In 1993, President Clinton signed the original North American Free Trade Agreement (NAFTA). The most important free trade agreement of the 20th century was signed one year before Amazon was founded and made no mention of digital goods or e-commerce. This pre-Internet era free trade agreement as overdue for a refresh to reflect new realities.
25 years later, on November 30, 2018, Canada, the USA, and Mexico signed the new United States-Mexico-Canada Agreement (USMCA), aka “the new NAFTA.” The updated agreement was ratified by all three countries in early 2020, and despite lobbying to delay implementation due to COVID-19, went live on July 1st, 2020.
This impacts US to Canada shipments in a big way:
Increase of de minimis
Goods below the de minimis for each country can be imported free from duty and/or taxes. Prior to the new NAFTA, shipments valued at $20 CAD (below the stated de minimis) would not be assessed for duties and taxes; parcels valued above $20 CAD can be assessed by Canada Post (where they also slap on an additional service fee of $9.95 handling fee for inspection).
To facilitate greater cross-border trade, the US negotiated to have Mexico and Canada raise their de minimis shipment values levels. This is the first time in decades that Canada raises their de minimis.
Change in De Minimis on Duties for US to Canada shipments
OLD (before July 1, 2020):
● $20 CAD / $15 USD for postal and non-postal
NEW (in effect as of July 1, 2020):
● $150 CAD / $107 USD for duty relief for non-Postal shipments (NEW)
● $20 CAD / $15 USD for postal shipments (unchanged)
Change in De Minimis on Taxes for US to Canada shipments
OLD (before July 1, 2020):
● $20 CAD / $15 USD for all postal and non-postal
NEW (in effect as of July 1, 2020):
● $40 CAD / $29 USD for tax and duty relief for non-postal shipments (NEW)
● $20 CAD / $15 USD for postal shipments (unchanged)
The new NAFTA agreement also creates a confusing system that treats postal and private carrier shipments differently: Postal shipments remain on the old de minimis.
How to take advantage of this new program?
1) Find an international shipping company that will ship via a private courier service but also is a partner of the USPS. The right shipping mix to Canada typically involves a postal service where duties and tax are prepaid coupled with a private carrier delivered duty paid (DDP) service
2) Ensure that your international shipping carrier can ship via the Low Value Shipment Program so that you don’t need a Canadian business number and can ship via third party registration.
3) Add terms and conditions to your website that state the Canadian consumer is the Import of Record.
Alex Yancher is the CEO of Passport Shipping, the #1 international shipping carrier for ecommerce, backed by top Silicon Valley investors such as M13, Resolute Ventures and Social + Capital. Formerly, he was the co-founder and COO of Lynks, a Y Combinator backed international personal shopping service helping people around the world buy products from the US and China. In three years, Lynks became the largest importer of single parcels into the Middle East. Before Lynks, Alex was a leader on the Business Operations team at Facebook. To learn more from the #1 Canadian Parcel shipping company and a free quote on how much the USMCA impacts your business, please reach out to Sales@passportshipping.com.
