CUSMA, the Canada-United States-Mexico Agreement, came into effect on July 1st, replacing NAFTA. In Canada, it’s called CUSMA but in the US, it’s USMCA (United States-Mexico-Canada Agreement) and TMEC (Tratato Mexico-Estados Unidos-Canada) in Mexico.
With the exception of new Chapters on labour, e-commerce, SME’s and the environment, CUSMA is a cut-and-paste copy of NAFTA. The automobile industry is the most affected, as its rules of origin are more demanding, with higher percentages of North American content, new Labour Value Content rules, and a new requirement to use 70% of North-American steel and aluminium. Some of these new requirements are phased-in over several years. There are also minor changes in the rules of origin for garments, chemicals and cosmetics. For dairy, poultry and egg products, Canada has managed to maintain its supply management system, which the US wanted dismantled, but had to open the door to more US products, representing 3.6% of the Canadian market. No change regarding customs processes, with the exception of the NAFTA Certificate of Origin form replaced by an Origin Certification similar to the CETA one, though more detailed. And the Origin Certification can now be issued by the importer, which is a novel, unusual provision.
The new Agreement is great news for Canada and it’s also good news for European firms already active or interested in the Canadian market, as it provides stability to the Canadian economy. And for a European exporter selling in Canada, serving the US market from a Canadian distribution center is both efficient and economical. Thanks to CETA, European products enter Canada free of customs duties. They can be re-exported and enter the US free of duty if they don’t exceed the US$800 ‘’de minimis’’ limit, an ideal tool for B2C and e-commerce. The proximity of the US border also makes it easy to set-up a reverse logistics system to receive and consolidate any returns.
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