Trade Talk Blog S
mall businesses play a critical role in Canada’s economy, accounting for the majority of all businesses and employing millions of people. The new Canada-United States-Mexico Agreement (CUSMA) has brought about several significant benefits and opportunities for Canadian small businesses by enhancing access to the American and Mexican markets while strengthening Canada’s position in trade negotiations.
But, as a small business owner, the uncertainty of trading across borders can be overwhelming. A successful import-export business requires knowledge not just of regional laws and regulations but also of factors that may impact markets on an international scale. And with the implementation of the new Canada-United States–Mexico Agreement (CUSMA) for North American trade, small businesses now have access to secure rules around imports and exports between key market countries, benefiting both their efficiency and profitability.
In this article, we’ll discuss 8 benefits of CUSMA for small businesses that are interested in expanding their operations across North America.
What is CUSMA?
The CUSMA is a free trade agreement that came into effect on July 1, 2020, bringing about changes to regulatory frameworks that importers and exporters operate by. The Agreement is referred to as CUSMA (Canada-United States-Mexico-Agreement) in Canada, USMCA (United States-Mexico-Canada-Agreement) in the United States, and T-MEC (Tratado Mexico-Estados Unidos-Canada-Agreement) in Mexico.
CUSMA reinforces the important elements of the trading relationship between the three countries while adding new provisions to overcome current trade issues. Changes made to the Agreement include incorporating a chapter on customs administration, modernized customs procedures to facilitate the flow of goods between the three countries, and improved technical procedures. The full text of the Agreement and its related texts can be found here.
CUSMA VS NAFTA
The CUSMA replaces the pre-existing North American Free Trade Agreement (NAFTA), which is no longer accepted by customs authorities. CUSMA still maintains the tariff-free market access of NAFTA, with additional outcomes for labor, automotive trade, dispute resolution, energy, agriculture, and agri-food. The Agreement has also been modified to include language on gender and Indigenous peoples’ rights.
Enacted in 1994, NAFTA sought to create a free trade zone for Canada, Mexico, and the United States. Services other than aviation transport, maritime, and basic telecommunications were included in NAFTA and required manufacturers or exporters to complete a certificate of origin.
Importers and exporters should be aware that while their goods may have qualified under NAFTA, they may not automatically benefit from CUSMA. You may want to consult your customs broker to check if your goods qualify.
Following the introduction of CUSMA, the NAFTA certificate of origin is no longer relevant. However, importers are still required to prepare all documentation and include the correct information to certify the origin of their goods.
Certificate of Origin
Importers need to present customs authorities with a certificate of origin that includes the following:
- A statement of who the certifier is (exporter, manufacturer, or importer)
- The certifier’s contact information
- The exporter’s contact information
- The importer’s contact information
- The producer/manufacturer’s contact information
- A description of the goods and the HS Tariff Classification
- Invoice number
- Origin criteria
- Blanket period (if there is more than one shipment)
- Authorized Signature of the certifier and Date
Benefits of CUSMA
Under CUSMA, small businesses can experience operational improvements directly impacting their imports and exports. To benefit from CUSMA, importers must review the regulations under the Rules of Origin to ensure their goods still qualify. For qualifying goods, importers should certify their origin, bearing in mind that they will be subject to a CBSA audit and should keep all records and documents.
That being said, here are 8 benefits of CUSMA for small businesses:
Duty-Free Market Access
CUSMA provides Canadian small businesses more privileged access to the United States and Mexican markets by phasing out tariffs on most Canadian goods. It ensures duty-free market access for over 99 percent of Canadian exports to all three countries. This provision reduces the costs associated with importing and exporting, increasing Canadian small businesses’ competitiveness in foreign markets.
Updated Customs Procedures
With the integration of modern technology, the entire process of importing and exporting goods has become more efficient and streamlined. The updated customs procedures introduced by CUSMA offer a range of benefits for businesses engaged in cross-border trade. Electronic signatures and importers certifying the origin of goods online ensure a faster clearance process, reducing the potential for delays and obstacles in transporting goods across borders. Moreover, eliminating local data as a hindrance in the process is a significant step forward in facilitating seamless cross-border trade.
