In December of 2019, the U.S. Congress approved the USMCA agreement and in January of this year President Trump signed the agreement into effect. Canada followed the U.S. and ratified the agreement in March. Mexico had already ratified the deal in June of 2019. The completed agreement went into effect on July 1st of this year. While this effectively ends the North American Free Trade Agreement (NAFTA), governments and companies in all three countries are adjusting to the new rules and will continue to do so over the coming months. Follow this link for a USMCA fact sheet
Here are a few critical items in this new agreement:
- Labor provisions: 40 to 45 percent of automobile parts must be made by workers who earn at least $16 an hour by 2023. Mexico agreed to pass new labor laws to give greater protections to workers, including migrants and women. Most notably, these laws are supposed to make it easier for Mexican workers to unionize.
- Country of origin rules: Automobiles must have 75 percent of their components manufactured in Mexico, the US, or Canada to qualify for zero tariffs (up from 62.5 percent under NAFTA).
- US farmers get more access to the Canadian dairy market: The US got Canada to open its dairy market to US farmers, a big issue for Trump.
- Intellectual property and digital trade: The deal extends the terms of copyright to 70 years beyond the life of the author (up from 50). It also includes new provisions to deal with the digital economy, such as prohibiting duties on things like music and eBooks, and protections for internet companies so they’re not liable for content their users produce.
- Sunset clause: The agreement adds a 16-year sunset clause — meaning the terms of the agreement expire, or “sunset,” after 16 years. The deal is also subject to a review every six years, at which point the US, Mexico, and Canada can decide to extend the USMCA.
According to the U.S. Department of Commerce, International Trade Administration “USMCA is mutually beneficial for North American workers, farmers, ranchers, and business.”
For everyday shipping, USMCA offers several advantages over NAFTA:
- The de minimis, or duty and tax exemption threshold, increases for imports into Canada and Mexico, potentially reducing overall shipping costs
- Value limits increase, reducing the amount of documentation necessary
- Volumes of full clearance decrease, lowering costs and increasing efficiencies
- Quicker clearance for more shipments will result in higher customer satisfaction
When it comes to transporting your company’s products across North America, it is critical to have a trusted, knowledgeable, and experienced provider who understands the dynamics of an ever-changing market and the benefits of the newly enacted USMCA agreement to your business. Our team has over 100 years of transportation and logistics experience including years of helping our customers move their goods across North America. To speak to one of our transportation professional, click here or call us today at 816-524-7500.