In about a month, on July 1st, the United States-Mexico-Canada Agreement (USMCA) will take effect. This new, far-reaching trade agreement updates many of the provisions of the North American Free Trade Agreement (NAFTA), which has been in place now for 26 years.
While much of the conversation around the USMCA has been around its impact on auto manufacturers, that industry doesn’t have a major footprint here in Maine. However, there are new rules around agriculture, Intellectual Property (IP) and small business — all of which may be relevant to business owners in Maine.
Here is a brief overview of the changes that are coming with the new USMCA.
Rules for Agriculture
The agreement will facilitate agricultural trade in North America. For example, the United States, Mexico and Canada have agreed to enhance information exchange and cooperation on agricultural biotechnology trade-related matters.
The agreement will also provide greater access to Canadian markets for U.S. farmers who produce such products as dairy, eggs, poultry, wheat and wine. Being so closely situated to the Canadian border, this may provide a new opportunity to Maine farmers. In return, Canadian exporters of dairy and sugar will have greater access to U.S. markets. In total, American agricultural exports are expected to increase by $2.2 billion under the USMCA.
Rules for Intellectual Property (IP)
The USMCA strengthens IP protections by blocking the production of inexpensive knock-off products. According to the United States Trade Representative, the trade agreement will “provide strong patent protection for innovators, enshrining patentability standards and patent office best practices to ensure that U.S. innovators, including small- and medium-sized businesses, are able to protect their inventions with patents.” Adding that it will also “enhance provisions for protecting trademarks … to help companies that have invested effort and resources into establishing goodwill for their brand.”
There are also new protections, such as customs duties and other measures, for products distributed digitally. These protections are expected to increase trade and investment in innovative digital products — such as videos, software, music, e-books and games. These IP protection rules should be a welcome sight to the growing number of Portland area technology startups.
Small Business Provisions
Because the prevalence of small businesses here in Maine, and due to our proximity to Canada, the USMCA’s provision that adjusts the “de minimis shipping value level” for goods entering Canada is of particular interest.
When a good’s value is below that minimum amount, they can move across the border with “minimal formal entry procedures.” Shipments worth up to $150 Canadian won’t be assessed duties otherwise eliminated under the treaty. The de minimis shipping value is $40 Canadian for basic taxation purposes. This should lower the cost to reach Canadian consumers.
Beyond this rule change, the USMCA has a full chapter dedicated to supporting small businesses, including provisions designed to promote cooperation, increase trade and expand investment opportunities.
We Can Help
Contact Filler & Associates to discuss how the new agreement could affect your supply chain. In some cases, changes may be warranted to comply with the USMCA and take advantage of new opportunities.