The USMCA and What It Means For US-Canada Cross Border Shipping
What is the USMCA?
In 2018, President Trump and his team negotiated a replacement for the North American Free Trade Agreement (NAFTA) called the United States-Mexico-Canada Agreement (USMCA). Ratified by the Canadian government in March 2020, right before it shut down due to COVID-19 concerns, the USMCA contains major policy changes from its predecessor, NAFTA.
The agreement is touted as a mutually-beneficial trade agreement for the three nations and their businesses. As the trade deal is implemented, it should create a more balanced, equitable trade relationship between the US, Canada, and Mexico while boosting the economy.
Here are a few highlights of the USMCA trade agreement:
● In order to encourage domestic trade, automobiles must 75 percent of their components manufactured in the US, Mexico, or Canada.
● The US now has access to Canada’s profitable dairy market.
● It updates copyright laws and includes provisions for digital trade and intellectual property.
● The de minimis for trade going into Canada has been doubled, which means shippers have to pay fewer duties on internationally traded goods.
How the USMCA Affects US-Canada Trade
De Minimis
One of the biggest changes from NAFTA to the USMCA is the raised de minimis threshold between the US and Canada. Canada raised their de minimis for the first time in decades from CA$20 to CA$40.
This change will benefit companies--particularly small and medium-sized ones--who ship to and from Canada and the US. It will reduce the taxes sellers need to pay for such cross-border deliveries and expedite the entire process. This will also benefit consumers, as savings may be passed on to them.
In particular, the USMCA should stimulate cross-border e-commerce transactions from the US to Canada. It’s important to note, however, that these changes don’t apply to the US Postal Service or the Canadian Post.
US-Canada Cross-Border Shipping Going Forward
Going forward after the USMCA is implemented, expect to see cross-border trade between the US and Canada flourish. After China, Mexico and Canada are the US’s biggest trading partners, and this deal should streamline and simplify the entire shipping process.
Under the USMCA, exporting to Canada is the perfect way to expand your market without opening yourself up to major risk. The Canadian economy is growing, and thanks to the USMCA, the US economy should be as well. According to the International Trade Commission, the new trade agreement will “add $68.2 billion to the U.S. economy and create 176,000 new jobs.”
And as COVID-19 related factory closures and shipping delays from China increase, it’s a smart move to shift your focus from East Asia to North America. Shipping to Canada is less expensive, faster, and more efficient.
Now that negotiations are over and the deal is set in stone, it’s time for companies to take advantage of trade with Canada. At CAP Logistics, we offer specialized cross border shipping knowledge and a customized, hands-on approach for every client. We collaborate with you to find the perfect shipping logistics for your product.
And remember, if you’re working, we’re working--nights, weekends, and holidays. Get your free quote today to see how we can create a customized solution for your shipping logistics.