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A new free trade agreement : the USMCA replaces the NAFTA

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After several months of negotiations, the United States-Mexico-Canada Agreement has been agreed on and should be signed soon. Valid for 16 years, with the possibility for the signatory countries to update it after 6 years, the agreement is open to renewal.

Implementation of the USMCA

On 30 September, the three signatory states concluded the agreement. However, it will come into effect only after having been signed by the parliaments of the 3 countries and submitted to the US Congress in January 2019. Donald Trump would like to sign the USMCA at the end of November with Canadian Prime Minister Justin Trudeau and the Mexican President Enrique Peña Nieto.

Sectors affected by the new free-trade agreement

The USMCA includes several changes compared to NAFTA:– In the automotive sector, at least 75% of the value of the parts must come from North America to be exempted from custom taxes and part of the workers must be paid at least $ 16 an hour, which makes Canada able to compete with Mexico.
– Arbitration of commercial disputes is submitted to a binational committee that applies the rules of the treaty. A company no longer has the possibility to sue a signatory State in case of dispute.
– E-commerce benefits from the new agreement with the increase of the threshold for sales taxes and customs duties. The threshold goes from $ 20 to $ 40 for taxes and from $ 20 to $ 150 for customs.
– The agreement expands the conditions for free trade in the dairy and poultry sectors. The United States will have access to the Canadian market up to 3.5%
– Patents for biologic drugs are protected for 10 years.

On the other hand, the regulations do not change for the Canadian cultural exception and extend to digital content. The important custom taxes on steel and aluminum exported to the United States from Canada also remain and are not affected by this new treaty.

For advice and information on formalities related to your customs obligations and trade opportunities in North America, contact ASD Group experts.

This article is intended for informational use only and does not constitute legal, financial or tax advice. For specific advice applicable to your business, please contact us.

ASD Group, your preferred expert contact in international development, VAT and international taxes, customs operations, social regulations and business strategy.

ASD Group works for you using the latest software technologies available and the advanced skills of our teams. Contact us for more information!

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