NAFTA Turns Into a Three-Way Deal With a New Name

With the last-minute announcement on Sept. 30 that Canada would be joining the free-trade agreement with the United States and Mexico, there will be a new North American Free Trade Agreement covering about $12.5 trillion in trade.

But it will no longer be referred to as NAFTA. Its new name is the United States-Mexico-Canada Agreement, or USMCA.

While the name is changed, many of the provisions governing textiles and apparel will remain the same. “For our sector, there were not the huge changes in the agreement that people had feared,” said Julie Hughes, the president of the U.S. Fashion Industry Association, a Washington, D.C., trade group representing apparel importers and retailers.

Slight tweaks to the new accord mean that sewing thread, pocket linings, elastic bands and coated fabrics made in the three countries must now come from the region. Visible linings are exempt from this requirement.

The trade-preference level for apparel sent from the United States to Canada has more than doubled. In the past, U.S. manufacturers could send up to 9 million square-meter equivalents a year in clothing made from non-regional fabrics to our northern neighborhood. That has been upped to 20 million SMEs.

“This will be big for Southern California manufacturers,” said Steve Lamar, the executive vice president of the American Apparel & Footwear Association, who has been following the free-trade negotiations. “That is something we and many others have been asking for.”

The TPLs on apparel made from wool sent from the United States to Canada have been reduced.

E-tailers are getting a bit of a boost. Mexico and Canada will increase their de minimis shipment value levels, which is the minimum value of an imported shipment that is subject to duties and customs documentation. Mexico is doubling its de minimis from $50 to $100, and Canada is upping its de minimis from 20 Canadian dollars to 150 Canadian dollars.

“One of the objectives in renegotiating the trade agreement was to get Canada and Mexico to increase their threshold on de minimis,” Hughes said, noting that the United States allows up to $800 shipped by e-tailers to come into the U.S. duty-free. “This is a nice thing, especially for smaller companies with customers in Mexico and Canada,” Hughes said. “It makes it easier to do business.”