The stalled U.S.-Mexico-Canada free trade agreement could be approved by the U.S. House of Representatives this year, Speaker Nancy Pelosi said Thursday. The statement is the clearest sign to date that negotiations with the Trump administration and Democrats are close to wrapping up.
“I would like to see it done this year. That would be my goal,” Pelosi said, adding that she believes an agreement is “imminent.”
That would be good news for retailers, says Jeffrey Weiss, a partner in law firm Venable LLP’s International Trade Group who previously served as the U.S. Commerce Department’s deputy director for policy and strategic planning.
That’s because the deal will lead both Mexico and Canada to 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 ($30.25) from C$20 ($15.13). The trade agreement also means that Canadian consumers won’t have to pay a duty for cross-border online orders that are C$150 ($113.44) or less; Mexican shoppers won’t have to pay a duty on cross-border online orders that are the equivalent level of $117 or less.
While the de minimis increases are less than the United States may have wanted, they should make it easier for online orders to ship across the borders and may encourage some retailers to begin selling across the Mexican and Canadian borders, says Jonathan Gold, the National Retail Federation’s vice president of supply chain and customs policy.
“We expect that retailers will take advantage of those increases,” he says. “It will likely drive some retailers to begin selling abroad.”
A fact sheet released by the Office of the U.S. Trade Representative argues the deal is a boon to small and midsized retailers.
“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.”
The agreement also acknowledges ecommerce’s significance within the retail industry, says Jennifer Safavian, executive vice president for government affairs of the Retail Industry Leaders Association.
“The deal is important to our members because it brings our relationships with Canada and Mexico up to date,” she says.
The deal will also update the procedures for how customs works. For example, it will enable shipments that are less than $2,500 to qualify as “express shipments” that require reduced paperwork. And it requires each country to publish their laws, regulations, contact information, tariffs, taxes and other fees online. In doing so, the U.S. Trade Representative intends for the agreement to serve as a template for future trade agreements, NRF’s Gold says.
Other key provisions in the deal are:
Data storage. USMCA is the first U.S. trade agreement to prohibit other countries requiring retailers and other businesses that collect their citizens’ data to store that data in their respective countries. “Retailers rely on data for a variety of purposes,” Gold says. “If they had to house their data all over the world, it would cost them a lot of money, as well as lead to concerns about how it is protected and used.”
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.
Bloomberg contributed to this reportFavorite