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July 1, 2026, marked a much-anticipated milestone under the Canada-United States-Mexico Agreement (“CUSMA” or the “Agreement”), as the three parties were required to confirm whether they would renew the Agreement for a further term.
Representatives of the Free Trade Commission for Canada, the United States, and Mexico held the first mandatory six-year joint review of the pursuant to Article 34.7(2) of the Agreement on July 1st.1 Canada and Mexico had formally indicated their intention to renew CUSMA in advance of the review meeting. During the review meeting, the United States formally declined to extend the CUSMA in its current form. As a result, the Agreement was not renewed at this time for a further 16-year term (set to start in 2036).
Importantly, this announcement does not terminate the CUSMA. The Agreement still has 10 years remaining unless the 16-year extension is triggered at a later time. Any party can also withdraw from the Agreement with six-months’ notice under Article 34.6; but the Agreement would remain in force for the remaining parties.
Further CUSMA Background
Under the Agreement’s sunset mechanism, the parties will continue to conduct annual reviews. If the parties do not agree to extend the Agreement before 2036, it will terminate at that time.
Critically, the immediate practical impact on businesses is limited. The July 1 review preserves the status quo.
That said, the US decision signals the start of what is likely to be a prolonged renegotiation process. Annual reviews now provide the US with a recurring platform to press for concessions in areas over which it has expressed concerns, including market access, trade balances, and perceived structural shortcomings in the Agreement.2
Impact on Businesses
The July 1 review has not altered the current North American trading landscape for businesses. The broader trade environment continues to be defined by unilateral US tariff measures imposed under section 232 of the Trade Expansion Act of 1962 and sections 301 and 122 of the Trade Act of 1974,3 and by Canadian countermeasures including surtaxes and an expanding Canadian remission regime.
Despite widespread tariffs imposed by the United States on its trading partners, the US Administration has generally exempted Canada from tariffs. Indeed, the United States has opted to exempt Canadian goods that meet the existing rules of origin under the CUSMA. This exemption is not affected by the passing of the July 1st review date.
On the other hand, the sectoral tariffs imposed by the United States under section 232 (i.e. the national security tariffs on steel, aluminum, autos and wood products, etc.) do not exempt Canadian products, even if those products meet the CUSMA rules of origin.
In response to these tariff pressures, Canada has taken steps to expand the relief available to Canadian importers through its remission framework. While historically granted on an ad hoc basis, remission orders have become an increasingly important tool for mitigating the impact of surtaxes and other retaliatory measures on Canadian businesses.
Recent expansions to the remission regime have introduced broadened relief for imports in key sectors, including steel, aluminum, manufacturing, aerospace, and automotive.4 Canada continues to grant sector-, product-, and company-specific remissions where domestic sourcing alternatives are unavailable or where the applicable duties would otherwise give rise to significant adverse economic impacts.
Notably, amendments to the United States Surtax Remission Order (2025) (“Remission Order”) extended horizontal relief previously set to expire on June 30, 2026 to July 1, 2027 for:
- Aluminum and steel goods and motor vehicles used for public health, health care, public safety and national security purposes;
- Aluminum goods used for manufacturing, processing, food and beverage packaging or agricultural production; and
- Aluminum and steel goods used for the manufacturing of motor vehicles, aerospace products, and their related parts.
The amendments also extended remission to a range of steel mill products determined not to be made in Canada, as well as expanded the Remission Order to add a substantial number of goods to the list of goods now eligible for remission.
Canada similarly also amended the Steel Derivative Goods Surtax Order to extend the exemption for auto and aerospace inputs from July 1, 2026 to July 1, 2027.
Businesses operating in affected sectors should evaluate their eligibility for existing and newly expanded remission orders as part of a broader trade compliance review, particularly as CUSMA modernization discussions and tariff disputes continue to evolve in parallel.
Looking Ahead
The outcome of the July 1 review does not require immediate operational changes for businesses trading under the CUSMA. However, the prospect of annual renegotiation discussions introduces a degree of medium-term policy uncertainty that warrants proactive planning.
In this environment, businesses should review their North American trade compliance posture to ensure they are positioned to respond to potential changes in the Agreement and to take full advantage of currently available duty mitigation measures. Key steps include:
- Confirming tariff classifications and origin determinations, including eligibility for CUSMA preferential treatment;
- Reviewing customs valuation methodologies, particularly for intercompany and cross-border transactions;
- Assessing eligibility for applicable remission orders, including recently expanded surtax relief; and
- Ensuring audit-readiness in light of increased CBSA enforcement activity.
McMillan LLP continues to monitor CUSMA negotiations and the evolving tariff landscape, and is available to assist businesses in managing trade exposure and strengthening compliance frameworks.
Footnotes
1 Canada-United States-Mexico Agreement, Chapter 34 – Final provisions, at 34.7(2): “On the sixth anniversary of the entry into force of this Agreement, the Commission shall meet to conduct a “joint review” of the operation of this Agreement, review any recommendations for action submitted by a Party, and decide on any appropriate actions. Each Party may provide recommendations for the Commission to take action at least one month before the Commission’s joint review meeting takes place.” See Chapter 34.
2 Office of the United States Trade Representative, Ambassador Greer Issues Statement on the USMCA Joint Review, July 1, 2026.
3 Trade Act of 1974, Pub. L. No. 93-618, 88 Stat. 1978 (1975).
4 Order Amending the United States Surtax Remission Order (2025): SOR/2026-154; Order Amending the Steel Derivative Goods Surtax Order: SOR/2026-155; see also: Department of Finance Canada, Canada to extend steel and aluminum tariff measures to support workers and businesses.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
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