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  • 03 Apr 2020
  • Canada

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.

https://ustr.gov/sites/default/files/files/Press/fs/USMCA/USMCA-Digital_Trade.pdf

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.

Global eTrade Service:

Global eTrade Services (GeTS), a global leading trade platform company, is shaping the future of trade and supply chain with its innovative use of technology and deep G2B and B2B domain expertise. GeTS enables the orchestration of physical logistics, compliance and financial requirements of trade and supply chain seamlessly, smartly and securely, thus powering global trade by making it accessible, predictable and easier to fulfill. The company has linkages to 61 Customs nodes across the world, with more than 175,000 connected parties and conducting 24.1 million transactions annually. 

Our unique products such as,

CALISTA™ Intelligent Agent (IA) - AI-driven CALISTA™ Intelligent Agent (IA) is built to orchestrate the global supply chain, spanning across logistics, compliance and financial activities. It provides insights on freight options, free trade agreements, import/ export formalities, and other value-added services. It can also recommend optimal freight solutions, provide alerts and trigger actions to orchestrate the supply chain activities based on budget, preferred timelines, and modalities.

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https://globaletrade.services/products/calistatm-intelligent-agent-ia

Trade Compliance managed Services

GeTS will guide traders through the importing or exporting process, assist in classifying the goods, act as a liaison between the trader and the government, and advise on the regulations associated with each commodity to gain a better understanding of international trade.

https://globaletrade.services/products/trade-compliance-managed-services

 

Published by Vikram Patil, PMP, ITIL