The USMCA - Resetting tri-lateral trade arrangements in North America

Luis:                Good morning to all and welcome to our USMCA webinar, hosted by BakerHostetler, Gowling and Muggenburg, Gorches y Penalosa. Today we will talk about the resetting of tri-level of trade arrangements in North America, specifically in connection with rules of origin, intellectual property and digital trade. Let me introduce our a panelists first. Michael Snarr is a partner in international trade practice at BakerHostetler in the Washington, D.C. office. His expertise is in the areas of customs and international trade and litigation including antidumping and countervailing duties. Jacqueline Lesser is counsel at BakerHostetler in the IP and digital assets and data management practices. She has practiced in the areas of trademark and copyright law for more than 25 years. Wendy Wagner is a partner Gowling's Ottawa office. Her expertise is in international trade and is recognized by Chambers Global, Legal 500, Lexpert, The Legal Media Group Experts Guide and Best Lawyers. Scott Jolliffe, former CEO of Gowling, is a leading IP lawyer in Canada and internationally. Specializing in the protection and management of intellectual property rights. Ana Esther Urquizo is a senior attorney in Muggenburg, Gorches y Penalosa where she is part of the intellectual property group. Her expertise is in registration, protection and maintenance of all types of intellectual property rights. Valentina Gutierrez Diaz is as an attorney of Muggenburg, Gorches y Penalosa, specialized in corporate, contract law and international trade. Her expertise is in international trade, focused in customs and international trade globally. I am Luis Ramirez Villela, a partner of Muggenburg, Gorches y Penalosa, specialized in corporate, mergers and acquisitions and international trade. My expertise in international trade is focused in customs and international trade law. Our agenda is as follows: from NAFTA to USMCA, there are rules of origin principals, the specific rules of origin, rules of origin and interaction with USA/China tariffs, IP and digital trade, patents and trademarks, copyright and enforcement, trade secrets and digital trade and, finally, the Q&A question section. Please find below on your screen the Q&A box so you can send questions and answers from this presentation. Since we are respectful of your time we will be responding all of your questions separately after this webinar.

From NAFTA to USMCA. The USMCA will be replacing NAFTA effective on July 1^st, 2020. It will bring many changes to the trading relationship between the three countries. Such as qualification for duty free treatment, substantial increase in the intellectual property rights and the digital trade. Let me introduce you now to Wendy Wagner which will explain the general rules of origin principals.

Wendy:            As Luis has mentioned we're going to discuss a bit about USMCA's rules of origin. Essentially the rules of origin are the rules under the agreement that determine if a product has enough North American content to qualify for duty free treatment under NAFTA and now the USMCA. The basic principals that goods don't qualify for duty free treatment only because they're exported from the US, Mexico or Canada to one of the other countries. We're just reviewing the rules of origin principals and, I was just about to say that under the agreement goods don't qualify for duty free treatment only because they're exported from Canada or US or Mexico to one of the other countries, there's really complex rules that apply that determine if the goods qualify. Essentially there's a set of general rules of origin, principals in the agreement and these are generally consistent with NAFTA. Then there's also, in many cases, product specific rules of origin that have to be satisfied and for some industries, and notably the automotive sector, those have changed quite a bit to require a different level of North American content. So we're going to cover that a bit. Finally, Michael is going to talk about how origin related issues have become increasingly important under the USMCA, because the US has imposed tariffs against third countries such as China, and we have to understand how those origin issues interact with origin issues under UCMCA. So we can flip to the next slide. Sorry, one slide back.

                        As I noted, under USMCA just like NAFTA, products will qualify under the agreement if the good satisfies any one of the general rules of origin principals. The first one being that goods satisfy if they're wholly obtained or produced in one of the NAFTA territories, now USMCA, and that's largely the same under USMCA. There's also a rule that the product will qualify if the goods are produced entirely in Canada, Mexico or the USA, from materials that are themselves originating under the terms of the agreement, and again that's largely the same. Looking at that fourth bullet, unassembled goods rules, I'm not going to explain that. It's a pretty complicated principal that applies to unassembled goods and that remains largely the same as well. The real differences arise with respect to the third principal, which is the principal under which many goods qualify for duty free treatment under the agreement, and that requires satisfaction of specific rules of origin and Valentina's going to discuss the changes to the rules for autos and auto parts, and there's other significant changes as well for different categories of products.

