Yes, NAFTA Affects Your Industry Too

The symbiotic relationship between trade compliance and supply chain is the cornerstone of a shipper’s competitive advantage. You know this well, but you may be unfamiliar with how NAFTA affects your entire supply chain.

Service providers who stay current on the global trade landscape are assets to their clients. I know, I used to be that client. As much as I would educate myself on the newest changes in trade compliance, being able to leverage my service providers for added input greatly contributed to our supply chain’s strength.

Companies can’t afford to have non-compliance issues slow the movement of goods or stop shipments to certain areas of the world. They need informed and strategic partners at every level of their supply chain.

Though a company might not leverage duty-free treatment under the North American Free Trade Agreement, there are some additional elements to consider that might impact your supply chain.

NAFTA went into effect in 1994 and provides tariff-free treatment to goods traded between Canada, Mexico, and the United States. In May 2017, President Trump notified Congress of his intent to renegotiate this agreement. February 2018 marks the seventh round of talks, which to date have had minimal progress on renegotiation.

What is Impacted?

Not only are products eligible for duty-free treatment at stake under NAFTA renegotiation, but other considerations could affect your company, such as:

  • Procurement: Possible limitation of U.S. companies’ access to Mexico and Canada opportunities.
  • Content requirement: Proposal to raise the mandated amount of U.S. content within certain sectors.
  • De minimis: Recommendation to raise the de minimis (minimum dollar value of qualifying goods for which formal customs procedures are not required and duties or fees are not collected) threshold in Canada and Mexico to match U.S. de minimis ($800 USD)
  • E-2 Investor Visa companies: The E-2 visa allows individuals to enter and work inside the United States based on an investment they will be controlling while inside the country.NAFTA renegotiation impacts a wide range of entities, including:
  • Importers currently benefitting from the NAFTA program.
  • Any business with brick-and-mortar stores in Canada or Mexico.
  • Businesses driven by government procurement.
  • Businesses founded by, or doing business with, an E-2 visa holder.

Current Renewal Status

Canada, Mexico, and the United States agree they intend to modernize the agreement. Mexico and Canada oppose the U.S. intention to increase U.S. content percentage in the automotive sector.

As of Jan. 31, 2017, six of the seven negotiation rounds had taken place and will continue through the first quarter of 2018. To date, the three parties recognize the importance of negotiations and agree longer rounds of talks might be necessary, especially with the Mexico elections in July 2018.

Though recent negotiations seem optimistic, the risk of NAFTA withdrawal is real and cannot be ignored. Aside from knowing their numbers if losing duty-saving opportunities, companies need to stay informed to ensure their supply chains retain their competitive advantage.