Express Shippers Mostly Pleased With USMCA, Despite de Minimis Concerns

Express shippers are troubled by a footnote that suggests the U.S. could lower its de minimis rate for NAFTA partners (see 1811060010) and ask that it be removed, said Michael Mullen, executive director of the Express Association of America, during a Nov. 15 U.S. International Trade Commission hearing. Mullen also said the fact that the taxes and duties levels are separate means the $40 Canadian and $50 for Mexico will be the operative de minimis amounts. That Canadian level "is among the lowest in the world," Mullen said, adding that Mexico already offers simplified duties and taxes above $50 and $117, so the administration needs to make sure the pact does not make things worse.

Aside from the de minimis disappointment, Mullen said the U.S.-Mexico-Canada Agreement, which updates the current NAFTA, will be positive for the express shipping industry. The chapter on customs and trade facilitation "is superior to similar chapters in previous trade agreements," he said, both by adding new sections and by being more detailed than the similar chapter that was in the Trans-Pacific Partnership. He pointed to several specifics, such as Chapter 7.7, which requires parties to identify the reason for a border hold, and to reveal the agency responsible for the hold, if it's not Customs.

He said Chapter 7.10 has a welcome emphasis on harmonization, and allows traders to self-file without the use of a broker. He said currently, a Mexican customs broker must be used, and this will "dismantle the onerous process of shipping across the land border in Mexico." In Chapter 7.8, on express shipments, it provides for release immediately on arrival, whereas currently the standard is four hours.

The ITC commissioners, who are charged with estimating the economic benefit of the NAFTA rewrite, heard on Nov. 15 from several constituencies who are critical for Democratic support, especially in the House of Representatives. One is the Sierra Club, which opposes the deal. Ben Beachy, director of the organization's Living Economy program, said the pact does not address what he calls environmental arbitrage. He gave the example of car battery recycling. That was commonly done in the U.S., he said, but when EPA standards on lead pollution tightened, exports of used car batteries to Mexico quadrupled. He said lead poisoning became common around the Mexican facilities, and jobs were lost in the U.S.

The unions that testified did not oppose the deal, though they did not endorse it, either. The lack of explicit opposition to a trade deal had never happened before, according to Michael Dolan, a trade specialist for the Teamsters. He said he wanted to share "our hope that this NAFTA replacement represents a new model, a pivot toward a new paradigm for Americans' participation in international commerce."

He said he hopes that the $16 an hour wage content provision in the auto industry is a floor, not an average, because it will only help put upward pressure on labor wages in that industry if that's so, and if it's indexed to inflation. "I hope [the lack of specificity] is merely an oversight during the hectic end game to the talks," he said. Specifically for the Teamsters, Dolan criticized the fact that U.S. freight rail workers cannot cross into Mexico while Mexican crews serve U.S. rail yards. But, he said, new restrictions on cross-border trucking will help drivers.

Celeste Drake, trade specialist for the AFL-CIO, said that her organization reserves judgment on the new NAFTA. "While there are positive changes in it, including improved labor, rule of origin and investment terms, it is not obvious that the improvements are sufficient to make a meaningful difference to jobs and wages or to Mexico's protection union regime," she said.

She said AFL-CIO members are worried about whether the new deal will stop outsourcing to Mexico of aerospace, steel, aluminum, meat processing, baking and call center jobs, as well as the auto jobs where the deal aims to make a difference. With regard to those efforts, Drake said, "We have significant questions about whether the rule will provide sufficient incentive to create meaningful new U.S. jobs, whether automakers will be able to exploit holes in the rules, and whether automakers will simply ignore the rules and accept the 2.5 percent auto tariffs." She noted that the ITC analysis of the initial NAFTA failed to predict "the mass exodus of auto and auto parts production" to Mexico.