So the one thing I wanted to touch on is there are a few important updates to the general principals of rules of origin and one is that the di minimis content threshold is raised from 7%25 to 10%25. Basically what that means is that if you have some form components in a product that don't satisfy the rules of origin, if they are less than 10%25 of the value of the finished product, the goods may still qualify. It gives a little bit more scope under USMCA versus NAFTA in order to have goods qualify. Similarly, there are also some more flexible rules that apply in terms of what producers can use, what processing operations producers can use, to satisfy the regional value content requirement, which is another product specific type of rule of origin. So this is all really quite complex and technical, but the bottom line is that it's possible that a good might qualify under the USMCA, even though it had not qualified under NAFTA because some of these liberalizing rules, and on the other hand because of some of the changes to the product specific rules, it's possible that a good that qualified under NAFTA will not qualify under USMCA. So it's critical for producers and exporters and importers who relied on NAFTA for duty free treatment ensure that they can still rely on USMCA for duty free treatment. We can flip to the next slide.

Just a few words on administrative requirement. Everyone who's familiar with the North American Free Trade Agreement, and had made use of it, will be familiar with the concept of NAFTA Certificates of Origin. That's now a thing of the past. The certification requirements have changed so that no specific format of certificate of origin is required. Essentially, a more looser form of origin claim can be made. It can be made on the invoice or another document. It can be made by the importer, the producer or the exporter and essentially there's nine different data elements, I'm not going to review them all here, that need to be part of that origin certificate but there's a little bit more flexibility in terms of the type of document that's used. So, I'm now going to pass it on to Valentina to tell us a little bit about the changes to the product specific rules of origin.

Valentina:        Thank you, Wendy. Next slide, please. The novelties of the USMCA, for the rules of origin, mainly for the automotive sector, could be classified as follows. Number one, regional content value. Number two, rule of origin for specific products. Number three, acquisition of steel and aluminum, and lastly, labour content value. On the first point, the regional content value refers to the percentage of the final product that must be manufactured in North America. This percentage will be gradual. It is anticipated that by 2020 the RBC should be 65%25, 66 sorry, compared to 62.5 established in NAFTA. This percentage will gradually increase to 75%25 by 2023. On the second point, the rule of origin imposes more restrictions for certain products in order to calculate those set RBC. The auto parts rule is divided into three sections. Number one, essential or core auto parts. These must have a minimum of 75%25 BCR. Then, the main auto parts. These must have a 70%25 BCR. Lastly, the complimentary parts. These must have a 65%25 of BCR. Next, please.

                        On the point about acquisition of steel and aluminum, a specific release is published. Which must guarantee that 70%25 of these products come from the region. These materials are of utmost importance for the production of vehicles in the region. Currently, these materials are highly imported from other parts of the world. So, increasing the production of such material is expected in the region with this rule; opening up new market opportunities for the region.

Lastly, the labour content value establishes that wages of $16.00 an hour have to be offered. This is perhaps the most transformative point for Mexico because it hopes to improve the working conditions in our country. The USMCA requires that its member countries not only enforce their own labour laws but follow international ... To achieve these changes Mexico passed labour reforms on May 1^st, 2019. Giving workers more rights and unions more power. These changes hope to be a long term success for Mexico labour groups. Now, I'll introduce Mike Snarr, that will talk about rules of origin in light of US/China tariffs.

