Exploring positive changes in Canada under the USMCA

The USMCA is a boon to Canadian Innovators and creators.   With better protection of IP protecting ideas, skills, and lucrative business ventures.  It is believed that Canada will attain a greater degree of prosperity.  

Prime Minister of Canada, Justin Trudeau was quoted saying “Free and fair trade in North America, a trading zone that accounts for more than a quarter of the world’s economy with seven percent of its population, is in a much more stable place than it was yesterday,” he said. “We now have a path forward.”

“The prime minister and president stressed that the agreement would bring the countries closer together, create jobs and grow the middle class, enhance North American competitiveness and provide stability, predictability, and prosperity to the region.”

Former Conservative prime minister Brian Mulroney issued a statement calling the agreement “a highly significant achievement for Canada” that will benefit all three countries.

“I have not yet had the opportunity to study the full text – and frequently the devil is in the details – but Canada appears to have achieved most if not all of its important objectives in this lengthy and challenging set of negotiations,” he said.

Overview

Canada and the United States share the world’s longest secure border, over which approximately 400,000 people, and goods and services worth $2.4 billion, cross daily.

Canada and the United States have one of the largest trading relationships in the world. Canada is the largest market for the United States—larger than China, Japan and the United Kingdom (Britain) combined.

The globally competitive regional market created under the original NAFTA in 1994 today accounts for nearly 486 million consumers and a combined GDP of more than US$22 trillion.

De Minimis Value

U.S.-based online merchants and couriers are pushing hard for an increase in the de minimis threshold (DMT).

The new U.S. Mexico Canada Agreement (USMCA) could be devastating to retail merchants in Canada and to the nearly 2 million Canadians working in the retail sector.

Under the Trade Facilitation and Trade Enforcement Act of 2015, the De Minimis Value increased from USD $200 to USD $800 on all shipments from Canada to the USA, no matter the country of origin of the products.  

This means all shipments under $800 in value are eligible for duty and tax-free importation to the USA.  Which helps facilitate online small business trade and level the playing field between Canada and USA retailers. 

Canada agreed to increase the threshold from goods shipped into Canada from CAD $20 to CAD $40.   For goods valued between CAD $40 and CAD $150, the tax will be collected and after CAD $150 both duty and taxes will apply.  

Sales taxes vary by province. In Ontario, it’s the HST rate of 13%. In Quebec, it’s the GST-QST rate of 14.975%. If we take the combined sales tax rate of each province, and weight it by sales of retail goods, sales taxes average 12.25% across Canada.

Conclusion

Canada is the only G7 country to have trade agreements with all G7 countries.

The De minimis threshold is an ongoing concern for Canadian retailers as it will not give them the same competitive advantage as importers (foreign retailers) shipping low-value products to Canada. As the Canadian retailer may have higher prices from import duties and taxes.

Canadian retailers hope the federal government will consider granting them the same level of duty exemptions that they have just granted foreign retailers.

When implemented, the USMCA will help Canadians compete globally and prosper in a healthy, integrated North American economy.

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