CUSMA Compliance in 2026: What's Changed

The Canada-United States-Mexico Agreement entered into force on July 1, 2020, replacing NAFTA after 26 years. As we move through 2026, the agreement is entering a critical phase: its first joint review under the six-year sunset clause, combined with an enforcement environment that has grown significantly more aggressive on all three sides of the border.

For Canadian businesses that trade with the United States and Mexico, understanding what has changed — and what may be about to change — is not optional. This guide covers the current state of CUSMA compliance, the key shifts that have occurred since the agreement's implementation, and what you need to do to stay on the right side of the rules.

CUSMA Overview: The Foundation

Before diving into what has changed, it is worth grounding ourselves in the agreement's core structure. CUSMA is built around several key pillars:

• Market access: Duty-free or preferential tariff treatment for goods that meet rules of origin requirements.
• Rules of origin: The criteria that determine whether a product qualifies as "originating" under the agreement.
• Customs procedures: Streamlined border processes, advance rulings, and certification of origin requirements.
• Labor and environment: Enforceable standards with a facility-specific rapid response mechanism.
• Digital trade: Provisions governing cross-border data flows, source code protection, and electronic commerce.
• Dispute resolution: State-to-state dispute settlement (Chapter 31), investor-state provisions (limited), and the labor rapid response mechanism.

For most Canadian exporters, the practical heart of CUSMA compliance is rules of origin. If your goods qualify as originating, they enter the U.S. or Mexico duty-free (subject to the complex IEEPA tariff situation discussed below). If they don't qualify, you pay MFN (Most Favoured Nation) tariff rates — or potentially higher under current special tariff actions.

For a detailed explanation of how rules of origin work in practice, see our dedicated guide to understanding rules of origin under CUSMA.

What Has Changed in 2025-2026

Full Phase-In of Automotive Rules of Origin

The most significant compliance change in 2025-2026 is the full phase-in of CUSMA's automotive rules of origin. When the agreement launched in 2020, it included a three-year transition period for the automotive sector. Those transition periods have now fully expired:

• Regional Value Content (RVC) for passenger vehicles: 75% (up from NAFTA's 62.5%)
• Core parts (engines, transmissions, body/chassis): 75% RVC
• Principal parts: 70% RVC
• Complementary parts: 65% RVC
• Steel and aluminum: 70% of purchases must originate in North America
• Labor Value Content (LVC): A minimum percentage of vehicle value must be produced by workers earning at least USD $16/hour

Intensified U.S. Enforcement

U.S. Customs and Border Protection (CBP) has dramatically increased its verification activity for CUSMA origin claims. In 2025, CBP issued roughly three times more origin verification requests to Canadian exporters than in 2023. The areas drawing the most scrutiny include:

• Steel and aluminum products: Amid ongoing Section 232 tariff actions, CBP is closely verifying that goods claiming CUSMA treatment genuinely meet origin requirements — particularly the "melted and poured" standard.
• Agricultural products: Seasonal produce, dairy, and sugar products are subject to tariff-rate quotas under CUSMA, and CBP is enforcing quota limits aggressively.
• Textiles and apparel: The yarn-forward and fiber-forward rules are complex and frequently misapplied, making this a high-verification sector.

The IEEPA Tariff Complication

The most confusing compliance development in 2025-2026 is the interaction between CUSMA preferential treatment and the broad IEEPA tariffs imposed by the United States on Canadian goods. For a complete analysis of the tariff landscape, see our guide to U.S. tariff changes in 2026.

The key points:

• IEEPA tariffs (currently 25% on most goods, with variations by sector) are imposed under a separate legal authority from normal trade policy.
• The U.S. position is that IEEPA tariffs apply on top of or instead of normal duty rates, regardless of CUSMA eligibility — though this remains legally contested.
• Canadian exporters should still claim CUSMA origin where applicable, as the legal landscape may shift and the underlying preferential rates remain in the agreement.
• Maintaining CUSMA compliance documentation is essential for both current duty mitigation strategies and future recovery of duties if the tariffs are rolled back or successfully challenged.

