USMCA (NAFTA 2.0) Ratified - Good news for eCommerce or Digital Trade
The United States, Mexico, and Canada have all ratified the USMCA a free trade agreement between the three North American countries and often dubbed as NAFTA 2.0. On March 13th, 2020 Canadian parliament ratified it while in the United States it came into effect on January 19th, 2020 & Mexico has ratified it in June 2019. It is expected to go into effect mid-2020. The agreement is effective for 16 years & can be renewed.
Highlights of the agreement
The below trade fact sheet provides the highlights of the changes coming into effect helping the businesses leading to freer markets, fairer trade, and robust economic growth in North America. https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/fact-sheets/modernizing
For this article, I will cover the Digital trade a.k.a eCommerce which is very new in the USMCA agreement (The older NAFTA came into effect before the dial-up internet era)
The USMCA establishes the Most Comprehensive Rules on Digital Trade to date and will set predictable rules & encourage a robust e-commerce market among the three countries. There is a special emphasis on the SME (Small and Medium-sized Enterprises) highlighting the benefits USMCA brings to the SME by reducing the red tape in cross border transactions, encouraging co-operation among parties across the border & thus expediting e-commerce exports through good regulatory practices.
credit: ustr.gov for the above table.
USMCA and its effect on eCommerce & cross border transactions
The customs and trade facilitation provisions of the USMCA will greatly reduce the costs and bring ease & predictability into cross border transactions enabling the flow of millions of low-value eCommerce shipments.
The following are some of the highpoints.
- Creates a new informal shipment level of $2,500, so that express shipments under that amount benefit from reduced paperwork.
- Raises the de minimis level for Canada for express shipments from the current C$20 to C$40 which are exempt from both duties and taxes and up to C$150 exempt from duties. Shipments above C$40 will be subject to local GST/HST but duties are only applied to those above C$150. Canada will also allow 90 days after entry for the importer to make payment of taxes.
- Sets the de minimis level for Mexico up to US$50 exempt from duties and taxes, and raises it to US$117 duty-free for express shipments.
- Help cut red tape & ease international trade by publishing online the laws, regulations, tariffs, taxes & other fees; to provide an online searchable database of customs information for the trade community. Refer below - CALISTA™ Intelligent Agent (IA).
- Prohibits customs duties on digital products distributed electronically (e-books, videos, music, software, games, etc.).
- Protects cross-border data flows and limits data localization requirements thus enhancing and protecting the global digital ecosystem
The ease of doing business and increasing the de-minimis values will make it easier for more businesses, especially small- and medium-sized ones, to be a part of cross-border trade. New traders, just entering the US, Mexico’s and Canada’s markets, will also benefit from lower costs to reach consumers.
Many express delivery carriers, who carry many low-value shipments for these traders, also stand to benefit through lower costs and improved efficiency.
It is an excellent opportunity for these companies to expand their foray into the international market starting from North America. Let us help you go global.
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Published by Vikram Patil, PMP, ITIL