Michael:           Thank you. So, many companies who normally import products from China recently have looked at moving parts of their supply chains into Canada or Mexico because of the United States section 301 tariffs. The section 301 tariffs can apply an additional 25%25 in duties on Chinese origin goods. Some may have wondered whether the USMCA rules of origin provide a formula for changing the origin of their Chinese goods so that when they're imported into the United States the section 301 tariffs do not apply. Unfortunately, however, that is not the case. United States applies a substantial transformation test, rather than the product specific tariff shifting rules, to determine the origin of the imported goods for purposes of section 301. You may be familiar with the substantial transformation standard, but there's been a court case in US Customs rulings that arguably have made it a stricter version of that test, as I will explain in a moment. The substantial transformation test looks at whether a product that emerges from a manufacturing or assembly process has a new name, character or use different from what it had previously. If so, the country of origin for that product was deemed to be the country where that transformative process had taken place. The process had to be substantial, meaning that the work had to be meaningful and complex, mere assembly was insufficient. US Customs would look at a range of factors to determine whether a manufacturing or assembly process was substantial. It might look at whether a majority of the components, by quantity or by value, came from a particular country, the time involved and the number of steps in the process, whether special equipment or specially trained workers were required, the value added by the process, whether components of the finished product or the finished product itself was programmed with software that would be necessary to perform essential functions and where that software originally was developed, and whether certain components, more than others, conferred the essential character of the imported good. Customs would look at these different factors and then decide, based on the totality of the circumstances, the origin of the product. Let's go to the next slide, please.

                        In December 2016 there was a case at the US Court of International Trade that created a wrinkle in this analysis. It started when Energizer Battery requested some country of origin rulings from US Customs for military grade flashlights. The flashlight was assembled in the United States from 50 components almost all of which, including the LED bulb, had been manufactured in China. Because US Customs found that the assembly process was not complex and, that the Chinese LED conferred the essential character of the flashlight, it held that the flashlight was of Chinese origin. Energizer appealed the decision and the US Court of International Trade agreed with Customs that the flashlight was of Chinese origin but on different grounds. The court said that when the components did not undergo a physical change in the assembly process, and the end use of the components was predetermined, there was no substantial transformation. The components still had their same name, character and use. Well this holding was different from US Customs traditional analysis because it focused on whether there was a new name, character or use of each component rather than whether the emerging end product had a new name, character or use. That decision raised all kinds of concerns among importers because so many of the components, even in a substantial complex assembly process, have a predetermined end use. You know what you are making from the components when you are going into that process. Since the courts decision in Energizer, US Customs has applied the decision in some of its rulings, but mostly it has gone back to follow a traditional substantial transformation analysis to determine country of origin. What seems to be different now is that where one of the substantial transformation factors seems to be heavily tilted toward China, that factor tends to be given extra weight, especially with section 301 tariffs at stake. US Customs seems to be finding, with a greater frequency, that those products are not substantially transformed. So in determining whether your manufacturing or assembly process, in Mexico or Canada, is a substantial transformation you have to look at the most recent Customs rulings applying that test in a section 301 context. Earlier substantial transformation rulings might be misleading. Under the USMCA we probably will continue to see rulings similar to those under NAFTA where US Customs may have found a product to be originating in Mexico, for example, but for a substantial transformation under section 301 tariffs, US Customs finds the product to be one from China. A March 2020 ruling, US Customs said that certain cables for a medical device should be marked as a product of Mexico because "the assembly contains a number of parts and steps that are significantly complex." Well, that sounds great. But US Customs went on to find that the product was of Chinese origin for section 301 tariffs, because the Chinese origin conductor imparts the essence of the finished cable assembly, and the addition of the connectors in Mexico does not substantially transform the conductor into a new and different article of commerce. So, do not take USMCA rules of origin for granted with respect to the section 301 tariffs. Work performed in Mexico or Canada must be very complex, changing physical properties or the chemical structure of the Chinese components, substantial amount of Mexican or Canadian components by quantity and value, with a different functioning capability in order to qualify as Mexican or Canada for purposes of section 301, regardless of what USMCA might say. Now some thought that the US Customs separate NAFTA marking rules would go away under USMCA but for now, US Customs June 16, 2020 updated interim implementing instructions say that the rules of origin campaigned in 19 CFR Part 102, which are the NAFTA marking rules, determine the country of origin for marking purposes of a good imported from Canada or Mexico. Except for certain agricultural good, a good does not need to first qualify to be marked as a good of Canada or Mexico, as was the case in NAFTA in order to receive preferential treatment under USMCA. So let's go to the next slide.

