How can your business benefit from the changes made to NAFTA in the Canada/United States/ Mexico Agreement?

How can your business benefit from the changes made to NAFTA in the Canada/United States/ Mexico Agreement?

In this period of economic recovery, it is more important than ever for Canadian companies to take advantage of the Canada-United States-Mexico Agreement to export their products and services to the United States and Mexico. Three years after its ratification, here is how this trade agreement, which replaces NAFTA, continues to simplify things for Canadian companies.

The benefits of CUSMA for your industry or SME

CUSMA has had a significant impact on a wide range of Canadian industries. Advantageous to the automotive, textile and aluminium/steel industries, but disadvantageous to dairy producers, this trade agreement has improved overall export conditions to the United States and Mexico. You will find below a reminder of the benefits of CUSMA for Canadian industries and SMEs.  

Custom duties and Rules of Origin

As in NAFTA, custom duties remain waived between the three countries. It is also worth noting that certain Rules of Origin that determine product eligibility for preferential tariffs have been modified to the advantage of Canadian companies. Among these changes is that the minimum threshold requirement has been increased: goods can now contain 10% of content that does not originate in the exporting country (this is 3% more than under the old NAFTA rules)

What’s more, the Regional Value Content (RVC) regulations have been relaxed. Certain elements can now be considered as being originating content in the RVC calculation  (including “the value of all originating material used in the production of non-originating material” as well as the “transaction value of non-originating material”). In the automotive and parts sector (among others), Canadian companies benefit hugely from the increase in the Regional Value Content threshold! Vehicles must now have 75% Regional Value Content, up from 62.5% under NAFTA.

As well, the RVC of goods sold between related people may be calculated using the transaction value method. For bundles of goods, they are still considered to originate in the exporting country if the value of the non-originating goods in the bundle does not exceed 10% of the total value.

Certification of Origin

Contrary to what was required under NAFTA, the certificate of origin can be completed by the goods exporter, but also the importer or producer. It can also be completed and sent by internet, rather than by the mail, which used to be the only option. As well, now you only have to present an invoice or other proof document that contains minimal information about the origin of the goods.  The Canadian Border Services Agency site explains these requirements and provides a sample certificate of origin.

Reduction of technical barriers

The CUSAM has reduced technical barriers that were impeding trade. The technical regulations and standards now apply equally to the same types of products from all three signatory countries. Conformity assessment authorities (laboratories and testing and certification bodies) have harmonized their accreditation criteria and fees, as well as their licencing and conformity assessment procedures.

However, not all products certified in Canada will be compliant in the United States and Mexico, according to Jean Thibodeau, from the Bureau de normalisation du Québec, “There are bi-national and tri-national standards for certain categories of goods, so it’s a case-by-case process.”

Digital products and services

CUSMA has eliminated tariffs on digital products since they are now included in the new definition of “cultural industry” as ensured by the Canadian government. The same regulations that govern cross-border trade in services are therefore applied to digital services. As a result, the cultural industries exemption also applies to digital services. 

As well, interactive computer services and content published on digital platforms are now protected by civil liability laws. Also, data localization obligations are now applied only to financial institutions, foreign investors and foreign services.

Intellectual property

With the ratification of CUSMA, copyright increased from “the life of the author plus 50 years” to “the life of the author plus 70 years.” What’s more, a regime for regulating the amount of damages awarded was been pre-established for trademark infringement. As for unauthorized misappropriation of trade secrets, criminal remedies are now available, which was not the case under NAFTA.  

Small and medium-sized enterprises

It is easier for Canadian SMEs to do business with the United States, since customs and rules of origin procedures have been simplified and improved under CUSMA. As well, government regulations are more transparent and easily accessible online.

Need more clarification? Deal with a qualified partner.

If you have any doubts about whether or not your products or services can be exported to the U.S. or Mexican markets, schedule an exploratory meeting with one of our export experts.  They will be able to guide you through your export journey for goods, services or technologies.

 

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