One year into the USMCA, we selected 10 areas that businesses need to pay attention to, in order to leverage all benefits of the free trade agreement.
1. Will USMCA Offer You New Opportunities?
The U.S. International Trade Commission estimates that within 5 years, USMCA could add up to $235 billion in new economic growth—and 589,000 jobs—to the U.S. economy.
United States Trade Representative Robert Lighthizer said the USMCA is [a] trade agreement that contains strong, enforceable labour and environmental standards that will help to level the playing field for American workers.
embraces the promise of the digital economy and enhances America’s competitive advantage in technology and innovation.
with strong, enforceable disciplines against unfair, market-distorting subsidies and currency manipulation.
that contains a ‘sunset’ provision that will give future administrations leverage to ensure that, USMCA will never become outdated and out of balance.
So how will you leverage this opportunity? Of is your primary objective only to make sure that your current NAFTA benefits continue as before?
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2. DE MINIMIS in USMCA
Be aware that the De Minimis rule is different in USMCA. To facilitate greater cross-border trade, the United States has reached an agreement with Mexico and Canada to raise their de minimis shipment value levels:
Canada will raise its de minimis level from C$20 to C$40 for taxes.
Canada will also provide for duty-free shipments up to C$150.
Mexico will continue to provide USD $50 tax-free de minimis and also provide duty-free shipments up to the equivalent level of USD $117.
Shipment values up to these levels would enter with minimal formal entry procedures, making it easier for more businesses, especially small- and medium-sized ones, to be a part of cross-border trade. Canada will also allow a period of 90 days after entry for the importer to make payment of taxes.
Increasing the de minimis level with key trading partners like Mexico and Canada is a significant outcome for the United States small- and medium-sized enterprises (SMEs). 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. The United States express delivery carriers, who carry many low-value shipments for these traders, also stand to benefit through lower costs and improved efficiency.
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3. Intellectual Property Rights To Drive Innovation
The United States, Mexico, and Canada have reached an agreement on a modernized, high-standard Intellectual Property (IP) chapter that provides strong and effective protection and enforcement of IP rights critical to driving innovation, creating economic growth, and supporting jobs.
The IP Chapter will:
Require full national treatment for copyright and related rights so creators are not deprived of the same protections that domestic creators receive in a foreign market.
Continue to provide strong patent protection for innovators by enshrining patentability standards and patent office best practices to ensure that innovators, including small- and medium-sized businesses, are able to protect their inventions with patents.
Include strong protection for pharmaceutical and agricultural innovators.
Require a minimum copyright term of life of the author plus 70 years, and for those works with a copyright term that is not based on the life of a person, a minimum of 75 years after first authorized publication.
Require strong standards against the circumvention of technological protection measures that often protect works such as digital music, movies, and books.
Establish appropriate copyright safe harbors to provide protection for IP and predictability for legitimate enterprises that do not directly benefit from the infringement, consistent with national law.
Provide important procedural safeguards for recognition of new geographical indications (GIs), including strong standards for protection against issuances of GIs that would prevent producers from using common names, as well as establish a mechanism for consultation between the Parties on future GIs pursuant to international agreements.
Enhance provisions for protecting trademarks, including well-known marks, to help companies that have invested effort and resources into establishing goodwill for their brands.
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4. Enforcement Powers are Strong
The trade agreement will require all of the following:
Ex officio authority for law enforcement officials to stop suspected counterfeit or pirated goods at every phase of entering, exiting, and transiting through the territory of any Party.
Express recognition that IP enforcement procedures must be available for the digital environment for trademark and copyright or related rights infringement.
Meaningful criminal procedures and penalties for unauthorized camcording of movies, which is a significant source of pirated movies online.
Civil and criminal penalties for satellite and cable signal theft.
Broad protection against trade secret theft, including against state-owned enterprises.
USMCA includes protections against misappropriation of trade secrets, including by state-owned enterprises: civil procedures and remedies, criminal procedures and penalties, prohibitions against impeding licensing of trade secrets, judicial procedures to prevent disclosure of trade secrets during the litigation process, and penalties for government officials for the unauthorized disclosure of trade secrets.
5. Digital Trade SORTED!
The new Digital Trade chapter contains the strongest disciplines on digital trade of any international agreement, providing a firm foundation for the expansion of trade and investment in innovative products and services.
