On September 30, 2018, Canada, the United States and Mexico agreed to a new and modern trade agreement called the United States-Mexico-Canada Agreement (USMCA). The USMCA:
The USMCA will only enter into force after the ratification process to implement the agreement is completed by all three countries.
This Tax Insights provides selected highlights of this agreement from a Canadian customs perspective. Additional commentary will follow on how this comprehensive and complex agreement may otherwise impact your business.
Under the USMCA, the automotive rules of origin will require:
Importers, producers and exporters that operate within the automotive industry in the United States, Mexico and Canada need to review these new USMCA requirements in detail to determine whether their vehicles and parts continue to qualify for preferential tariffs once the USMCA is implemented.
The original NAFTA eliminated virtually all tariffs between Canada, the United States and Mexico, with some exceptions. The USMCA maintains these benefits and ensures that the vast majority of USMCA trade will continue to be duty-free. In addition, the Customs Administration and Trade Facilitation chapter intends to standardize and modernize customs procedures throughout North America, which is intended to facilitate the free-flow of goods between the three countries.
Importers, producers and exporters may gain possible synergies from the alignment in customs procedures across the USMCA area, thus ensuring a greater compliance footprint and potentially saving money and resources in their supply chain. The Canadian, US and Mexican customs administrations will also collaborate and share information on many aspects relevant to customs and the flow of goods within the USMCA area.
The USMCA expands the pool of applicants that can apply for a written advance ruling on certain decisions to be rendered by customs officials. Under the USMCA, the application for a written advance ruling can be made by a representative, as well as any other person with a justifiable cause (which is not currently the case in Canada).
The expansion of the ruling applicant pool allows others with an interest in the transaction to gain clarity and certainty by requesting an advance ruling, and potentially having the ability to manage the risks associated with possible unwanted tariff assessments and penalties.
Under the USMCA, clerical or minor errors will not be treated as a breach of customs law.
The distinction of clerical and minor errors does not currently exist in Canada from a customs perspective, therefore this new provision may provide for greater fairness when dealing with the Canada Border Services Agency for certain types of minor clerical errors.
The USMCA increases the limit for express courier shipments from the current CA$20 to CA$150 for duties, and to CA$40 for taxes at the point or time of importation in Canada.
This increased threshold doubles the current available limit for eligible goods with no requirement to file a customs entry. Goods valued between CA$40 and CA$150 will be subject to sales taxes where applicable, but no customs duties; and goods valued at CA$40 or less will not be subject to either duty or sales tax.
The PwC customs practice can help your business:
It is critical for your business to preserve the tariff and trade benefits that will be available under the USMCA.