                        This slide shows that the de minimis threshold, that is the value below which Customs duties are not required, has been increased for each of the USMCA partners. For the United States, the de minimis threshold is $800.00. For Canada and Mexico the threshold has been raised to $117.00. So USMCA should make it possible for more smaller value transactions to be performed duty free. So that concludes our presentation on USMCA and rules of origin. We'll have some additional questions and answers at the end but for now I'd like to turn it back to Luis to introduce the next panel.

Luis:                Thanks, Wendy, Valentina and Mike for the first section of the webinar. Let me now introduce you to Scott Jolliffe who will introduce the IP and digital trade section. Scott.

Scott:               Thank you, Luis, and good morning everyone. My name is Scott Jolliffe from the Gowling WLG firm in Canada. We're going to now change the discussion to the intellectual property of digital trade provisions of the USMCA. I'll be presenting part of this together with my colleagues, Ana, who will talk about patents, trademarks and industrial designs. Jackie, who's going to talk about copyright and enforcement measures, and I'll conclude this section on the discussion of the new provisions relating to trade secrets and digital trade. So, I think it's fair to say that the USMCA provides the most comprehensive package of IP coverage of any trade agreement since TRIPS, which was implemented over 25 years ago. To a large extent, as we'll discuss, the agreement brings Canada and Mexico in line with US law and practice in the many areas of traditional IP protection. But there's an important new chapter on digital trade which represents a first for international trade agreements. The agreement also creates a new committee on intellectual property rights which will continue to discuss and implement the best ways to deter IP infringement to enhance border enforcement of IP rights, explore the value of protection of trade secrets and discuss restrictions on geographical indications. Equally importantly the USMCA now sets the standard for the US, Mexico and Canada's negotiationable future trade agreements. For example, US entry into the Trans-Pacific partnership and its negotiations with the European Union. So let me now turn it over to Ana to talk about the changes brought about by the agreement in the areas of patents, industrial designs and trademarks. Ana?

Ana:                 Thank you, Scott, and good morning everyone. Next slide, please. Thank you, Stephanie. I'm going to talk to you about some of the major changes affecting patents and trademarks derived from the USMCA. Let me tell you first that our Mexican industrial property law is currently being amended. Comprehensive ... covering all IP aspects included in the USMCA is being discussed right now at the Congress and it should be enacted soon. Having said so, let's start with patents. Let's start with the 5 year patent restoration term. What does this mean? This means that if the patent procedure is unreasonably delayed then the applicant may request the patent office to extend the validity of the patent. If this request isn't being filed, then the patent office will examine all the application procedure and if the process indeed exceeded 5 years from the legal date to the date of grant for unreasonable delays, then it will have to issue a complimentary patent certificate to extend up to 5 years the validity of the patent. This is aligned with a new article of the law, to come in place, regarding the limitation of requirements from the patent office. Currently, the patent office can issue as many requirements as it deems convenient, but now it will only be able to issue two patent requirements. Once the formal examination has been concluded then the patent examination will take place, and only two requirements can be issued, and once the applicant answers the second requirement if indeed issued, then the patent of this will have to determine if the patent indeed should be granted or not. Yes, these of course will reduce the examination process and will avoid having to extend patent terms. Now, in connection with transparency in the patent system, this only means that the files will be open for consultation. So once the formal examination has been concluded, then the Mexican authority will publish an extract of the patent in the Official Gazette, and then the file will be open and any third interest party will be able to review the same. As for the requirement to register a patent licence agreement these will be eliminated. Canada never had this requirement, by the way. So if a patent owner executes an agreement having to do with patents with third parties this agreement will be valid even if not registered with Mexican patent office. On this closed test, or other data for agricultural chemicals and pharmaceutical products, the Mexican law is very clear that this should be protected according to specific laws and treaties, of course the USMCA. Here the Mexican authority will be aligned with the Federal Commission for the protection against ... risk which is the authority's right of issuing ... approvals. According to the USMCA there's going to be a 5 year protection period for pharmaceutical products, test data, submitted for marketing approval and a 10 year period for agricultural chemical products. Canada currently provides an 8 year period and the US, 12 years exclusivity. Also, in the US the marketing exclusivity period for small molecule drugs is status quo.  Next slide, please.

