U.S. and Canadian negotiators late on Sunday secured an agreement to salvage the basic framework of the 24-year-old North American Free Trade Agreement. However, the new deal, which is called the U.S.-Mexico-Canada Agreement, or USMCA, includes a few key provisions that will yield key benefits for online retailers.
To start, both Mexico and Canada will increase their de minimis shipment value levels, which is the minimum value of an imported shipment that is subject to duty collection and customs documentation. Mexico is doubling its de minimis threshold to $100 from $50, and Canada is doubling its threshold to C$40 from C$20.
The deal also means that Canadian consumers won’t have to pay duty for cross-border online orders that are C$150 or less; Mexican shoppers won’t have to pay duty on cross-border online orders that are the equivalent level of $117 or less. The deal also aims to make it easier for those orders to ship across the borders. That should make it easier for more businesses, especially small- and mid-sized ones, to be a part of cross-border trade, according to a fact sheet released by the Office of the U.S. Trade Representative.
“Increasing the de minimis level with key trading partners like Mexico and Canada is a significant outcome for United States small- and medium-sized enterprises (SMEs),” the sheet says. “These SMEs often lack resources to pay customs duties and taxes, and bear the increased compliance costs that low, trade-restrictive de minimis levels place on lower-value shipments, which SMEs often have due to their smaller trade volumes. New traders, just entering Mexico’s and Canada’s markets, will also benefit from lower costs to reach consumers. United States express delivery carriers, who carry many low-value shipments for these traders, also stand to benefit through lower costs and improved efficiency.”
A number of industry players are supportive of the trilateral agreement. For instance, the National Retail Federation believes the deal will boost sales across borders, says Jonathan Gold, the trade group’s vice president of supply chain and customs policy. “The potential is there to produce strong gains,” he says. “It’s too early too tell how large those gains could be.”
Other key provisions in the deal are:
Digital product protections. The new digital trade chapter prohibits customs duties on digital products, such as e-books, videos, music, software and games. It ensures that suppliers are not restricted in their use of electronic authentication or electronic signatures, thereby facilitating digital transactions and guarantees that enforceable consumer protections, including for privacy and unsolicited communications, apply to the digital product sales.
Intellectual property (IP) protections. The new IP chapter contains more rigid protections for patents and trademarks that encompass the breadth of the industry, beyond the scope of the original agreement.Favorite