, 2026. Auto rules of origin are the central negotiating point — any changes to content requirements will flow directly into vehicle pricing and production decisions. US-Mexico bilateral talks have advanced faster than Canada-US talks; the USTR stated on March 18 that Canada is lagging behind Mexico.
If the review results in stricter rules of origin, fewer Canadian goods may qualify — meaning more exports face tariffs. The outcome matters enormously.
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 (75% transaction value or 65% net cost).
- 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.
If you paid IEEPA tariffs between March 2025 and February 2026 on qualifying goods, file CBP protests within 180 days of entry liquidation. The Supreme Court ruled IEEPA tariffs unlawful and $166 billion in refunds is being processed across 53 million entries and 333,000 importers.