                        Let's talk now about industrial designs. First let me tell you that Mexico recently became a party of the Hague Agreement which governs the international registrations of industrial designs. This means that a party may apply here in Mexico for the registration of its industrial design and also do so in other countries with one ... here in Mexico. About the validity, Mexico, it's up to 25 years from the legal date. I mean it's 5 years, but renewable for successive 5 years terms, so totaling 25 years. The US, the validity is up to 15 years from the date of grant and Canada, 10 years from the date of grant also, but for applications filed on or after November 5, 2019 the term may vary up to 15 years from the filing date. So, that's specific rules there that should be accomplished. Also, US and Mexico already adopted a 1 year pre-application disclosure and Canada will adopt the same.

Now, let's talk about trademarks. There's a broader definition of trademarks about the so called non-traditional marks which include the smell mark, the sound marks, the collective or the certification marks. Mexico adopted most of these changes in 2018. The US already includes all of these marks and Canada adopted these last year, pursuant to a CETA Agreement, which is between Canada and the European Union. Regarding the implementation of treaties, according to the USMCA, all parties should ratify several treaties by the date of entry of the USMCA. Of course we're talking about intellectual property agreements like the Madrid Protocol for trademarks, the Hauge Agreement for industrial design, which is the one I already talked to you, or the Brussels Convention for Copyrights. Mexico is already a party of all said agreements. Also here, like in patents, trademark licence will not have to be registered anymore and the use of the marks performed by a licencee will not be affected if said licencee is not registered with the Mexican trademark office. About the electronic trademark system, this is really good news for us, it has been enhanced and now that we're living this pandemic situation it has been very good because we can not only file trademark publications, electronically file them, but we can also file several other procedures. This has been great.

Finally, I'm going to talk to you about geographical indications. Subject for the Mexican trademark of history view that is signed, and it has specific geographical origin and qualities or reputation due to that origin, statement of protection will be issued and it will be published in the Official Gazette. Also, the Mexican trademark office is the authority charged of registering Mexican geographical indications in the US and Canada. Regarding American and Canadian geographical indications a special registry will be created so that the geographical indications can be registered here in Mexico. Next, Jackie Lesser will talk to you about copyright and enforcement.

Jackie:             Thank you, Ana. For copyright the treaty, USMCA, looks to harmonizing with copyright laws of the three countries and I'm going to really talk about what the major changes are. First of all, the term will be harmonized. There is a provision for a 70 year term for the life of an author. So for natural persons it's the life of the author plus 70 years. For companies and entities that will be at least 75 years from the date of first publication. That's a change in Canada where the copyright term has, to date, been 50 years past the life of the author and Canada is given 2 and a half years to make that transition. In Mexico, the term for a natural person has been life of the author plus 100 years and all the remaining terms are in compliance with the USMCA. How does that really affect anyone? Well, today, copyrighted work could go into the public domain in Canada, whereas it would be still be protected in the US, which particularly for works of authorship such as novels, books, that's created an issue. Another standardization which is very important to technological protection measures and rights management information. For the music industry, music has a rights management information system to be able to protect it for music, movies and books. There's also technological protection measures for computer systems and other systems. That will be standardized so it will be required. There will be enforcement provisions as well. One especially key provision is the establishment of a safe harbour for legitimate internet service providers, for online service providers, to deter against privacy. This is essentially a carrot and stick provision. We want to provide that we are protecting intermediaries and providing a system where they can easily, and with due process, stop counterfeits. If you are familiar with the US process to date, that's the Digital Millennium Copyright Act, which provides for a notice and take down provisions for online service provider to provide a copyright agent who is designated to receive complaints, and for there to be a time for take down and an opportunity for the possible infringer to present a defense of some kind, and for there to be either take down or removing to a different system for enforcement. That provides the online service provider with protection. The DMCA also provides for subpoena powers and other powers as part of that. Canada and Mexico do not have similar systems and they will have to create an online system for notice and take down for online copyright infringement. If we go to the next slide.

