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“What are the benefits of USMCA” is a question that many new exporters find themselves asking. This transformative pact has unlocked numerous advantages for companies, allowing them to tap into the thriving markets of Canada and Mexico with fewer hurdles. Yet, attempting to export to these nations without guidance on the free trade agreement (FTA) specifics is asking for trouble.
The Office of the United States Trade Representative (USTR) lists the following as benefits of the USMCA:
These benefits will allow exporters to send goods with ease.
The USMCA (United States, Mexico, and Canada Agreement) provides these advantages and many others that we’ll cover in this guide.
The USMCA was officially put into practice on July 1st of 2020. While this FTA is technically young, much of it takes inspiration from NAFTA (North American Free Trade Agreement, which came before it. NAFTA started in 1994 and created a positive trading relationship between the U.S., Canada, and Mexico.
Many of the features contained in NAFTA have been brought over to USMCA and expanded upon. This FTA even has some additional features that weren’t in the original in FTA.
There are numerous U.S. businesses that make a profit from their foreign customer base. Therefore, the USMCA is essential for the success of their operations.
The USMCA and NAFTA are both pivotal trade agreements, but each one has some key differences. While NAFTA paved the way for free trade in North America in 1994, USMCA was introduced to modernize and enhance provisions and address the challenges of the 21st century.
Similarities between the two include agreements to:
USMCA has been able to carry on the legacy of NAFTA by continuing these practices. However, the trade agreement as provided some additional provisions that importers and exporters in each country will find useful.
New policies added by USMCA address things such as:
With these new additions provided by USMCA, exporters in the U.S. will be able to take advantage of additional benefits in their operations.
The whole point of an FTA is to make trade between countries much easier. That said, new exporters, or those without experience shipping to Mexico and Canada, might not realize how the USMCA trade agreement benefits them.
We’ll start by discussing the primary benefits of using this FTA.
One way that the USMCA has assisted exporters is by expanding the market access for U.S. farmers and ranchers. Both Mexico and Canada are top importers of U.S. agricultural products. To show just how much Mexico and Canada contribute to the U.S. agricultural market, we’ve included some data that displays how much U.S. agricultural goods both countries imported.
| Country | 2020 | 2021 |
| Canada | $21 Billion | $25 Billion |
| Mexico | $18.1 Billion | $26.5 Billion |
Source: U.S. Department of Agriculture Canada and Mexico Highlights and Food Export Association of the Midwest USA Canada and Mexico
Under USMCA, tariffs and duties against U.S. agricultural exports will be eliminated and more U.S. goods will be accessible to Canadian buyers.
Such goods include the following:
By having increased agricultural market access, goods made and exported by U.S. ranchers and farmers will be more competitive with Mexico and Canada. From an exporting perspective, this levels the playing field between U.S. farmers and ranchers and those in places like Mexico, who tend to have lower operating costs.
The USMCA free trade agreement isn’t just a win for big corporations; it also provides a significant advantage for small and medium-sized enterprises (SMEs). These businesses often face bigger challenges when trying to navigate international trade due to limited resources. Thankfully, USMCA includes provisions specifically tailored to support SMEs.
Two specific ways the USMCA agreement benefits these businesses include:
The SME chapter included in the USMCA promotes better cooperation between parties that will increase trade and investment opportunities. This section also establishes tools that provide useful information that help businesses understand the benefits of the agreement.
Secondly, the USMCA SME chapter establishes an event called The Dialogue, which is convened by numerous parties.
This includes:
The purpose of The Dialogue is to give SMEs the opportunities to voice their views and provide information to government officials. By providing valuable insight, authorities can ensure the interests of SMEs will be considered in the future.
Look into our article on exporting to Canada if you want to send your goods above the border.
The process of transferring goods at the border of two countries is often accompanied by lengthy customs processes and high expenses. Fortunately, USMCA has also shortened many of the procedural processes that occur in trade.
New policies that shorten border crossings include:
Electronic submission of documents for export and import will help streamline customs procedures. The USMCA also requires online documents to be treated equally with solid paperwork.
Another way this FTA reduces red tape at the border is by reducing documentation for informal shipments less than $2,500 in value. This means goods intended for personal use will cross between borders much more easily.
The USMCA also has a de minimis provision that allows a small amount of goods originating outside of North America to qualify for the USMCA tariff shift. U.S. goods going to Canada that have a value of $40 CAD or less will be free of duties and taxes, while items up to $150 CAD will be exempt from duties only.
The de minimis provision also applies for products exported to Mexico. U.S. items to sent to this country that valued at US$50 are exempt from duties and taxes, while goods valued at US$117 are only duty free.
One problem that importers and exporters in North America faced before were different port procedures or requirements for documentation. Thanks to the USMCA, varying rules will be thrown out in favor of uniform procedures.
Finally, the USMCA removes the requirement that companies establish an office where they’re conducting business. This removes a serious financial burden that prevent SMEs to participate in international trade.
Intellectual property (IP) is the lifeblood of innovation and creativity in today’s digital age. Fortunately, the USMCA recognizes this and offers robust protections to safeguard the IP rights of creators and businesses.
IPs under USMCA protections include:
USMCA has created the Committee on Intellectual Property Rights. This committee is charged with engaging the IP rights of exporters, specifically SMEs, when they send their goods to another country.
Chapter 20 of the USMCA also streamlines the process of obtaining IP right protections for exporters. Doing so reduces high costs that many SMEs can’t afford.
Not all goods that are sent to Mexico or Canada are physical items. Many goods that are transferred between nations are in a digital format as well.
Digital goods can include any of the following:
According to a United States-Mexico-Canada Trade fact sheet, there are numerous protections and considerations for U.S. exporters of digital goods to enjoy.
These include:
These considerations will allow U.S. exporters the same maneuverability when exporting their digital products as exporters of physical products would. U.S. eCommerce companies in particular will benefit from this, as they will be able to transfer data to customers in Mexico or Canada seamlessly.
Check out our article on exporting to Mexico if you’re ready to send goods below the borders.
If you’re exporting to Mexico or Canada, it’s a good idea to be familiar with the USMCA’s framework and how it applies to your shipment. Unfortunately, making your way through the details of this FTA can be time-consuming. That’s why you should hire the professionals at Cargo Exports USA.
To help make exporting for you, consider the following services we provide:
Whatever service you need, the staff at Cargo Exports USA can help. Schedule a consulting session today or contact our team at (866) 301-0635 for more details.
