Exporters will pay for US free trade agreements
New US free trade agreements with Panama, Korea and Columbia will increase costs for Canadian exporters through new competition and higher Customs processing fees, according to a CME analyst.
Washington—Canadian exporters will face higher shipping costs thanks to new free trade agreements between the US and Korea, Panama and Columbia, says Birgit Matthiesen, special advisor on US affairs to the president and CEO of the Canadian Manufacturers & Exporters (CME).
The Washington-based analyst said the free trade agreements—approved this month by US Congress—will reduce or eliminate tariffs on imports to the US from Korea, Panama and Columbia. By US law, legislation that reduces revenue to the government must be offset in another way, she said, and in this case Canada will be picking up the tab.
“The administration has proposed…to offset the loss of import duty revenue from those three countries by hiking—by almost 65 percent—something called the Customs Merchandise Processing Fee (MPF).”
The fee isn’t charged on NAFTA-eligible shipments, she explained “but a significant portion of our shipments to the United States are not NAFTA. Given the nature of our trade—multiple shipments, lower value shipments, a truck crossing [the border] every 1.5 seconds—you can see that the disproportionate burden of this MPF will fall on Canada.”
“We will again be picking up the tab for more imports into the United States that are duty free, in competition to Canadian goods.”
It’s difficult to calculate how much the MPF increase will cost shippers, but they’re already paying an average of 15 to 20 percent of each shipment’s invoice value to get through the “wall of data” required at the border, she said.
The MPF increase and passenger fee, combined with Buy American positions in the US Jobs Act create a situation that’s “not good” for Canadian manufacturers, she concluded.
CME was preparing a formal response to the changes.
Related coverage: Ottawa seeking waiver from Buy American