CSCMP's Supply Chain Quarterly
February 25, 2020
Forward Thinking

USMCA brings meaningful supply chain benefits, trade experts say

With house passage of trade deal, experts are hopeful the USMCA will become a reality in 2020.

Trade experts say supply chain professionals have much to cheer about now that the United States-Mexico-Canada Agreement (USMCA) is closer to becoming a reality. The biggest deal? The agreement's efforts to address customs administration and trade facilitation, which experts say will go a long way toward streamlining cross-border shipments.

"From beginning to end, it's the totality of [this agreement] that supply chain professionals should be excited about," said Jason Craig, director of government affairs for transportation and third-party logistics (3PL) provider C.H. Robinson, adding that the agreement's Chapter 7, which deals with customs and trade facilitation, represents a sharper focus on those issues than any other trade agreement to date. "NAFTA itself didn't have a whole lot of language around border crossing ... Chapter 7 is focused on that. [Officials have] dedicated a tremendous amount of resources into the cross-border process and improved it across the board." 

For starters, USMCA, which updates and replaces 1994's North American Free Trade Agreement (NAFTA), includes roughly 30 pages of text dealing with customs and trade facilitation compared to NAFTA's three to four pages, Craig said. Key issues include the use of a single window system, which allows the use of a single set of data to transmit shipments across the borders of all three countries, and the acceptance of electronic documents, which eliminates the need to "fumble around with producing original paper documents," Craig explained. Such issues allow customs systems to "talk to each other" while streamlining the documentation required for cross-border shipping. 

"Many [provisions] like that just really modernize Chapter 7 and bring it up to what we feel is the best free trade language that addresses cross-border [shipments]... right now," he added.

Chapter 7 also addresses procedural inconsistencies at ports, according to Ben Bidwell, director of customs brokerage for C.H. Robinson. Currently, within each country ports operate "somewhat independently," Bidwell said, adding that Chapter 7 calls for consistency by going further on advance ruling notifications, which require how certain imports will be treated. Under USMCA, each country has to apply advance rulings uniformly throughout its territory; there can be no variance from port to port, which is often the case today. 

"Essentially, if you're ABC importer and you're importing plastic cell phone cases through [the Port of] Long Beach and [the Port of] New York, you could get a request or notice from customs in [Long Beach] saying 'we don't agree with your tariff classification, we think it should be x,' meanwhile New York is okay with a different classification. The USMCA has done a lot to help address these inconsistency issues."

Congress has 90 days from the time the text of the USMCA is filed to approve it. With the House passage on December 19, the Senate has until March to take its vote, although it is expected to take it up in January. Mexico ratified the USMCA in June, and Canada still has to approve the deal. Barring any "additional surprises" Craig says industry watchers are hopeful the trade deal will soon be a reality. 

Industry practitioners agree. Greg Hewitt,  CEO of DHL Express US, issued a statement touting the cross-border benefits of the deal following the House passage on December 19.

"The global e-commerce marketplace has fundamentally changed supply chains and trade flows around the world. DHL Express very much welcomes the effort by the US, Mexican, and Canadian governments to modernize the North American free trade framework for this new environment," Hewitt said. "We are in no doubt that the advancements it proposes in areas such as trade facilitation and customs simplification, cross-border data flows, and reduced tariffs and barriers, for example, will benefit the U.S. small businesses and multinational corporations that ship internationally with DHL."

Victoria Kickham, an editor at large for Supply Chain Quarterly, started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for Supply Chain Quarterly's sister publication, DC Velocity.

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