With much fanfare the Trump administration renegotiated NAFTA, the trade agreement that defines trade in North America between the US, Canada, and Mexico.
While NAFTA was never meant to be a borderless trade deal, it was supposed to reduce duties and taxes and make trade easier between the three countries.
However, for small businesses in the US there has always been the issue that many low-priced products shipped to Canada and Mexico became subject to import duties.
Canadian and Mexican customer would often complain or ask US sellers to reduce the value of the product to below $16 (Canada) or $50 (Mexico). At those low rates, the shipment would be automatically exempted from duties and taxes, but if a customs agent did not believe the declared value, the shipment could get stuck in processing or returned to the sender.
The simplest way to fix the problem is to convince Canada and Mexico to raise their de minimis levels (read: duty free threshold) to be in line with US levels.
Unfortunately, that did not happen in the USMCA, the replacement to NAFTA which must be ratified by Congress.
Since Congress must ratify USMCA, they do get an opportunity to try to fix some issues, but that requires Canada and Mexico must agree to those changes as well.
With that in mind, eBay released a statement supporting the efforts by Congress to address the de minimis levels issue.
Recently, members of both the U.S. House and Senate sent letters to US Trade Representative Robert Lighthizer in response to troubling language included in the new U.S.-Canada-Mexico Agreement (USMCA).
As the trade agreement replacing NAFTA, the USMCA includes several strong new digital trade provisions but falls far short of gaining meaningful improvements on de minimis levels that enhance frictionless trade for US small businesses.
In fact, not only does the USMCA not secure commitments from Canada and Mexico to significantly increase their already very low de minimis levels, but contains a footnote indicating a willingness to lower the US de minimis level, which was raised from $200 to $800 by Congress in 2015 after years of negotiations.
Furthermore, the de minimis system outlined in the new USMCA is unnecessarily complicated, with separate levels for Canadian and Mexican tax and duty thresholds, amongst other complications.
As the House Members state in their letter “… [this system] threatens to result in more cumbersome and costly procedures for U.S. small businesses exporting to Mexico and Canada, acting as potential new barriers to trade.”
The company applauds all the Members of Congress who have recognized this import US small business trade issue and we will continue to work with members of the House, the Senate and the office of the US Trade Representative to promote small business trade.
Copy of House Letter
Do you ship to Canada and Mexico and do you think that a higher de minimis level will benefit your business? Please use the comments section below or head over to our Facebook Group for Small Business Sellers and interact with other small business owners.