Upcoming Changes as the USMCA is Signed into U.S. Law

January 30, 2020


The U.S.-Mexico-Canada agreement (USMCA) was officially signed into law this week, updating the 26-year-old North American Free Trade Agreement (NAFTA). Several changes will come with this new agreement including a significant impact on the automotive industry that could see the cost of automobiles increasing. While the final cost of automobiles may go up, cross-border activity between the three countries should increase as well as benefit the trucking industry which makes up, on average, over 60% of total cross-border NAFTA transportation movements.

The USMCA changes targeting the automotive industry include:

  • An increase in the percentage that automakers must produce in North America to qualify for zero tariffs—from 62.5% to 75%. This increase aims to reduce sourcing from other countries.
  • A requirement that 70% of a vehicle’s steel and aluminum must originate from North America.
  • A requirement that 40% - 45% of parts for any tariff-free vehicle must come from a ‘high-wage factory’. These factories must pay a minimum of $16.00 per hour in average salaries for production workers which is triple the current average wage in a Mexican factory. According to a New York times article, U.S. government officials hope this requirement will either force automakers to buy more supplies from the U.S. or Canada or cause wages in Mexico to rise.

In addition, the USMCA opens the Canadian dairy market to U.S. farmers. Canada agreed to open its market to American milk, cream, butter, cheese and other products. In return, the U.S. expanded access to its own market for Canadian dairy and sugar.

The de minimus threshold

Perhaps one of the more interesting parts of the agreement is the de minimis threshold. The term de minimis (Latin for ‘from the smallest’) describes when an item, usually purchased online, passes through customs and its value is compared against the de minimis level set by the destination country's government. The higher the threshold, the better for small businesses and consumers. In particular, it’s good for e-commerce providers and third-party sellers operating through online platforms.

Under the USMCA, the threshold will increase from $20.00 to $150.00 for imports into Canada and $50.00 to $100.00 for imports from Mexico. Currently the U.S. has a threshold of $800.00 but there is a footnote within the agreement that could see the U.S. lower its threshold – a bit concerning and worth monitoring.

It reads:

“Notwithstanding the amounts set out under this subparagraph, a Party may impose a reciprocal amount that is lower for shipments from another Party if the amount provided for under that other Party’s law is lower than that of the Party.”

There are other changes in the USMCA that impact intellectual property, pharmaceuticals, digital trade, the environment and more. Read the agreement in its entirety here.


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Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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Upcoming Changes as the USMCA is Signed into U.S. Law

January 30, 2020


The U.S.-Mexico-Canada agreement (USMCA) was officially signed into law this week, updating the 26-year-old North American Free Trade Agreement (NAFTA). Several changes will come with this new agreement including a significant impact on the automotive industry that could see the cost of automobiles increasing. While the final cost of automobiles may go up, cross-border activity between the three countries should increase as well as benefit the trucking industry which makes up, on average, over 60% of total cross-border NAFTA transportation movements.

The USMCA changes targeting the automotive industry include:

  • An increase in the percentage that automakers must produce in North America to qualify for zero tariffs—from 62.5% to 75%. This increase aims to reduce sourcing from other countries.
  • A requirement that 70% of a vehicle’s steel and aluminum must originate from North America.
  • A requirement that 40% - 45% of parts for any tariff-free vehicle must come from a ‘high-wage factory’. These factories must pay a minimum of $16.00 per hour in average salaries for production workers which is triple the current average wage in a Mexican factory. According to a New York times article, U.S. government officials hope this requirement will either force automakers to buy more supplies from the U.S. or Canada or cause wages in Mexico to rise.
In addition, the USMCA opens the Canadian dairy market to U.S. farmers. Canada agreed to open its market to American milk, cream, butter, cheese and other products. In return, the U.S. expanded access to its own market for Canadian dairy and sugar.

The de minimus threshold

Perhaps one of the more interesting parts of the agreement is the de minimis threshold. The term de minimis (Latin for ‘from the smallest’) describes when an item, usually purchased online, passes through customs and its value is compared against the de minimis level set by the destination country's government. The higher the threshold, the better for small businesses and consumers. In particular, it’s good for e-commerce providers and third-party sellers operating through online platforms. Under the USMCA, the threshold will increase from $20.00 to $150.00 for imports into Canada and $50.00 to $100.00 for imports from Mexico. Currently the U.S. has a threshold of $800.00 but there is a footnote within the agreement that could see the U.S. lower its threshold – a bit concerning and worth monitoring. It reads: “Notwithstanding the amounts set out under this subparagraph, a Party may impose a reciprocal amount that is lower for shipments from another Party if the amount provided for under that other Party’s law is lower than that of the Party.” There are other changes in the USMCA that impact intellectual property, pharmaceuticals, digital trade, the environment and more. Read the agreement in its entirety here.
ABOUT SPEND MANAGEMENT EXPERTS Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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