The Digital Trade chapter will:
Prohibit customs duties and other discriminatory measures from being applied to digital products distributed electronically (e-books, videos, music, software, games, etc.).
Ensure that data can be transferred cross-border and that limits on where data can be stored and processed are minimized, thereby enhancing and protecting the global digital ecosystem.
Ensure that suppliers are not restricted in their use of electronic authentication or electronic signatures, thereby facilitating digital transactions.
Guarantee that enforceable consumer protections, including for privacy and unsolicited communications, apply to the digital marketplace.
Limit governments’ ability to require disclosure of proprietary computer source code and algorithms, to better protect the competitiveness of digital suppliers.
Promote collaboration in tackling cybersecurity challenges while seeking to promote industry best practices to keep networks and services secure.
Promote open access to government-generated public data, to enhance innovative use in commercial applications and services.
Limit the civil liability of Internet platforms for third-party content that such platforms host or process, outside of the realm of intellectual property enforcement, thereby enhancing the economic viability of these engines of growth that depend on user interaction and user content.
6. Local Data Storage Requirements
The agreement includes a prohibition on local data storage requirements in circumstances where a financial regulator has access to data that it needs to fulfil its regulatory and supervisory mandate.
7. Currency manipulation
The renegotiated agreement includes a chapter to address unfair currency practices by requiring high-standard commitments to refrain from competitive devaluations and targeting exchange rates, while significantly increasing transparency and providing mechanisms for accountability.
8. What about Labor rights?
The United States, Mexico, and Canada have agreed to a Labor chapter that brings labour obligations into the core of the agreement, makes them fully enforceable:
Effective recognition of the right to collective bargaining.
Adopt and maintain in law and practise labour rights as recognized by the International Labor Organization, to effectively enforce their labour laws, and not to waive or derogate from their labour laws.
New provisions to prohibit the importation of goods produced by forced labor, to address violence against workers exercising their labor rights, and to ensure that migrant workers are protected under labor laws.
Rapid Response Mechanism, providing for monitoring and expedited enforcement of labor rights
New trade rules of origin to drive higher wages by requiring that 40-45 percent of auto content be made by workers earning at least USD $16 per hour.
9. Consider the Environment
The Environment chapter includes a comprehensive set of enforceable environmental obligations, including obligations to combat trafficking in wildlife, timber, and fish; to strengthen law enforcement networks to stem such trafficking, and to address pressing environmental issues such as air quality and marine litter.
Environment obligations include:
Prohibitions on some of the most harmful fisheries subsidies, such as those that benefit vessels or operators involved in illegal, unreported, and unregulated (IUU) fishing.New protections for marine species like whales and sea turtles, including a prohibition on shark-finning and commitment to work together to protect marine habitat.
Obligations to enhance the effectiveness of customs inspections of shipments containing wild fauna and flora at ports of entry, and ensure strong enforcement to combat IUU fishing.
First-ever articles to improve air quality, prevent and reduce marine litter, support sustainable forest management, and ensure appropriate procedures for environmental impact assessments.
Requiring the Parties to adopt, maintain and implement our relevant obligations under seven multilateral environmental agreements (MEAs).Robust and modernized mechanisms for public participation and environmental cooperation.
The United States and Mexico have negotiated a separate Environment Cooperation and Customs Verification Agreement that will help bolster our efforts to combat trade in illegally taken wildlife, fish and timber.
10. Learn to leverage: 4 Part Mini Series
Learn more about the USMCA by zooming in on the agreement with a 4 part series to watch, recorded prior to the entry into force of the USMCA. In four parts we talk about what really matters for businesses. This is bite-sized. modern training that your staff can view anywhere, anytime and on any device. The topics are:
What is USMCA? What is NAFTA? Decades of close cooperation in North America
What is USMCA? What is NAFTA? Decades of close cooperation in North America
USMCA MODERNIZES NAFTA INTO A 21ST CENTURY TRADE AGREEMENT - What are the key changes to NAFTA?
USMCA Rules of Origin in more detail and the NAFTA Certificate of Origin elimination. How to prove originating status in the 21st century?
PREPARING FOR THE USMCA IMPLEMENTATION - Steps businesses can take now.
Watch all episodes here: https://www.customsmanager.org/post/usmca-free-trade-agreement
To benefit fully from the free trade agreements, we recommend scheduling a call with your Customs Manager, part of your ongoing support subscription.
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