07 Oct How Will CUSMA Impact the Transport Industry?
The Canada—United States—Mexico Agreement (CUSMA) came into effect on July 1, 2020. It replaced NAFTA, the agreement implemented in 1994 that made its member countries the largest free trade region in the world.
CUSMA retains the main elements of NAFTA, but adds new provisions. The updated provisions are meant to strengthen economic ties between Canada, the United States and Mexico, and to address 21st-century environmental and social issues.
In terms of the transportation industry, this agreement gives Canada protected and privileged access to the United States, Canada’s top trading partner. Approximately 10 million commercial trucks cross the Canada-U.S. border each year, accounting for over 70% of trade with the United States.
CUSMA: Key objectives
CUSMA’s primary goal is to promote steady economic growth for all three countries through mutually beneficial trade.
When the Agreement was signed, its negotiators considered different ways for businesses to take advantage of these new trade opportunities, making the market fairer and freer.
They decided to:
- Update the certification of origin procedure
- Create new de minimis thresholds for e-commerce
- Make changes to the rules of origin in the automotive sector
- Expand duty-free provisions for the agricultural sector
- Allow goods to be traded duty-free online
How does CUSMA benefit the transportation industry?
Improved merchandise trade
The previous NAFTA free trade agreement eliminated virtually all tariffs between Canada, the United States and Mexico. Since July 1st, CUSMA has ensured that nearly all trade within North America remains tariff-free.
In addition, new customs guidelines aim to standardize trade by modernizing customs procedures across North America. CUSMA also includes changes that smooth potential technical barriers to trade. These updates will make it easier for Canadian companies to export LTL freight or FTL freight throughout the CUSMA region.
Maintains de minimis thresholds
However, CUSMA has raised de minimis thresholds for duty and tax relief for courier shipments from the U.S. and Mexico. The thresholds increased from CAD$20 to CAD$40 for taxes and up to CAD$150 for duties.
This applies to all goods that have entered the U.S. or Mexican market. The corresponding de minimis thresholds for courier shipments to Mexico are US$50 for taxes and US$117 for duty-free. In the U.S., the de minimis rate for tax exemption is currently US$800
Simplified certification of origin for exporters
Exporters are no longer required to complete an official certification of origin. Proof or origin can now be provided via informal documents, such as commercial invoices, and may be submitted electronically.
To further simplify the process, the document can be completed by the importer, exporter or even the producer.
Increased low-value shipment threshold
To meet the low-value shipment (LVS) threshold, a shipment value must not exceed CAD$3,300.
Under CUSMA, goods that meet the LVS threshold can benefit from simplified report, release and documentation requirements, regardless of the country of origin of manufacture or the country of export.
Since CUSMA came into effect, the CBSA applies the LVS threshold consistently across all commercial programs, regardless of the mode of transportation or import stream.
CUSMA: a win-win agreement
To sum up, CUSMA is meant to be continually reviewed and updated. The Agreement between the three North American countries includes numerous improvements across many different sectors. CUSMA also mandates a formal review of the Agreement at least every six years, following its entry into force.
This new review process is intended to ensure that the Agreement remains relevant, effective and beneficial to all North American stakeholders. It will also address any issues before they can become a larger problem.
Contact the team at Transport Econo Nord for all your Canada-U.S. transportation needs!