                        There are comprehensive IP enforcement measures that go well beyond copyright and go to trademark, trade secret enforcement, that will be essentially harmonized. The treaty contemplates a collaborative border enforcement operation including enhanced customs authorization to stop suspected counterfeits. In the US there's already a process in place. An IPR process through US Customs that permits for the seizure and the destruction of counterfeit products, that after notification from a rights holder, and also includes penalties as well. Those processes are not currently in place in Canada and Mexico. There are also enhanced civil and criminal penalties and injunctive relief for trademark, trade secret, copyright and related rights. By related rights we're talking about piracy. For both Canada and Mexico there will need to be additional legislation for those enhanced penalties. It's my understanding in Mexico that's already before the Mexican Congress. Notably the treaty also provides for not only criminal penalties and procedures for direct actors but for aiders and abettors. When you look at that in terms of an online service provider, and I'll take you back to the DMCA, there has been cases in the US where rights holders had considered an online service provider an aider and abettor. So here you've got, again, a carrot and stick situation where you're providing an online service provider with an opportunity to self-police. However, for others who are not online service providers, there is no such thing as a safe harbour. They could be held liable under the relevant statutes. There's also an enhanced criminal and civil enforcement of trade secrets. Here against government actors. The US has trade secrets, and my colleague, Scott, will talk about trade secrets generally there, but I will mention it in terms of enforcement. The provision against government actors is particularly new. Also with respect to digital, to enforce digital infringement, there will be standardizations for that as well. With that I pass this along to my colleague at Gowling, Scott.

Scott:               Thanks, Jackie. Next slide. Actually before I start talking about trade secrets let me say that a number of you have asked whether or not a copy of this presentation will be made available. The answer is yes. We'll send it out to all of those who have registered for this right after the webinar. Also, just a reminder, please ask whatever questions you have. We'll try to deal with them before we wrap up the webinar, and to the extent that we cannot, we will provide you with answers to your questions following the webinar. So if you have a question please don't ask it anonymously if you'd like us to follow up. Let me talk a little bit about trade secrets. Although many of the provisions of the USMCA are based on the Trans-Pacific Partnership Agreement, at least the last version in 2018, the USMCA provides the most robust protection for trade secrets of any other international trade agreement. It requires the adoption of laws by all three countries against the misappropriation of trade secrets including State owned enterprises. It requires the adoption of civil and criminal procedures and remedies from the theft of trade secrets. Calls for judicial measures to prevent the disclosure of trade secrets during litigation and the removal of any government action that might impede the licence of trade secrets. A lot of this is not new for the US where trade secrets are protected by various State and Federal laws and, providing particular circumstances, criminal remedies. The really new provision is that State owned enterprises must protect from secrets and the treaty appears to do away with potential sovereign immunity defense that might otherwise have been available to State owned enterprises. In Mexico the new industrial property law, that Ana spoke of, provides a comprehensive package for the protection of trade secrets including serious criminal penalties and substantial fines and damages for the violation of trade secrets. Let's turn to the next slide.

                        The new digital trade chapter provides the most comprehensive treatment of digital trade in an international agreement. It builds on the CPTPP but also covers new territory and sets a much broader all encompassing foundation for future trade agreements. The USMCA's intended to protect digital platform services and data like banking, film, music, book distribution and platforms like Amazon, Google and Facebook. Which on one hand are highly valued by customers but also are breaking new ground in terms of the collection, use, control, exploitation and monetization of data. The digital chapter is based on the mutual understanding in most countries that digital trade and goods, services and data are the foundation of modern development prominence and tries to eliminate tariffs and other cross-border taxes on digital products and services, prevent discrimination or otherwise provide equal treatment of IP rights in digital products and services and eliminate restrictions on cross-border and strips of data. It will essentially, in the US, help to modernize the current regulatory regime. The safe harbour provisions in the USMCA, and which Jackie spoke about, are really modelled under the US DMCA under which various stakeholders in the US are of different opinions on the DMCA success and was able to apply the USMCA, of course online service providers consider that it has generally been successful in eliminating their liability, but rights holders believe that it fails to protect them from online infringement. Just turn to the next slide.

