A New Deal – Updating North America’s Trade Agreement
October 19, 2018 Transplace

A New Deal – Updating North America’s Trade Agreement

By: Jose Minarro, Senior Vice President of Customs in Mexico, Transplace

For now, it’s only been agreed upon via a handshake, but the United States, Mexico and Canada have made a deal to update the North American Free Trade Agreement (NAFTA) – which will now be called the United States-Mexico-Canada Agreement (USMCA).

However, while it looks certain that an update will be made, there are still plenty of unknown factors when it comes to what will actually be included in the new USMCA agreement. Let’s take a look at what we know as of right now, and what shippers should be doing to prepare for an updated agreement in the North American trading bloc.

 An Update to NAFTA – What We Know

As you certainly may have heard in the news over the past few months, we know that changes are going to be made to NAFTA, but the specifics are still yet to be worked out. The U.S., Mexico and Canada are on the clock to establish the full terms of the agreement, and once it’s drafted, it will still need to be officially approved by the U.S. Congress, as well as both the Mexican and Canadian governments. This means that the deal likely won’t be voted on by Congress until 2019.

Additionally, an important factor in the approval process timeline is the term end of the current President of Mexico, Enrique Peña Nieto, and on December 1st, 2018, president elect, Andrés Manuel López Obrado will take over in office. At this time, both political officials are on record in support of the new deal.

Major Impacts on Certain Industries

Today, the U.S., Mexico and Canada trade more than $1 trillion worth of goods and services annually – and according to a recent article from Transport Topics, there are significant benefits for both Mexico and Canada as trade partners in the USMCA, as “the agreement updates rules regarding data sharing and protection of intellectual property, and both countries agreed to raise the minimum shipment value of small packages shipped across the border that are subject to duties or taxes, a change that is expected to spur more e-commerce.”[1]

Source: The Wall Street Journal

Source: The Wall Street Journal

Some of the industries that are expected to be the most impacted by the USMCA include the automotive sector, dairy, egg and poultry markets and much more. Trade between the US., Canada and Mexico is still expected to be robust, and the outcome of the trade agreement should be a win-win for all parties involved, as global corporations are expected to continue to invest in North America.

 How Should Shippers Prepare for the Updates?

Shippers that are claiming NAFTA products from the U.S., Mexico or Canada should take into consideration a few best practices to prepare for the new agreement. These steps include:

  • Stay up-to-date on internal processes and thoroughly understand your business operations. It’s important for shippers to know how their supply chain leverages NAFTA and which products do and do not qualify under the agreement.
  • Actively project both best-case and worst-case outcome scenarios to anticipate how a the USMCA will impact business functions.
  • When the official new agreement is signed into law, be sure to compare NAFTA with the USMCA deal to identify any opportunities to streamline your supply chain and operational processes.

To learn more about the USMCA and how it will impact shippers, Transplace will be holding a session in Monterrey, Mexico on October 24th. For more information on how to attend this session, please reach out to your account manager.

 How are your operations preparing for the USMCA?

[1] https://www.ttnews.com/articles/trucking-welcomes-trade-agreement-canada

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