The United States–Mexico–Canada Agreement (USMCA) also known as NAFTA 2.0 entered in effect on July 1st, 2020.
On January 1st, 1994, the North American Free Trade Agreement (NAFTA) took effect.
The Agreement was signed by Prime Minister Brian Mulroney (Canada), President George Bush (United States of America) and President Carlos Salinas de Gortari (Mexico).
NAFTA was the result of five years of negotiation between Canada, the United States of America, and Mexico with the aim of substantial elimination or reduction of tariffs for goods between the parties, and service agreements.
At that time, the World Trade Organization (WTO) endorsed the execution of this Agreement since same generated one the largest free trade zones in the world with the agreement to the granting of mutual tariff preferences and the reduction of non-tariff barriers to trade in goods and services.
The new Treaty also known as NAFTA 2.0  supersedes NAFTA and entered in effect on July 1st, 2020. This is, 25+ years after NAFTA´s enactment.
The NAFTA 2.0 was signed by Prime Minister Justin Trudeau (Canada), President Donald Trump (United States of America) and Enrique Peña Nieto (Mexico) and then ratified in terms of the legal framework of each party.
NAFTA 2.0 has 34 Sections which refer to, among others:
- Rules of origin,
- Trade remedies,
- Financial services,
- Digital trade,
- Intellectual property,
- Small and medium sized businesses,
- Anticorruption, and
- Dispute settlement.
NAFTA 2.0 focuses on different issues that range between cross border flow of data, improvement to the intellectual property provisions, environmental provisions to automobile exports, steel, aluminum, etc.
NAFTA 2.0 was inspired on the need of drafting a free trade agreement to comply with the requirements of the 21 Century.
It is worth mentioning that there have been other Treaties that have referred in the past to digital economy, such as the Trans-Pacific Partnership (not in force)  and in some way the Comprehensive and Progressive Agreement for Trans-Pacific Partnership .
While the NAFTA 1.0 included provisions pertaining to the protection of intellectual property, it did not contain address digital trade. With NAFTA 2.0, digital trade is addressed in depth, and separately from crossborder trade in services, telecommunications and intellectual property issues. Chapter 19 “Digital Trade” of the NAFTA 2.0 is a set of provisions that regulates the trading of digital products, such as computer programs, image, text, video, sound recording or other products that are digitally encoded and that can be transmitted electronically and can be considered as a landmark for other treaties to be renegotiated.
Chapter 19 emphasizes primarily limitations on discriminatory measures, cross-border transfers, data localization, use of digital signatures, privacy, and cybersecurity. However, this chapter does not apply to government procurement.
First, NAFTA 2.0 prohibits customs duties and other discriminatory measures from being applied to digital products distributed electronically, such as e-books, videos, music, software or games. Specifically, Article 19.3 provides that none of the Member States may impose customs duties or levies on the importation or exportation of electronically transmitted digital products between a person located in one of the parties to the Treaty, and another person located in another of the Treaty member countries. However, each party may impose internal taxes, fees or other charges on electronically transmitted digital products .
As concerns Non Discriminatory Treatment, Article 19.4 states: “No Party shall accord less favorable treatment to a digital product created, produced, published, contracted for, commissioned, or first made available on commercial terms in the territory of another Party, or to a digital product of which the author, performer, producer, developer, or owner is a person of another Party, than it accords to other like digital products. This provision does not apply to a subsidy or grant provided by a Party, including a government-supported loan, guarantee, or insurance”.
In line with the above, and to facilitate digital transactions, Article 19.5 requires each party to maintain a legal framework governing electronic commercial transactions that is consistent with the principles of the “United Nations Commission on International Trade Law (UNCITRAL) Model Law on e-commerce.
In addition, each party commits to avoid enacting unnecessary regulatory burdens for electronic transactions, and to accept electronically submitted trade management documents, such as the legal equivalent of the paper version of those documents. Consequently, no party may deny the legal validity of a signature solely on the basis that that signature is in electronic format.
With regards to Electronic Authentication and Electronic Signatures, Article 19.6 reiterates that a Party shall not deny the legal validity of a signature solely on the basis that the signature is in electronic form – in accordance with the local laws already enacted in most North America jurisdictions.
In line with the above, Article 19.7 makes reference to adopting and maintaining effective and transparent measures to protect consumers from deceptive and fraudulent business practices, and to adopt a legal framework that provides for the protection of personal information of digital commerce users. Further, Article 19.13 includes several provisions intended to limit and regulate unsolicited commercial electronic communications (spam).
As concerns privacy and transborder flow of personal data, Article 19.8 requires the parties to comply with the APEC Privacy Framework and the OECD Recommendation of the Council concerning Guidelines governing the Protection of Privacy and Transborder Flows of Personal Data (2013).
Regarding the location of computing facilities, Article 19.12 provides that neither party may require a party’s investor or service provider to use or locate computing facilities in the territory of that party, as a condition for conducting business in that territory.
On the other hand, Article 19.15 promotes collaboration in addressing cybersecurity challenges while seeking to promote industry best practices to keep networks and services secure. Article 19.15 sets forth that the parties will seek to develop the capacities of their national entities responsible for responding to cybersecurity incidents, as well as strengthen existing collaboration mechanisms to cooperate in identifying and mitigating such incidents. Further, under Article 19.15(2), each Treaty party commits to encourage enterprises within its jurisdiction to use risk-based approaches that rely on standards and best practices to identify and protect against cybersecurity risks and detect, respond to and recover from cybersecurity events.
Regarding source code, NAFTA 2.0 limits governments’ ability to require the disclosure of proprietary source code and algorithms, in an effort to better protect the competitiveness of digital suppliers. Article 19.16 states that Treaty member countries may not require persons located in another of the parties to transfer, or provide access to the source code of its software, or the algorithm expressed in that source code, as a condition for the importation, distribution, or marketing in their territory, of such computer programs or products containing them.
Finally, NAFTA 2.0 promotes open access to government data, to enhance innovative use in commercial applications and services. Article 19.18 provides that when a party decides to make government information available to the public, that country will endeavor to ensure that the information is in an open and machine-readable format, and can be searched, retrieved, used, reused and redistributed and consequently, the parties will seek to cooperate in identifying ways in which each country can expand access and use of government information.
- Esq. Francoise Gilbert (Lexing USA)
- Esq. Enrique Ochoa (Lexing Mexico)
- Esq. Carlos Marquez (Lexing Mexico)
- Me Jean-François De Rico (Lexing Canada)
- Me Guillaume Larouche (Lexing Canada)
* This article is an abstract of Chapter 19 of NAFTA 2.0 and same can not be considered as a legal advice. Any special inquiry or request must be dealt with a legal professional.
 NAFTA 2.0 is known with the acronym CUSMA in Canada, USMCA in the United States of America and TMEC in Mexico.
 Mexico´s Value Added Tax Law was amended recently in order for foreign companies that deliver goods and services electronically to pay VAT in Mexico.