Rules of Origin: A Chapter-by-Chapter Update

CUSMA's rules of origin are set out primarily in Chapter 4 (Rules of Origin) and the product-specific rules in Annex 4-B. The rules vary significantly by product type:

Tariff Shift Rules

The most common origin criterion is a tariff shift — the requirement that non-originating materials undergo a specified change in tariff classification as a result of production in North America. For example, a product classified under HS Chapter 94 (furniture) might require that all non-originating inputs come from a different HS Chapter (a "chapter change") or a different HS Heading (a "heading change").

Regional Value Content (RVC)

For many products, particularly in the automotive, machinery, and chemical sectors, origin can be determined by calculating the regional value content. CUSMA provides two methods:

• Transaction value method: RVC = ((Transaction Value - Non-Originating Materials) / Transaction Value) x 100
• Net cost method: RVC = ((Net Cost - Non-Originating Materials) / Net Cost) x 100

The net cost method is mandatory for automotive goods and available as an alternative for most other products.

De Minimis Provisions

CUSMA allows a de minimis exception: if non-originating materials constitute no more than 10% of the transaction value of the good (7% for textiles and apparel), the good may still qualify as originating even if it does not undergo the required tariff shift. This is a critical relief valve for products with minor non-North American components.

For a deeper dive into rules of origin mechanics, including product-specific examples, see our comprehensive guide on CUSMA rules of origin.

The July 2026 Joint Review

CUSMA includes a 16-year term with a joint review at the six-year mark — July 2026. This review is not a renegotiation, but it is a formal assessment by all three parties of whether the agreement is functioning as intended, with the opportunity to flag issues for potential amendment.

What Is on the Table

Based on public statements and stakeholder consultations through early 2026, the following areas are expected to be primary topics:

Textile and Apparel Rules

The textile and apparel sector under CUSMA operates under a "yarn-forward" rule — meaning that, to qualify for preferential treatment, the yarn used in textile production must originate in North America. For certain products, a "fiber-forward" rule applies, requiring North American origin from the fiber stage.

Key compliance points for 2026:

• The Tariff Preference Levels (TPLs) that allow limited quantities of non-qualifying textiles to enter at preferential rates are being monitored closely for overuse.
• The supply shortage mechanism allows sourcing from outside North America when specific yarns or fibers are unavailable in the region — but documentation requirements are stringent.
• CBP is increasingly using laboratory analysis to verify fiber content and origin claims for textile imports.

Agricultural and Food Products

CUSMA's agricultural provisions are among the most politically sensitive and compliance-intensive:

• Dairy: Canada committed to providing U.S. dairy producers access to 3.59% of the Canadian dairy market by Year 6. The administration of these TRQs has been the subject of two WTO-style dispute panels under CUSMA, both decided against Canada.
• Poultry and eggs: Subject to TRQs with specific allocation mechanisms.
• Sugar: Subject to both TRQs and sugar-specific rules of origin that require North American production from raw cane or beet sugar.
• Wine and spirits: Subject to origin rules that require North American production from North American agricultural inputs with limited exceptions.

Your CUSMA Compliance Checklist for 2026

Regardless of your sector, every Canadian business claiming CUSMA benefits should be working through this compliance checklist:

Working with Customs Brokers and Trade Advisors

Given the complexity of the current environment, most Canadian exporters benefit from professional compliance support. When selecting a customs broker or trade compliance advisor, look for:

• CUSMA-specific experience: The agreement is complex enough that general trade knowledge is insufficient. Your advisor should have deep, current CUSMA expertise.
• Sector knowledge: Rules of origin vary dramatically by sector. An advisor who specializes in automotive compliance may not be the right fit for agri-food — and vice versa.
• Audit defense capability: If CBP or CBSA initiates a verification, your advisor should be able to manage the process, prepare responses, and represent your interests.
• Proactive monitoring: The best advisors don't just file paperwork — they monitor regulatory changes, flag risks, and recommend adjustments before problems arise.