Canada Joins the U.S and Mexico in New North American Trade Agreement

Canada confirmed that it has reached agreement with the United States and Mexico on a new trade agreement to replace the current North American Free Trade Agreement (NAFTA). The trilateral agreement was reached just prior to the U.S. government submitting a bilateral U.S. – Mexico agreement to Congress for approval.

The new trilateral agreement, called the United States – Mexico – Canada Agreement (USMCA), includes important changes to NAFTA including (as reported):

Automotive Sector:

Canada and Mexico will be allowed to export up to 2.6 million units annually without facing U.S. tariffs – roughly a 40% increase over current levels. However, the USMCA calls for at least 75% of the content to come from within the three countries and be manufactured by workers making an average of US$16 per hour.

Dairy Sector:

Canada will eliminate its ‘Class 7’ milk pricing system allowing for greater access to the Canadian market by U.S. producers.

Increased De Minimis Values:

Canada will increase its de minimis levels to C$150 for duties and C$40 for taxes allowing for these low value shipments to enter Canada without the additional costs.

Section 232 Duties on Steel & Aluminum:

The agreement does not seek to repeal the US Section 232 trade action or Canada’s retaliatory tariffs. It does protect Canada and Mexico from future Section 232 tariffs for an initial 60 days while the parties try to negotiate a solution.

Agreement Term:

The agreement has a 16 year term with an initial review period under which issues may be discussed and corrected before such issues grow into major irritants or trade actions.

Please contact your local Delmar International representative or our North American Customs Advisory Services Group at AdvisoryServices@delmar.ca for additional information and assistance.

Additional References:

USTR Fact Sheet 1

USTR Fact Sheet 2

USTR Fact Sheet 3

USTR Fact Sheet 4

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