                        The intention is that the USMCA will prevent discriminatory duties, breach of products and ensure unimpeded data transfer and storage across borders. The Agreement is also intended to eliminate restrictions on the use of digital authentication and electronic signatures. Interestingly the USMCA requires collaboration in tackling cyber security threats and related issues. Finally, on privacy, the Agreement acknowledges the need for local consumer protection in areas like privacy and unsolicited communications that will continue to apply to the digital market place. Subject to your questions, that wraps up our summary of the changes brought about the USMCA in intellectual property and digital trade areas. Thank you, Jackie, and thank you, Ana. Back to you, Luis.

Luis:                Thanks, Scott, Ana, Jackie for your IP and digital trade presentation. We will now start with the Q&A. I will start with the questions raised anonymously and I would like to start with Mike. These would be two questions, Mike. The question raised is, are there any significant changes to rules of origin for crude oil and natural gas leaks and natural gas? I would include another question there. Are some of the other areas where ... the specific rules of origin have changed?

Michael:           Thank you, Luis. I understand that there has been some additional flexibility in the rules of origin that may apply in those sectors. One of the sectors where we do see a number of changes is in the chemical sector because now, instead of just relying on tariff shift rules for a rule of origin, there are a series of rules, eight different rules that apply to different types of processes for chemicals and for everything in the chemical chapters. For example, there's a chemical reaction rule that where you have a chemical reaction in one of the USMCA countries. You have a change through that process that's considered a qualifying and originating under USMCA. There's also a rule about changes in particle size. There's a rule about purification, mixtures and blends. The industry has been, I think, very supportive of these rules that give some more flexibility to determining the qualification for a change that would give you a rule of origin in the USMCA countries.

Wendy:            Luis, it's Wendy. I just wanted to add I know specifically with respect to crude, there's some liberalizing rules relating to the diluent that's used to facilitate transportation of crude petroleum oils, and my understanding is that the diluent if it's less than 40%25 of the content of the crude the origin is disregarded for the purpose of the rules of origin analysis. So I know there's a liberalizing rule there. I'm not sure about the rest of petrochemicals. The other one I'm aware of, which doesn't relate specifically to rules of origin, but there's a kind of balancing provision that's currently at Article 605 of the NAFTA that requires Canada to export a particular proportion of petrochemicals to the United States, as compared to the rest of world, and my understanding is that's removed in USMCA as well so provides more flexibility, not in terms of export within the territory, but actually in terms of exports outside the territory.

Luis:                Thanks, Wendy. I would like to explain the comment and raise the question, but this is also anonymous, from this perspective from the rules of origin. The other question, under the new USMCA rules there may be additional requirements to disclose the original content value of a product where before, if an item is not legible, 100%25 of the value could be counted in further assembly as RBC. What are the recommendations, if any, to protect some competent providers information from becoming public?

Wendy:            Do you want me to start on that? I think it's probably a question for each jurisdiction.

Luis:                Sure. If you can start, Wendy.

Wendy:            From a Canadian perspective, if it were Canadian authority, this would usually arise in a verification context. If it were the Canadian authorities who were doing the verification there would be all of our customs, data's maintain confidential. It's exempt from access to information acts. So there's a high degree of confidentiality. The one area where there's always difficulties is oftentimes the importer who's subject to verification and they need information from the producer or exporter in order to substantiate. Sometimes that information is business sensitive so as producer you don't want to actually share it with the importer, or others from a business partner perspective, although it's not to be made public. That can be an issue and sometimes we've been able to work that out by having the producer supply that information direct to the authorities versus having the importer be privy to that. It's a bit of a tricky issue and that's not always possible.