Raised De Minimis
The de minimis level is the value below which imported goods can enter a country duty-free and with minimized governmental review. With an increased threshold for duty-free imports, businesses can now ship their products to Canada and Mexico without incurring additional taxes or fees, making it easier and more cost-effective for companies to engage in cross-border trade. Similarly, consumers can purchase goods online from international vendors without being subjected to high taxes or tariffs. This, in turn, fosters greater competition and choice for consumers, benefiting the economy, small businesses, and individual consumers.
Lower Delivery Costs
Small businesses entering new markets will significantly benefit from lower delivery costs, especially when relying on express carriers. With the implementation of CUSMA, small businesses can now enjoy seamless border crossing procedures, coupled with cost savings due to lower tariff and non-tariff barriers. Furthermore, the Agreement also allows customs procedure standardization, further streamlining the delivery process and translating to even more cost savings for small businesses.
Improved E-commerce Rules
CUSMA embraces the digital economy by including the first-ever chapter on E-commerce, addressing new challenges for small businesses in the digital age. This chapter streamlines many trade processes, such as paperless customs procedures and the reduction of regulatory barriers to cross-border data flows. It ensures Canadian small businesses’ compliance with new e-commerce regulations, promoting smoother and more efficient transactions and higher customer satisfaction levels.
Intellectual Property Protection
CUSMA includes Intellectual Property (IP) protections that promote innovation and creativity, which are vital for small businesses growth. The Agreement raises the minimum standards of protection and enforcement for IP, improving small businesses’ ability to protect their patents, trademarks, and copyrights. It also includes provisions for protecting intellectual property in cyberspace, boosting Canada’s digital economy’s growth and enabling small businesses to benefit from it.
Labour and Environmental Protections
CUSMA includes new labour and environmental standards that increase labour protections and reduce pollution levels while promoting fair competition. The Agreement includes strong, enforceable labour rights, such as the right of collective bargaining, eliminates forced labour, and ends employment discrimination. It also includes provisions to protect the environment, such as reducing toxic chemicals released and the promotion of sustainable practices in manufacturing. These provisions substantially benefit Canadian small businesses, enhancing Canada’s reputation for good environmental practices, providing a fair market, and preventing unethical labour conditions.
Access to Government Procurement
CUSMA provides Canadian small businesses greater access to government procurement opportunities in the United States and Mexico. Under the Agreement, procurement rules ensure that small businesses receive sufficient information on bidding opportunities and are treated fairly when bidding. This provision enables Canadian small businesses to access an enormous market of public procurement opportunities, helping them grow.
Consulting with a Customs Broker
The changes made to the older free trade agreement can be overwhelming, and regulations can easily change over time. That’s why we strongly recommend that you consult a customs broker who will help you deal with changes, assure compliance, avoid unnecessary fines and delays, and keep businesses up-to-date on all regulations and procedures.
CUSMA is a great opportunity for small business owners to operate in North America. Between NAFTA and CUSMA, CUSMA offers simplified regulations and documentation requirements, making trading easier. It also provides access to government grants and funding that help businesses succeed by removing existing trade restrictions. This helps encourage businesses to take the risks that bring about growth and prosperity.
The mere fact that companies can now save money due to reduced transport costs associated with greater supply chain control under CUSMA proves the immense potential it holds for small businesses looking to expand in the Northern American market. Moreover, companies can now benefit from an increased focus on eco-friendly business practices across the continent and reduced environmental regulations. Ultimately, these improvements lead to a stronger economic and environmental impact while ensuring business success.
CUSMA presents substantial opportunities for Canadian small businesses. With improved market access, intellectual property protection, enhanced environmental and labor standards, and access to government procurement, small businesses can stand out in foreign markets, creating jobs and increasing economic growth. Therefore, Canadian small businesses must take advantage of these benefits to remain competitive and prosper in the North American market.
How GHY Can Help You
At GHY, we are committed to helping you expand across different markets. Book a meeting with one of our Trade Experts, we can help you understand the Customs Act and find the customs valuation method that suits your case―saving you time and money in the long run.
We also provide full-service solutions for managing, tracking, and filing all required paperwork associated with cross-border trade. This ensures that all processes are handled efficiently and accurately so that your shipments arrive on time and comply with applicable regulations. With Breeze Customs at your side, you can rest assured that you’ll receive the best service possible at a competitive rate.