By Rosalyn Steward, Assistant Chief Counsel
On January 15, 2020, the Senate passed the United States, Mexico, and Canada Agreement (USMCA), and on January 29, 2020, President Trump ratified the agreement, solidifying trade with our top two trading partners. The deal will take effect when all three countries have ratified it. Mexico ratified the agreement in June of 2019, however it is still pending in Canada.
For the first time in a U.S. trade agreement, there is a dedicated chapter on Small and Medium-Sized Businesses (SMEs), as well as other crucial provisions throughout the agreement beneficial to SMEs.
The chapter on SMEs promotes cooperation between the U.S., Canada and Mexico (the Parties) to increase SME trade and investment opportunities. It establishes information-sharing tools that will help SMEs better understand the benefits of the agreement, it also establishes a committee on SME issues that will be comprised of government officials from each country. The chapter creates a new framework for an ongoing SME dialogue that will enable SME participants to provide views and information to government officials on the implementation and further modernization of the agreement.
Other Provisions in USMCA That Support SMEs:
The Customs and Trade Facilitation Chapter will cut red tape in cross-border trade by:
- easing international trade for SMEs by requiring online publication of laws, regulations, contact information, tariffs, taxes and other fees; documentation required for customs clearance; and procedures to correct errors.
- expanding the scope of advanced rulings by customs authorities, as well as provisions requiring an online searchable database for customs information for the benefit of the trade community, and expedited release of express shipments
- creating a new informal shipment level of $2,500, so that express shipments under that amount benefit from reduced paperwork.
- raising the de minimis level for Canada for express shipments for the first time in decades, with up to C$40 exempt from duties and taxes (increased from C$20) and up to C$150 exempt from duties.
- setting the de minimis level for Mexico up to US$50 exempt from duties and taxes, and raising it up to US$117 duty-free for express shipments.
The Digital Trade Chapter prohibits customs duties on digital products distributed electronically, supporting internet-enabled small businesses and e-commerce exports, and:
- protects cross-border data flows and limits data localization requirements.
- limits Parties’ ability to require disclosure of proprietary source code and algorithms.
The Government Procurement Chapter facilitates the participation of U.S. and Mexican SMEs in government procurement by providing notices of intended procurement in a single electronic portal, providing incentives to make tender documentation free of charge and to consider how to better structure procurements to help U.S. small businesses compete. The Chapter maintains for the U.S. and Mexico the exclusions that existed under the NAFTA, including the exclusion of U.S. small business set-asides.
- The Intellectual Property (IP) Chapter creates a Committee on Intellectual Property Rights that is explicitly charged with, among other things, engaging on “intellectual property issues particularly relevant to small and medium-sized enterprises.” The Chapter requires the Parties to streamline application procedures and make public information available online on such topics as applications for trademarks, geographical indications, industrial designs and plant variety rights. This reduces transaction costs that are often a barrier to market entry for SMEs.
- The Cross-Border Trade in Services Chapter eliminates local presence requirements for cross-border service providers, benefitting small businesses by removing the unnecessary burden of opening a foreign office as a condition for doing business.
- The Good Regulatory Practices Chapter focuses on good governance procedures promoting transparency and accountability of governments developing and implementing regulations. Such practices can support the development of compatible regulatory approaches among the Parties, and reduce or eliminate unnecessarily burdensome, duplicative, or divergent regulatory requirements. The Chapter includes provisions encouraging the Parties to take into consideration the effects on small businesses in the development and implementation of regulations.
Rosalyn Steward is Assistant Chief Counsel for International Trade. She can be reached at Rosalyn.firstname.lastname@example.org.