The Benefits of the New NAFTA (USMCA) For Small Businesses

The United States-Mexico-Canada Agreement (USMCA) came into effect on July 1st, 2020. The agreement replaced the previous North American Free Trade Agreement (NAFTA), which was in effect since 1994.

The USMCA is designed to facilitate trade between the member countries, drive economic growth, and boost free and fair trade in North America. The pact is symbolic because Mexico and Canada are some of the largest trading partners in the U.S.

Companies in the U.S. sold more than $250 billion to Mexico and over $290 billion in products to Canada in 2019. This is great news for small businesses because Mexico and Canada are the first destinations for developing American businesses. So, how exactly will USMCA benefit small business exports?

Reduced Barriers to Business

The USMCA eliminates the need for businesses providing trans-border services to have a local office in that specific country. It also facilitates trade between Canada, Mexico, and the U.S. by reducing barriers at the border. New procedures like self-certification of origin and e-signatures simplify trade for bustling small businesses. 

Support for eCommerce

The USMCA improves the digital economy and eCommerce in various ways. First, the agreement absolves digital products from discriminatory measures like customs duties. It also bars countries from enforcing data localization restrictions. That means that Mexico and Canada can’t sue any U.S. platform supplier for third-party content posted on their websites or compel U.S. companies to keep data on their local servers.

This improves free data movement across borders from local data centers. This is critical for eCommerce businesses that need to transfer commercial data between countries in order to track product shipments and orders. Besides encouraging best practices in eCommerce, the USMCA also reiterates collaboration in managing cybersecurity challenges. 

Lower Cost of Shipping Merchandise Internationally

The USMCA introduces various changes that enhance de minimis values. Here are some things to know about de minimis values:

• The USMCA has set up a simple shipment lever of C$3,300 or U.S.$2,500;
• Canada has set C$150 as the new gateway for duty-free shipments. However, taxes are to be paid where applicable;
• The de minimis level for Mexico has increased to $50 for dispensation from taxes and duties;
• The de minimis level for express duty-free shipments is increased to $117;
• Canada has increased its de minimis taxes from C$20 to C$40, wiping off taxes and duties for orders below C$40. 

These changes benefit small businesses that lack the resources to pay NAFTA duties and customs. Under the USMCA, small businesses will benefit from increased efficiencies and lower costs in US express delivery. It is worth noting that digital products such as music, videos, and eBooks are exempt from customs duties.

Sweet Tips from Ally:

The USMCA changes support the U.S. in pushing for local product sourcing and manufacturing growth. This agreement touches various industries like factories, agricultural products, and manufacturing facilities, helping companies in those sectors as well.