2019 and 2020 have undoubtedly been quite challenging for trade professionals in North America. With new imposed tariffs, renegotiations of NAFTA, a pandemic, and the US election, 2020 proved to be one of the rockiest years yet in the last decade. With that, it’s likely that across both countries, the trade sector is ready to take advantage of smoother seas ahead for 2021.
Trade in 2021 will be largely impacted by the implementation of CUSMA (renegotiated NAFTA) and new presidential leadership in the US. While CUSMA came into effect this year, the benefits were short-lived, with Trump levying tariffs on Canadian goods like aluminum — and Canada threatened retaliation. In the context of COVID-19 ravaging the global population, supply chains and the economy at large severely disrupted trade.
In an article on the topic in Lexogoloy, Osler Hoskin & Harcourt LLP counsel Alan Kenigsberg and Gajan Sathananthan, said it best:
“2020 has proved to be an eventful year in cross-border trade.”
Below, we’ll be breaking down the elements of CUSMA, a Biden-Harris presidency, and COVID on US-Canada trade in 2021
Enacted in July 2020, this FTA enacted several critical changes to NAFTA. Covered in the recommended reading above, the areas of major change include: rules of origin for automobiles, tariff-rate quotes for dairy products entering into Canada, loosening of who documents countries of origin on goods, etc.
Interestingly, Alan Kenigsberg and Gajan Sathananthan note a unique opportunity for importers that is lesser-known — mostly benefiting US retailers. There were changes to de minimis threshold for importing goods into Canada:
“[…]As part of the negotiations for the agreement, Canada agreed to increase this threshold substantially. In relation to goods imported from the United States and Mexico, taxes are applied where the value exceeds $40, and customs duties are applied where the value exceeds $150. Goods imported from other countries are still subject to the $20 threshold.
This is a comparatively sizable jump, though the change was not as large as requested by the U.S. government.”
The Trump administration’s aggressive footing on international trade — as a result of protectionist ideals — certainly had an impact on Canadian trade. Time and time again, Biden has stated that he would not pursue tariffs in the way that Trump has during the presidency.
There is also an interesting opportunity in terms of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Biden has stated that he would be open to joining the partnership if it was renegotiated.
Think tank Peterson Institute for International Economics senior fellow, Jeffrey Schott, says of Biden’s openness to CPTPP:
“The incoming Biden administration’s domestic policies to strengthen US output and employment and to support the most vulnerable in society should not deter it from attending to the dramatic changes in the Asia-Pacific region.”
The Canadian government was able to source domestic producers of key medical goods and supplies, like masks and ventilators. As of now, it’s likely that the Canadian government is monitoring these goods and determining whether more domestic resources are needed in the face of export restrictions.
If you have any questions about what 2021 looks like for importers in Canada, or you’d like help in mapping out your next year of importing, it is highly recommended that you consult with a customs consultant or customs broker. This ensures that the information you’re working with is factual and that you are privy to all of the regulatory framework that would benefit you.
To contact a customs expert, click here.