Shipping across borders can be confusing, tedious and time consuming, especially when you’re running your own business. And with new government policies now in place and often changing, it’s more important than ever to understand how these changes could affect your business and your shipping strategy. We dive into the details about what shippers need to know about the new NAFTA (now known as the USMCA) here.
What Is NAFTA?
The North American Free Trade Agreement or NAFTA was created and implemented in 1994 to help eventually eliminate most tariffs and barriers of trade on services and products between Canada, the United States and Mexico. Some of the most notable items where tariffs faded out included automobiles, clothes and textiles, as well as agricultural products. Basically, the goal of the agreement was to foster free trade relationships among these North American countries.
What Is the New NAFTA?
The new NAFTA is called The United States-Mexico-Canada Agreement or USMCA, and it is replacing the old NAFTA. As stated in one of the USMCA Fact Sheets, “Canada and Mexico are our first and third largest exports markets for United States food and agricultural products, making up 28 percent of total food and agricultural exports in 2017. These exports support more than 325,000 American jobs.”
Additionally, the United States imports many goods from Mexico and Canada. In 2018, Mexico was the United States' second-largest supplier of imported goods, totaling an estimated $671.1 billion in trade with imports to the U.S. making up $371.9 billion of the total amount.
Some of the most imported Mexican items included vehicles, electrical machinery, general machinery, agricultural products, mineral fuels, as well as optical and medical equipment.
Canadian imports in 2018 were also high with Canada being the third-largest supplier of imported goods. In fact, imports from Canada totaled $318.8 billion in 2018. Some of the most notable Canadian imports include, agricultural products, snack foods, red meats, vegetable oils, processed fruits and vegetables, as well as fresh vegetables.
Additionally, some of the Canadian services imports to the U.S. included, travel and transport services, as well as telecommunications, computer and information services sectors.
What Are Some of the Updates to the new NAFTA or USMCA?
The new NAFTA or USMCA has updated features. The goal of the updates is to benefit the United States, Mexico and Canada mutually and in the best interest of all three North America countries.
Some of the important features of the USMCA include:
- It is a free trade agreement between the United States, Mexico and Canada.
- It is replacing the NAFTA, which was in effect since 1994.
- The UMSCA took effect as of July 1, 2020.
- In 16 years, the UMSCA will expire if not renewed between the countries.
- The UMSCA has updated provisions and features.
Additional key features in the USMCA include:
- Intellectual property will be under stronger protection and have more enforcement of intellectual property rights.
- Digital trade and eCommerce will be under greater scrutiny.
- De minimis shipment value levels will increase.
- Labor will have increased value, and new trade rules of origin will deliver higher wages to laborers.
- Environmental impacts chapter of the agreement will be more detailed and comprehensive.
If you are interested in reading the complete USMCA trade agreement, click here. Additionally, if you want to look through some of the frequently asked questions about the USMCA, click here.
How Will the New NAFTA or USMCA Affect Shippers?
If you manufacture, produce or sell your products or services across borders, then the USMCA will affect your shipping strategy. There are some important changes to know, and they are:
One of the biggest challenges in cross-border trade has been the lack of easily accessible, accurate trade regulation information and documents. Inaccurate information and documents make it nearly impossible for small businesses to expand their shipping across borders.
The USMCA requires the U.S., Mexico and Canada to provide free, accurate, and easily accessible online documentation that addresses each individual country’s regulations, laws, trade procedures, duties, charges and documentation requirements for enhanced transparency.
Online Document Processing
When you are a small business owner and trying to get your shipments out on time to your customers, you don’t have extra time to spend searching for the cross-border shipping documents you need for each specific country. In the USMCA, you won’t have to search anymore.
The new trade agreement has directed the U.S., Mexico and Canada to create a digital platform that is both simple and easy to use. The goal of the digital platforms is to streamline commerce and shipping. Within each country’s platform, shippers will be able to submit customs declarations and any other country-specific forms or documents. The digital platform must be easily accessible to all shippers.
Having too many types of rules in place makes it incredibly challenging for shippers to know which compliance rules to follow and when to follow them. In the USMCA, each country is required to adhere to uniform trade rules for both exports and imports as well as uniform regulations for each country. The goal is to make it easier for anyone shipping across border to know which regulations they need to follow and when.
Updated Origin Procedures
Origin procedures have been updated in the USMCA as well. The goal of updating origin procedures is to improve modern trade and limit administrative costs to shippers and traders. Here’s how things have been updated:
- Provide electronic processes.
- Increase trader or shipper participation in verification and certification processes.
- Make it easier to certify the origin of goods.
- Bolster collaboration and cooperation between customs administrations while following the new rules.
- Maintain balance between compliance and trade facilitation.
Certificate of Origin
In the USMCA, anyone importing goods will no longer have to fill out a formal certification document. In fact, you will be able to prove origin with informal documentation, such as invoices or an informal origin certificate.
Under the USMCA, you will need to have the following information for showing proof of origin:
- Organization’s information, including name, title, address, phone number and email.
- Names of exporter, producer and importer.
- Description with details of goods and the tariff classification.
- Origin criteria.
- Blanket period (if applicable).
- Authorized signature and date (e-signatures are now accepted).
- Exact closing statement:
- “I certify that the goods described in this document qualify as originating, and the information contained in this document is true and accurate. I assume responsibility for proving such representations and agree to maintain and present upon request or to make available during a verification visit, documentation necessary to support this certification.”
Remember, you will need to keep your certification documents for at least 5 years.
Increase in De Minimis
An increase in de minimis in the USMCA means that low-value goods can enter a country duty-free, so you won’t have to worry about paying more. This increase in de minimis is good for both small business and shippers because it can increase your trade with the other nations in the agreement without you having to pay additional fees, such as duties or taxes. Here’s how de minimis has been updated in the USMCA:
- United States: $800 USD.
- Canada: $150 CAD for duties (customs) and $40 CAD for taxes.
- Mexico: $117 USD for duties (customs) and $50 US for taxes.
To ease strain and keep shipments moving more smoothly, all express shipments in the USMCA are required to be processed by customs before the arrival of the shipment. If all required documents and important data are there, the shipment can be released quickly. That’s good news for your small business and your customers!
Single Window Clearance
Having everything you need in one place is very important, and that goes for cross-border shipping, too. In the USMCA, new provisions have been made that require a technology-based single window clearance system to be set up that informs all importers, exporters and others in the shipping process to keep track of the status of the shipment. As with most of the updates in the USMCA, the goal of this update is to speed up and streamline the shipping process.
Let FreightCenter Help
The USMCA has a lot of information and updates, and you have a lot on your plate as a small to medium sized business owner or manager. Sifting through all the updates and trying to figure out how they apply to you and your shipping strategy is time consuming.
That’s why partnering with a 3PL, like FreightCenter, gives you a competitive advantage. Let our shipping experts guide you through the cross-border and domestic shipping processes. With our powerful, easy to use transportation management system, the best carriers with the best shipping rates are delivered right to you, so you can choose the option that is best for your freight shipment. Our shipping experts are ready to help.