NAFTA, the North America Free Trade Agreement is the open door for prosperity between the USA, Canada and Mexico.
The agreement was signed by the governments of Canada, Mexico and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994.
The agreement opened the door for open trade, ending tariffs on various goods and services, and implementing equality between Canada, America, and Mexico. NAFTA allowed agriculture goods to be tariff-free such as eggs, poultry and other meats and crops. This allowed corporations to trade freely and import and export various goods on a North American scale. For more details on NAFTA, please visit this link: http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta
Opportunities:
From small businesses to large businesses, from a farm producer to heavy machinery manufacturer and all in between, trade has never been seen such success before. Companies are now able to take advantage of the eliminated or reduced tariffs to sell goods across the borders.
Let’s review some of the industries that benefitted greatly from this agreement in the past 10 years:
• OIL and GAS
With the discovery of San Oil in Western Canada, U.S. and Canadian companies were able to participate in the exploration and the refining of that oil while importing and exporting machinery to achieve the desired results. Manufacturers of pipe and tubular in Mexico were able to export their products to The USA and Canada.
U.S. manufacturers of Steel Plates and other Oil & Gas related essentials were finally able to compete on the market in Mexico after receiving reduction in tariffs.
• E Commerce:
Canadians are viewed as the largest consumers of E-Commerce products in the world. With NAFTA, and the explosion of E-Commerce since 2000, U.S. manufacturers and suppliers of all small goods have experienced unequivocal success in selling to Canadian customers over the internet.
• The Food Industry:
Many farmers and frozen food producers in the USA, Mexico and Canada have seen great success after the implementation of NAFTA in mid 90’s. Authentic Mexican foods are now in most grocery stores in the USA and Canada. The same was achieved by U.S. frozen food producers on the market in Mexico
Challenges:
The success achieved by many industries taking advantage of NAFTA was met with many challenges; I will examine two of those challenges in this article:
• Strict requirements or quality indicators and language demands
The U.S. exporters of cosmetic products were faced with stricter rules to sell in Canada. Some of the demands by the government of Canada included:
a) Labeling must be in English and French. That alone could cause manufacturers great amount of money to alter their label printing machines or purchase new machines and that could increase the price of the products.
b) The Canadian Health administration requires stricter rules on the ingredients of cosmetics and some products would lose its potency if changes are made.
• Border Crossing Issues
When exporting to Mexico, border crossing can be very challenging. Many industries have seen some or all of the following issues happen to their products during the crossing:
a) Trans-loading products at the border have caused delays that caused extra fees imposed by the carriers
b) Trans-loading sensitive products such as electronics and delicate equipment have caused irreparable damages and subsequent loss of money
c) Trans-Loading of products at the border have resulted in mysterious disappearance of products and a subsequent refusal of shipments by the customers in Mexico
d) The use of inexperienced custom brokers can be so fatal to the relationship between the U.S. or Canadian exporters and the importers in Mexico
NAFTA has been a great source of prosperity for companies in the three countries; however, when exporting to Canada or Mexico, companies must evaluate the following critical components:
1. Customs Clearance
Exporters must align themselves with brokers that are familiar with the rules and regulations in the countries they are exporting to. Taking that step can be vital to their success in that country
2. Transporting of Goods
Many exporters use carriers or brokers that Trans-Load at the border with Mexico to save money on transportation. That fatal mistake has caused millions of dollars in damages, delay fees and loss of products. Exporters must utilize the brokers who only deal with No-Trans Load shipping at the border with Mexico. Paying an extra $300 to $500 in transportation cost could ultimately save hundreds of thousands of dollars in the long run.
Sam Karam is President / CEO, SM Transport, LLC, The NAFTA Experts. Email:sam@smtransportllc.com, visit www.smtransportllc.com or call 713-444-5474.
The agreement was signed by the governments of Canada, Mexico and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994.
The agreement opened the door for open trade, ending tariffs on various goods and services, and implementing equality between Canada, America, and Mexico. NAFTA allowed agriculture goods to be tariff-free such as eggs, poultry and other meats and crops. This allowed corporations to trade freely and import and export various goods on a North American scale. For more details on NAFTA, please visit this link: http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta
Opportunities:
From small businesses to large businesses, from a farm producer to heavy machinery manufacturer and all in between, trade has never been seen such success before. Companies are now able to take advantage of the eliminated or reduced tariffs to sell goods across the borders.
Let’s review some of the industries that benefitted greatly from this agreement in the past 10 years:
• OIL and GAS
With the discovery of San Oil in Western Canada, U.S. and Canadian companies were able to participate in the exploration and the refining of that oil while importing and exporting machinery to achieve the desired results. Manufacturers of pipe and tubular in Mexico were able to export their products to The USA and Canada.
U.S. manufacturers of Steel Plates and other Oil & Gas related essentials were finally able to compete on the market in Mexico after receiving reduction in tariffs.
• E Commerce:
Canadians are viewed as the largest consumers of E-Commerce products in the world. With NAFTA, and the explosion of E-Commerce since 2000, U.S. manufacturers and suppliers of all small goods have experienced unequivocal success in selling to Canadian customers over the internet.
• The Food Industry:
Many farmers and frozen food producers in the USA, Mexico and Canada have seen great success after the implementation of NAFTA in mid 90’s. Authentic Mexican foods are now in most grocery stores in the USA and Canada. The same was achieved by U.S. frozen food producers on the market in Mexico
Challenges:
The success achieved by many industries taking advantage of NAFTA was met with many challenges; I will examine two of those challenges in this article:
• Strict requirements or quality indicators and language demands
The U.S. exporters of cosmetic products were faced with stricter rules to sell in Canada. Some of the demands by the government of Canada included:
a) Labeling must be in English and French. That alone could cause manufacturers great amount of money to alter their label printing machines or purchase new machines and that could increase the price of the products.
b) The Canadian Health administration requires stricter rules on the ingredients of cosmetics and some products would lose its potency if changes are made.
• Border Crossing Issues
When exporting to Mexico, border crossing can be very challenging. Many industries have seen some or all of the following issues happen to their products during the crossing:
a) Trans-loading products at the border have caused delays that caused extra fees imposed by the carriers
b) Trans-loading sensitive products such as electronics and delicate equipment have caused irreparable damages and subsequent loss of money
c) Trans-Loading of products at the border have resulted in mysterious disappearance of products and a subsequent refusal of shipments by the customers in Mexico
d) The use of inexperienced custom brokers can be so fatal to the relationship between the U.S. or Canadian exporters and the importers in Mexico
NAFTA has been a great source of prosperity for companies in the three countries; however, when exporting to Canada or Mexico, companies must evaluate the following critical components:
1. Customs Clearance
Exporters must align themselves with brokers that are familiar with the rules and regulations in the countries they are exporting to. Taking that step can be vital to their success in that country
2. Transporting of Goods
Many exporters use carriers or brokers that Trans-Load at the border with Mexico to save money on transportation. That fatal mistake has caused millions of dollars in damages, delay fees and loss of products. Exporters must utilize the brokers who only deal with No-Trans Load shipping at the border with Mexico. Paying an extra $300 to $500 in transportation cost could ultimately save hundreds of thousands of dollars in the long run.
Sam Karam is President / CEO, SM Transport, LLC, The NAFTA Experts. Email:sam@smtransportllc.com, visit www.smtransportllc.com or call 713-444-5474.
