On August 27th. 2018, Mexico and the United States reached a bilateral agreement as part of the renegotiation of the North American Free Trade Agreement (NAFTA) and called on Canada to accept the new terms to maintain the trilateral pact.

There’s still lots of work to be done. The administration is calling the deal with Mexico a “preliminary agreement in principle,” and the U.S. is still hopeful Canada will sign on.

Still, any new agreement is far from final. The administration still needs to negotiate with the third partner in NAFTA, Canada, to become part of any new trade accord. Will Canada can be part of it? “We will see,” Trump said, suggesting that if Canada is prepared to negotiate fairly it should be simple. He said the U.S. would put automotive tariffs on Canadian imports if talks don’t succeed.

 

So far, these are the Key Facts of the Trade Agreement:

1. Automotive Industry

The new deal would require that 75 percent of car content be made in the U.S. or Mexico, according to a U.S. fact sheet. Under the current Nafta, the so-called rules of origin set a minimum of 62.5 percent. The new accord also adds a requirement that 40 percent to 45 percent of auto content must be made by workers making at least $16 per hour.

That measure could move some production back to the United States from Mexico and should lift Mexican wages, the White House official said.

2. Sunset Clause

The United States and Mexico agreed to a 16-year lifespan for the deal, with a review every six years that can extend the pact for 16 years, softening a demand by the U.S. for a clause to kill the pact after five years unless it’s renewed by all parties.

3. The seasonality provision for Mexican agricultural exports

The new agreement will maintain zero tariffs on agricultural products marketed between the United States and Mexico and will address agricultural biotechnology to support innovations in agriculture.

4. Steel and Aluminum tariffs

The preliminary trade agreement reached by the US and Mexico will not remove the US’ existing Section 232 tariffs on Mexican exports of steel and aluminum in its current state. Steel and aluminium will remain with 25 percent tariffs and 10 percent tariffs respectively. Mexican officials said they expected the tariffs to be addressed down the road

5. Chapter 19

The administration proposed getting rid of NAFTA’s Chapter 19 dispute settlement mechanism, which has long been a thorn in the U.S.-Canada relationship. Such a move could result in a lot more tit-for-tat trade actions and potentially disrupt business between the countries.

Priorities for Mexico include maintaining equal standing in a partnership that has been key to national economic well-being. An 18-page document from the office of the United States Trade Representative outlines goals that center on reducing U.S. trade deficit with partners and maintaining economic opportunities for Americans.

Canada’s focus is modernization, including a more competitive technology sector and progressive measures like addressing climate change and gender equality.

How would this impact your business so far?

These negotiations may reshape the supply chains for retailers, manufacturers, and agriculture producers. Since its inception more than 20 years ago, U.S. trade with Canada and Mexico has grown faster than with any other trading partner nation.

We all know that, when the economy is doing well, 3PLs tend to do well. It is thus important for the 3PL industry that any changes to NAFTA does not slow the flow of goods, or increase the costs of goods to the end consumer.

From now on, The ILS Company is your Cornerstone

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The ILS Company is an Offshore Group Company dedicated to provide integrated logistic services to manage your supply chain. We effectively plan, implement and control your supply chain, including transportation, import/export, distribution and warehousing in the U.S. and Mexico.

ILS has operations in the U.S. and Mexico, maintaining close partnerships with Customs Brokers, Mexican carriers and/or transportation companies. Evaluating each partner prior to entering a business relationship seems like common sense, yet the extent and depth of the evaluation required is usually undermined in exchange for a quick response or a cheap rate. While cost will always play a part, you should rate your partners for their in-route tracking ability, communications technologies, theft prevention and emergency response preparedness and security solutions that rely on IT applications rather than manual labor.

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ILS is on your side

The ILS Company has been shipping internationally for 17 years. The ILS Company’s mission is to contribute to the competitive advantage of our Customers by providing reliable, timely and integrated logistics services, information, and customized solutions in transportation, distribution, storage, and customs; always maintaining the integrity of goods and consistently delivering excellent Customer service.

Our import and export services are designed to facilitate international door to door shipments. We will take the time to analyze your situation before we propose a solution. Our services can be as simple as guiding you to collect and present complete Customs documentation or tailored to include Customs filing, bonds, duties and taxes as well as Customs Broker selection.

Whether you need to manage your inventory in Mexico, fullfill compliance with tax and customs laws in Mexico or temporarily import commercial samples and professional equipment our experienced Import and Export team will perform the services that meet your needs.

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We will keep updating more blog post, as soon as more information becomes available.

 

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