The United States, Mexico, and Canada Agreement (USMCA) recognizes the fundamental role of small and medium-sized enterprises (SMEs) as engines of the North American economy. In fact, Mexico and Canada are the top two export destinations for U.S. SME goods. In 2016 (latest data available), 82,000 U.S. small and medium sized businesses exported $51.2 billion in goods to Canada, and 53,000 U.S. small and medium businesses exported $76.2 billion in goods to Mexico. Now, for the first time in a U.S. trade agreement, the USMCA includes a dedicated chapter on SMEs, as well as other key provisions supporting small and medium-sized businesses throughout the agreement.
CHAPTER ON SMALL AND MEDIUM-SIZED ENTERPRISES
Key Achievement: First SME chapter in a U.S. Trade Agreement
The chapter promotes cooperation between the Parties to increase SME trade and investment opportunities. It establishes information-sharing tools that will help SMEs better understand the benefits of the agreement and provides other information useful for SMEs doing business in the region. The chapter also establishes a committee on SME issues comprised of government officials from each country.
Key Achievement: Establishing an SME Dialogue with Stakeholders
The chapter launches a new framework for an ongoing SME Dialogue, which will be open to participation by SMEs, including those owned by diverse and under-represented groups. The Dialogue will enable participants to provide views and information to government officials on the implementation and further modernization of the agreement, thereby ensuring that SMEs continue to benefit.
PROVISIONS THROUGHOUT THE USMCA WILL BENEFIT SMEs
Key Achievement: Cutting Red Tape at the Border via Increased De Minimis Levels
The Customs and Trade Facilitation Chapter includes new provisions that will help reduce costs and bring greater ease and predictability to cross-border transactions.
The Customs and Trade Facilitation Chapter:
- Creates a new informal shipment level of $2,500, so that express shipments under that amount benefit from reduced paperwork.
- Raises the de minimis level for Canada for express shipments for the first time in decades, with up to C$40 exempt from duties and taxes (increased from C$20) and up to C$150 exempt from duties.
- Sets the de minimis level for Mexico up to US$50 exempt from duties and taxes, and raises it up to US$117 duty-free for express shipments.
The Customs and Trade Facilitation Chapter will also help cut red tape and ease international trade for SMEs through provisions requiring online publication of laws, regulations, contact information, tariffs, taxes and other fees; documentation required for customs clearance; and procedures to correct errors. In addition, the chapter includes an expanded scope of advanced rulings by customs authorities, as well as provisions requiring an online searchable database for customs information for the benefit of the trade community, and expedited release of express shipments.
Key Achievement: Supporting the 21st Century Economy
The USMCA includes a new chapter on digital trade that contains the strongest provisions of any international agreement, supporting internet-enabled small businesses and e-commerce exports.
The Digital Trade chapter:
- Prohibits customs duties on digital products distributed electronically (e-books, videos, music, software, games, etc.).
- Protects cross-border data flows and limits data localization requirements.
- Limits Parties’ ability to require disclosure of proprietary source code and algorithms.
Key Achievement: Promoting Small Business Participation in Government Procurement
The USMCA facilitates the participation of U.S. and Mexican SMEs in government procurement by providing notices of intended procurement in a single electronic portal, and encouraging the conduct of procurement by electronic means, thus increasing transparency and efficiency for small and medium-sized businesses.
The Government Procurement chapter provides specific support for small and medium-sized businesses by:
- Focusing on policies to promote participation by small businesses in government procurement, including by providing incentives to make tender documentation free of charge and to consider how to better structure procurements to help U.S. small businesses compete.
- Maintaining, for both Mexico and the United States, exclusions consistent with those under the NAFTA, including, for the United States, the exclusion of the small business set aside.
Key Achievement: Protecting the Intellectual Property of Innovators
The USMCA Intellectual Property (IP) Chapter provides strong and effective protection and enforcement of IP rights critical to driving innovation, creating economic growth, and supporting American jobs, including the highest standards of protection for trade secrets of any prior U.S. FTA. The USMCA creates a Committee on Intellectual Property Rights that is explicitly charged with, among other things, engaging on “intellectual property issues particularly relevant to small and medium-sized enterprises.” The Chapter requires Parties to cut red tape in obtaining protection of IP rights, including by streamlining application procedures and making public information concerning applications for trademarks, geographical indications, industrial designs and plant variety rights available online. This reduces transaction costs that are often a particular barrier to market entry for SMEs.
Key Achievement: Supporting Cross Border Trade in Services for Small Business
The USMCA eliminates local presence requirements for cross-border service providers, benefitting small businesses by removing the unnecessary burden of opening a foreign office as a condition for doing business.
The Cross-Border Trade in Services Chapter also has an SME provision encouraging Parties to consider the effects of regulatory actions on SME service suppliers, and seek to ensure that authorization procedures for a service sector do not impose disproportionate burdens on SMEs.
Key Achievement: Supporting Small Businesses through Good Regulatory Practices
The USMCA includes, for the first time in a U.S. trade agreement, a chapter on good regulatory practices, which refers to good governance procedures that governments apply to promote transparency and accountability when developing and implementing regulations. Such practices can support the development of compatible regulatory approaches among the Parties, and reduce or eliminate unnecessarily burdensome, duplicative, or divergent regulatory requirements. Exceeding NAFTA and TPP standards, the chapter includes provisions encouraging Parties to take into consideration the effects on small businesses in the development and implementation of regulations.