- by Best Inc.
If you are involved in e-commerce, you may already know what USMCA stands for. In case you don't, however, it is an acronym for the United States-Mexico-Canada Agreement. If your business relies even in part on e-commerce, this is something you should be acquainted with.
As of July 1, 2020, the USMCA entered into force. That means that on July 1, 2020 or afterward, preferential NAFTA treatment cannot be claimed. So, NAFTA rules continued to apply for any merchandise entered into commerce before the above stated date. This has actually been in the works for some time – an agreement was being worked on in September 2018, in fact.
But what does it all mean?
The USMCA Agreement – What Is It?
Simply put and in a nutshell, looking at the almost 25-year-old NAFTA, a $1 trillion North American agreement on free trade, USMCA could be considered an updated version. So what's new? It contains new policies and major changes regarding the following:
- Some digital trade provisions
- Intellectual property protections
- Environmental standards
- Labor, etc.
How should the United States benefit from this agreement? It is thought that it will mutually support beneficial trade leading to the following in North America:
- Robust economic growth
- Fairer trade
- Freer markets
So who benefits from the agreement?
For American ranchers and farmers, this agreement is a monumental win. To export their goods, it will improve access to both Mexican and Canadian markets. Under USMCA, an expected $2.2 billion increase for American agricultural exports should secure an amazing deal for American farmers.
USMCA E-Commerce Impact
When it comes to e-commerce, this trade agreement (the USMCA) will have several areas of impact.
- Lower costs for data storage – Data is everything nowadays! As e-commerce businesses use it to make data driven decisions and personalize customer services, it becomes even more crucial. The cost of storing data can be exorbitant, however. But now, within their country of operation, this agreement will make it easier (and less expensive) for countries to house their clients’ data.
- For SMEs in e-commerce, simplified shipping procedures – Agreements and commitments to issuing custom formalities on a lesser basis were made by all three countries. Though it highly benefits e-commerce SMEs, it's actually beneficial to the entire e-commerce industry as a whole. The reason? More rigorous custom formalities are usually undergone by retailers in e-commerce with shipments of $2500-worth or less. With USMCA, however, those types of shipments will no longer require an EIN because they will be considered express shipments.
- Sales increases – Without stressing out about taxes and customs duties, on goods up to $150, Canadian shoppers can now purchase online US products. On products worth $100 and under, tax and duty-free shopping can be done by Mexican shoppers. Because the United States’ products are now more affordable, the reach to Mexican and Canadian markets can be expanded by e-commerce businesses in the US.
Theoretically, for many years to come, the benefits realized through the USMCA will be enjoyed by e-commerce retailers. Every six years, however, it is subject to review. Regardless, between the three nations, e-commerce relations should be aided significantly by this agreement. Particularly where midsized and small online retailers are concerned, it will be beneficial.
Who Can You Turn to for Clarity? Best, Inc.
Are you having a hard time understanding any or all of the benefits of the USMCA? We can help.
Contact Best Inc. for quotes and to find out how we can best support your e-commerce business.