USMCA: Salient Features That Small Businesses Must Know About

The United States-Mexico-Canada Agreement (USMCA), which has been in force since July 1st, 2020, is probably the first US trade pact that exclusively focuses on safeguarding the interests of small businesses and opening up new avenues in the partner countries. In 2021, small and medium-sized enterprises (SMEs) did a business of $1.2 trillion and pumped in over $1 trillion in partner countries. In 2019, over 87,000 SMEs in the US exported $59 billion in goods to Canada and over 52,000 small enterprises did a business of over $82 billion in Mexico.   

The above-mentioned information simply encapsulates that small businesses continue to thrive under the USMCA and contribute significantly to the North American economy. The following are some of the key features of the agreement that SMEs must know to draw maximum benefits:

1. A Dedicated Chapter Secures SMEs’ Interests

A separate chapter on SMEs in the USMCA focuses not only on facilitating trade and investment but also on resolving small business issues through a committee composed of government officials from each country. The pact gives the small establishments, especially the under-represented groups, a framework to share ideas with the officials and other stakeholders to make the environment further conducive for them to operate and grow. Information-sharing tools extended by the agreement are quite useful to SMEs for doing business in the region and keeping the USMCA relevant and up to date. 

2. Reduced Red Tape for Faster Cross-Border Trade

The Customs and Trade Facilitation Chapter provides express shipments a provision informal level of $2,500 to cut through the paperwork. For express shipments to Canada, up to C$40 is exempt from duties and taxes and up to C$150 from duties. For Mexico, de minimis level exemption from duties and taxes is up to $50; for express shipments, $117 is duty-free. The chapter also requires online publication of laws, regulations, contact information, tariffs, taxes, and other fees, documentation required for customs clearance, and procedures to correct errors for the benefit of the trading community. Also, the USMCA eliminates the unnecessary burden of opening a foreign office for cross-border service providers as a condition for doing business.

3. SMEs’ Participation in Government Procurement

The agreement facilitates the participation of US and Mexican SMEs in government procurement by providing notices of intended procurement on a single electronic portal and encouraging the conduct of procurement by electronic means for transparency. A chapter on government procurement makes tender documentation free of charge and the entire process better structured to help small businesses increase their participation and compete. 

4. Promotion of Digital Trade and IP Rights Protection

The USMCA also includes digital trade to support internet-enabled small businesses and e-commerce exports. It prohibits customs duties on digital products distributed electronically (e-books, videos, music, software, games, etc.) and protects cross-border data flows while limiting data localization requirements. It also limits parties’ ability to require disclosure of proprietary source code and algorithms. In terms of intellectual property, the USMCA includes a dedicated chapter that provides effective protection and enforcement of IP rights, which are critical for innovation and economic growth. Besides, the chapter reduces barriers and costs to market entry and cuts red tape in obtaining protection of IP rights. It facilitates streamlining application procedures and making public information concerning applications for trademarks, geographical indications, industrial designs, and plant variety rights available online. 

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