Luis:                Thanks, Wendy.

Wendy:            Michael, if you want to comment. I don't know if you want to comment on similarities or differences in the US approach.

Michael:           I think your comments apply equally in the US. It's a matter of working with the custom officials in that situation and making sure they understand the sensitivities about the confidential information as it's being provided.

Valentina:        As for Mexico it's very similar. The direct relation is between the importer/exporter and the authority. So it's tricky, as Wendy said, when the producer doesn't want to disclose that specific information but normally it is very similar to what Wendy mentioned, in Mexico.

Luis:                Thank you all for your responses. Let me go to Scott. Scott, what changes will be required in Canada to comply with the trade secret requirements under the USMCA?

Scott:               Thanks, Luis. As I mentioned when we first deal with the US and Mexico, in the US they're both State and Federal statutes that form Trade Secrets Act, which has been adopted by 48 States, and the 2016 Federal Defend Trade Secrets Act. In Mexico, similar protection will be provided under the new industrial property law. Canada's a little different. Although trade secrets are protected under common law through our Provincial courts, and under criminal fraud provisions, many feel that these restrictions are not sufficient to embrace the spirit and intent of the USMCA. There's currently a pending bill, C-4, before Parliament, the Canadian Parliament to implement the USMCA with amendments to the Criminal Code dealing with trade secrets. But many feel that these changes don't go far enough, and certainly not, according to our simple standard of proof. So I'm sure that even though the act to implement the USMCA will go through there will be many advocating for Federal legislation, outside of the Criminal Code, to protect trade secrets in a civil environment.

Luis:                Thanks, Scott. Now we'll go with two more questions and the clarification request. Then we will wrap up. Question to Jackie. Are there any changes with regard of the years notice and take down provisions of the DMCA?

Scott:               Jackie, you're on mute.

Luis:                Yeah, you're on mute.

Jackie:             I'm sorry about that. Interesting question. The US copyright office issued an over 200 page report on the DMCA at the end of May. Although we look at this in terms of the treaty as sort of a model and as something new, you have to remember that the DMCA is from 1998. So, there've been small changes and there's been a history in terms of how the rights holders view it. As Scott mentioned, you've got the rights holder versus the online service provider and the rights holders in certain cases, are extremely frustrated. They do not believe that their rights are adequately protected. You have the online service providers who believe that the system works for them. You also have other rights holders to believe their use is not adequately protected. So the copyright office has come out with a quite voluminous report and it's expected that there will be some changes, things will be kept in the spirit. The treaty doesn't provide that. There's no flexibility to have the notice and take down provisions will be affected, so we do expect some change in the US but within the spirit of the treaty we will still be obviously maintaining a notice and take down provision, we will be maintaining some sort of process and due process for third parties as well. I don't expect that there will be significant changes to the process but it is under revision as anything that would have been implemented and 1998 would have been.

Luis:                Thanks, Jackie. Ana, one final question regarding the patent process. Could you please explain what is considered a reasonable delay?

Ana:                 Okay. Reasonable delay may be considered the time between the patent, the legal date, and the conclusion of the formal examination. That is a reasonable delay. Also, force majeure acts would also be considered reasonable delays. Actions or omissions of the applicant tending to delay the process and actions or omissions non-attributable to the patent office also, having to deal with controversies regarding the patent. That would be reasonable delay.

Luis:                And obviously this pandemic would be considered as well, under force majeure. Correct?

Ana:                 Correct.

Luis:                Thank you. I just want to make a final verification to Luis Hernandez. That is correct. Your appreciation is correct, Luis. In Mexico it is still necessary to make several amendments to loss in order to have harmony with provisions of the USMCA. We look forward to within the next months have something from the Federal government and we will keep you posted as well on this. We're about time. We appreciate all for participating in this webinar and please do not hesitate to contact us if you have any questions. We will be sending, as mentioned by Scott, the presentation and thank you all. Have a great day. Thanks to all of you.