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How the USMCA benefits small businesses.

Everyone knows that there’s a trade agreement between Canada, the U.S., and Mexico, but many people don’t know how this agreement can benefit small businesses.

The United States – Mexico – Canada Agreement (USMCA, or CUSMA as it’s known in Canada) replaced the North American Free Trade Agreement (NAFTA) and came into effect on July 1, 2020. As per Wolters Kluwer, “USMCA is intended to support trade between the participating countries, encourage free and fair trade, and drive economic growth in North America.”

It’s of particular benefit to small businesses, since neighbouring countries are the first places that growing companies will target for export opportunities. For many U.S. companies, it’s closest northern neighbour is Canada.

Here are a few of the specific ways the USMCA helps small businesses.

There are fewer obstacles to doing business. The USMCA eliminates the local presence requirement for businesses offering cross-border services, meaning that companies won’t need to have a physical presence in Canada in order to export here. It also added procedures such as e-signatures, self-certification of origin, and other measures to reduce red tape at the border.

It reduces the cost of moving goods internationally. The Agreement included several changes that increase de minimis values, or the threshold for application of customs duties or taxes. With the threshold set high, there’s less paperwork involved and goods can clear customs faster. Under the USMCA, a new information shipment level was set at USD $2,500. Canada’s de minimis level for taxes was raised to CAD $40, all but eliminating duties and taxes for orders below that amount. (We previously posted about de minimis levels here.)

It offers greater protection for intellectual property. Under the USMCA, violators of patents, trademarks, copyrights, and certificates of origin (even in digital format) are subject to criminal penalties. Copyright protections are also extended to 70 years beyond the author’s life.

It supports e-commerce and the digital economy. Not only does the USMCA exempt digital products from customs duties, it also prevents any member country from imposing data-localization requirements, ensuring that data can move freely across borders from local data centres. It also emphasizes increased collaboration on cybersecurity issues.

The U.S. Small Business Administration has trade tools resource site available for companies in its borders. (In Canada, the Canadian Chamber of Commerce has resources available for Canadian companies.) And of course, visit our website for more information about exporting to Canada.


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