Here are the key changes that the United States-Mexico-Canada Agreement could bring for importers and exporters.
In September, the United States, Mexico, and Canada announced the completion of negotiations toward a new United States-Mexico-Canada Agreement (USMCA). According to the Government of Canada, the outcomes preserve key elements of this trading relationship and incorporate new and updated provisions focused on trade issues and on promoting opportunities for the nearly half-a-billion people who reside in North America.
The new agreement replaces the North American Free Trade Agreement (NAFTA), which in 1994 created the world’s largest free trade region. And while Canada, America’s second largest trading partner, was initially left out when the U.S. and Mexico reached a preliminary deal in late-August to revamp NAFTA, it later collaborated with its two trading partners to develop the USMCA.
The American Trucking Associations praised the governments of the U.S., Canada, and Mexico for coming together on a framework for continued free trade between the three North American nations.
“ATA is pleased that the United States, Canada, and Mexico will continue their nearly 25-year-long tradition of free and open trade among North American neighbors,” ATA President and CEO Chris Spear said in a statement. “The wide-ranging pact is a positive step for the nearly 50,000 Americans working in jobs directly connected to cross-border trucking – as well as the more than seven million Americans working in trucking-related jobs.”
7 Points to Watch
Here are seven things that all shippers should know about the USMCA and its potential impacts on import and export activities in the U.S., Canada, and Mexico:
- The deal is extensive and all-encompassing. The USMCA comprises 34 chapters and governs more than $1 trillion in trade, the BBC reports in US and Canada reach new trade deal to replace Nafta. Some of those details relate to specific products. For example, Canada and Mexico now have a quota of 2.6 million of exportable cars to the U.S. as a protection for their car industry (i.e., should the U.S. impose a global tariff on car imports). In addition, 40% of car parts of vehicles produced in the USMCA area must be made in areas of North America that are paying wages of $16 an hour.
- It may not be around for more than 16 years. The USMCA’s automatic sunset clause could result in the loss of this agreement in just 16 years, according to It is critical that the three member countries, Mexico, Canada, and the United States, conduct a joint review six years after the enactment of USMCA to preserve it.
- There are new rules for express shipments. From a transport perspective, the new NAFTA requires each of the member countries-Mexico, Canada, and the United States-to either adopt or maintain specific expedited customs procedures for express shipments, SCMR
- No more certificates of origin needed. SCMR says USMCA has eliminated the need for a NAFTA Certificate of Origin (CBP-434) and now allows importers to certify the origin of the merchandise. The new agreement also requires Canada to raise its de minimus level from $20 to $150 (Mexico agreed to raise its de minimus from $50 to $100 and the U.S. de minimus level is $800).
- Farmers will have new export opportunities to sell dairy products into Canada. Canada will provide new access for U.S. products, including fluid milk, cream, butter, skim milk powder, cheese, and other dairy products, the S. Treasury points out. (Under the original NAFTA, Canada limited how much milk, cheese, and other dairy products could come in from the U.S., according to CNN ). The new agreement also eliminates the tariffs on whey and margarine. For poultry, Canada will provide new access for U.S. chicken and eggs and increase its access for turkey. Under the modernized agreement, all other tariffs on agricultural products traded between the United States and Mexico will remain at zero.
- More vehicle parts manufacturing in North America. The new deal will require more of a vehicle’s parts to be made in North America in order for the car to be free from tariffs. It requires that 75% of the parts must be made in Canada, Mexico, or the United States, about 12 percentage points higher than under the original NAFTA. The provision will help keep the production of car parts in the United States and bring back some production that moved abroad, CNN
- More coordinated transportation moves. USMCA also includes commitments to streamline the way goods are moved across the border, Today’s Trucking Each country, for example, commits to using information technology that expedites procedures followed when releasing goods. There’s also the pledge to coordinate procedures at adjacent ports of entry where specific facilities or examinations are needed to process the freight.
The actual impacts of the new agreement have yet to be seen, but many in the transportation and logistics industry are optimistic about it. “Anything that I think reduces the barriers to transportation, freight transportation, is good,” Robert Ballantyne, president of the Freight Management Association of Canada, told Today’s Trucking, “and there doesn’t seem to be anything in this new agreement that raises any problems.”