DIPLOMATIC ECONOMY

USMCA Is More Business For Small Business

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By Loretta Greene

On July 1, 2020, the US-Mexico-Canada Agreement (USMCA) entered into force, officially replacing the North American Free Trade Agreement (NAFTA). USMCA is a ground-breaking achievement for US small businesses, and is the first trade agreement ever to include a full chapter dedicated to small business interests.

Supporting and expanding US  small business trade with Mexico and Canada is a top priority for me as the new Associate Administrator for SBA’s Office of International Trade (OIT).  SBA OIT has a team of talented trade finance specialists and finance products to help small businesses involved in international trade to access capital, purchase inventory as a manufacturer or supplier, and expand through trade.  OIT helps ensure small businesses are adequately represented in trade negotiations led by the Office of the US Trade Representative and educates US small businesses on the wide range of federal and state resources that can increase their ability to compete in international trade.

The modernization of trade with Mexico and Canada under USMCA is designed to benefit US small businesses and to ensure more balanced trade. US companies with fewer than 500 employees comprise 65 to 70 per cent of all identified US companies trading goods with our closest neighbors, according to the most recent statistics.

Companies selling goods to Mexico and Canada can now achieve expanded export opportunities under the USMCA.   In 2019, US companies sold US$292.6 billion in US goods to Canada and US$256.5 billion in US goods to Mexico.

As part of USMCA, SBA OIT launched a new international sales information resource site, www.sba.gov/tradetools, which is part of the http://www.trade.gov/usmca to assist small businesses to use USMCA. Both links also connect to pages created by Mexico and Canada.  Small businesses can explore the agreement, learn about the rules, and identify where to direct questions and find resources through these information sharing platforms. Resources include a new Customs and Border Protection’s USMCA Center staffed with experts.

As small businesses use the USMCA, they will find important commitments across the agreement including:

The Small and Medium-Sized Enterprise Chapter creates a SME Dialogue to consider small business trade opportunities and challenges across the three countries.  This is an important innovation to ensure US  small businesses will continue to be heard and considered.

The USMCA Cross-Border Trade in Services Chapter enhances market access.  US small business services can now be provided market access across North America without requirements for a foreign office or foreign representative.

The Customs and Trade Facilitation Chapter increases certainty by providing for advance rulings commitments with expanded scope and a free, publicly accessible websites for advance rulings. 

Furthermore, to decrease unintended trade costs, this Chapter also provides procedures to correct errors.

To support small e-commerce sellers shipping with express services, Canada has raised its de minimis level for North American express shipments for the first time in decades, doubling it from $C20 to $C40 for taxes.

Canada will also provide for duty free shipments up to $C150.

Mexico will continue to provide tax free treatment for shipments up to $US50 and will provide duty free treatment for shipments up to US$117.

The Good Regulatory Practices Chapter, a first in a US trade agreement, specifically includes provisions encouraging the Parties to take into consideration the effects on small businesses in the development and implementation of regulations.  The USMCA’s prioritization of small business traders is exciting as it will increase small business friendly ecosystems in North America and facilitate more trade.

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