Published by todaystrucking.com, October 3, 2018 —
TORONTO, Ont. – Whether you call it USMCA or the unofficial brand of NAFTA 2.0, North America’s new trade agreement is being greeted with a sigh of relief by transportation industry lobbyists and analysts alike.
“We were surprised that we were actually able to get the agreement since we heard there were issues,” says Jed Mandel, president of the Truck and Engine Manufacturers Association. “It was pretty last-minute.”
Trade negotiators had been at the bargaining table since August 2017, but it was only at the 11th hour before a U.S.-imposed deadline that a deal including Canada was secured. Now the details of the U.S.-Canada-Mexico Agreement (USMCA) need to be ratified by the governments involved.
Chris Brady, a New-York based analyst and the principal for Commercial Motor Vehicle Consulting, says NAFTA’s outright cancellation – threatened on occasion by U.S. President Donald Trump – would have been disastrous. “It’s not substantially different from the current deal,” he says of the USMCA, referring to the way the three economies have been integrating themselves since 1994. “It’s not a major restructuring of NAFTA, which is good.”
But there are differences. Business groups continue to dig into the details and participate in conference calls with Global Affairs Canada to determine exactly what has changed in terms of the supply chain.
“The government of Canada delivered the best deal possible. Now it’s up to the supply chain to take some time to understand what this deal means to our businesses,” said Canadian Trucking Alliance (CTA) president Stephen Laskowski.
There’s no question that free trade makes a difference in the business of cross-border trucking, affecting everything from freight volumes to the sourcing of components for the trucks themselves.
The freight rolling between Canada and the U.S. was valued at $582.4 billion between 2016 and 2017, according to the U.S. Department of Transportation. In 2017, trucks carried half the $300 billion of goods traveling to the U.S. from Canada, and 65.7% of the $282.5 billion of goods that were bound for this side of the border.
“This deal will introduce changes to our customer base and possibly our cross-border operations. Identifying all the changes will take time to unravel,” Laskowski said.
Commitments to streamline
The USMCA text includes commitments to streamline the way goods are moved across the border. Each country, for example, commits to using information technology that expedites procedures followed when releasing goods. There’s also the pledge to coordinate procedures at adjacent ports of entry where specific facilities or examinations are needed to process the freight.
An initial review by the Canadian Trucking Alliance has identified potential revisions to the temporary admission of goods as it relates to in-transit moves, changes to promote electronic submissions, and potential shifts in warehousing rules.
Each country is committing to establishing a “single window” for electronic submissions of documents and data, it adds. There may even be changes to the administration of customs penalties – including how they are imposed, or the way “clerical” or “minor” errors are treated.
Text in the agreement includes further commits to facilitate trade using programs designed to improve the movement of goods through a port of entry — and if possible aligning hours of service, joint customs inspections, and shared facilities, the alliance says.
“The previous NAFTA, nearly 25 years old, was due for modernization while ensuring the open and free market our members rely upon to remain globally competitive,” the Motor and Equipment Manufacturers Association (MEMA) said in a statement. It’s still looking to see how provisions and rules will affect the manufacturing of motor vehicle parts. “The potential strength and longevity of this agreement will be in the details.”
But the automotive sector that accounts for much of the trade flowing across the Canada-U.S. border has been spared the threat of U.S. 232 national security tariffs, although Trump has since admitted the threat was a bargaining tactic.
“The United States-Mexico-Canada Agreement will continue to provide our members, which have a footprint in all three countries, with preferential access to the U.S. market,” said David Adams, president of Global Automakers of Canada.
Still, 25% tariffs on steel and 10% tariffs on aluminum remain, and those have been pushing the price of things like specialty trailers higher.
“The steel and aluminum tariffs are still in effect and apparently are under negotiations. This is still a very troublesome issue and we are very concerned as we have indicated in the past,” says Don Moore, director – government and industry relations for the Canadian Transportation Equipment Association, whose members include such manufacturers. “We need the tariffs to be removed as soon as possible, particularly with our membership being largely small- and medium-sized entities who are large users of steel and aluminum.”
Brady expects the steel tariffs to remain for awhile yet. “The reason for that is President Trump thinks trade deficits are due to unfair trade practices and not other economic issues,” he says.
Other changes could affect freight volumes and lanes, depending on the type of business being secured. Those who deal with express shipments, for example, could benefit from higher “de minimis” standards that allow Canadians to spend $150 online before any duties are applied. The limit had been sitting at a mere $20.
“The general feeling was any increase in de minimis values would drive e-commerce,” says Ruth Snowden, executive director of the Canadian International Freight Forwarders Association (CIFFA), also noting how HST doesn’t apply until a $40 limit is reached. “I think it’s going to increase e-commerce.”
To her, the most important factor is the stability that comes with an actual deal.
“Who can operate a business, make investment, in a climate where you’re getting bullied and you don’t know what the future is going to be?” she asks.
“Anything that I think reduces the barriers to transportation, freight transportation, is good, and there doesn’t seem to be anything in this new agreement that raises any problems,” says Robert Ballantyne, president of the Freight Management Association of Canada. But from what he’s seen so far, many changes affect things like intellectual property and the rights for those who hold drug patents. Those are unlikely to affect freight volumes.
“The fact there is an agreement in place, that is good. And that means things will continue pretty much as they have under NAFTA,” he says, “and I think NAFTA’s been a huge success in terms of the growth of trade, which has been a pretty widespread benefit.”
Commercial Motor Vehicle Consulting’s Brady simply stresses that USMCA’s affects won’t be realized overnight.
“Anything in the supply chain, it’s very difficult to change in the short term,” he says.
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