USMCA (Revised NAFTA) deal: What you need to know
The United States, Canada and Mexico came to a last minute agreement on the revised trade deal that replaces NAFTA. The three countries signed the USMCA deal on November 30th, 2018. This leaves Congress to approve and it will likely to come up for a vote in 2019.
While negotiations between the US and Mexico were solidified earlier in the summer, the tri-lateral agreement including Canada, ran right up until the deadline imposed by the US.
With a renamed/renegotiated take on the 25-year-old NAFTA, it is important to understand the differences between both agreements.
Opening up Canada’s dairy market
In what was a potential deal breaker, USMCA opens up some of the Canadian dairy market to US farmers. Under the new agreement, Canada will set new quotas that open the market up for US dairy, poultry and eggs.
In exchange, the US will allow more Canadian dairy, peanuts/peanut products, and a limited amount of sugar
Canada agreed to end a system that had kept the price of some milk products, including milk protein, low. This change will also allow more US dairy products to enter the Canadian market.
Canada recently made concessions in the Trans-Pacific Partnership and a trade deal with the European Union that also opened up its dairy market.
Understandably, the Dairy Farmers of Canada have been outspoken regarding the USMCA. Canadian dairy producers are fearful of the impact on the industry.
The new deal requires 75% of the vehicle’s parts to be made in North America in order for it to be free from tariffs. This is about 12% higher than the previous agreement.
The primary goal of this change is to restore US manufacturing jobs.
Early in negotiations, the US pushed for a 5 year sunset clause, which would have kept trade in a state of disarray for years to come.
Under the new USMCA, the agreement will stand for 16 years with an option to extend.
The United States, Canada and Mexico will be required to meet every six years to decide whether to do so.
A clear sticking point for Canada, and in what is considered a win by the Canadian government Chapter 20 (the dispute resolution clause) will remain intact in its entirety. It will, however, have a different chapter name
Another settlement process, formerly known as Chapter 11, will be phased out between the US and Canada. For key sectors like oil and gas, infrastructure and telecommunications between the US and Mexico, it does remain an option.
The new agreement also addresses issues that did not exist 25 years ago; digital piracy, electronic distribution and patents.
The negotiations on relief surrounding the retaliatory tariffs were not a part of the USMCA agreement. All parties are expected to start negotiating these upon the signing of the new agreement.
To help you navigate through the complex compliance landscape (and avoid the penalties that can come from non-compliance), Community Customs Brokers’s team of professionals can provide answers to these and many other pressing questions related to doing business in Canada as an Importer/Exporter.