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NFTC Applauds Bipartisan Push by U.S. Governors to Modernize and Increase De Minimis in NAFTA Negotiations

Ahead of December NAFTA meetings, Governors call on negotiators to raise de minimis in order to benefit businesses, consumers, and suppliers across borders

Washington D.C. –
The National Foreign Trade Council (NFTC) today applauded a bipartisan group of state Governors who are calling on NAFTA negotiators to raise de minimis levels in NAFTA renegotiations.

Cutting customs red tape and raising the de minimis level in Mexico and Canada as part of the renegotiation of the NAFTA will help grow jobs, promote growth, and increase exports. NFTC has helped to spearhead efforts to modernize and expedite customs procedures with our NAFTA partners making special mention of the issue in comments submitted to the U.S. Trade Representative's (USTR) office ahead of the start of renegotiations noting that an increased de minimis level would "unlock the exporting potential of small and medium-sized businesses (SMEs) in particular, who often find complex customs procedures and costs to be among the most serious obstacles to trade."

The governors recently sent a letter to U.S. and Canadian negotiators ahead of intersessional meetings on NAFTA that will be held in Washington D.C. in mid-December. In their letter, the bipartisan Governors highlight how raising de minimis levels would cut red tape at borders that often slow deliveries and increases costs, hurting both businesses and consumers.

"In global trade, de minimis levels are important, because they permit small international transactions to take place without the lengthy delays, high costs, and red tape associated with larger scale commercial importing," the Governors write. "When a de minimis level is too low, the combined effects of the tariffs and the administrative collection process inflate the total cost of otherwise inexpensive goods. Low de minimis levels are particularly burdensome for consumers, small businesses, and manufacturers who rely on sourcing small components from a variety of suppliers."

Low and outdated de minimis and informal clearance levels are hindering the flow of low-value shipments coming from U.S. exporters to consumers in Mexico and Canada while, at the same time, Mexican and Canadian exporters benefit from state of the art customs procedures and a de minimis threshold of $800 in the United States. The NFTC urges USTR to make efficient customs procedures and higher de minimis levels in both Mexico and Canada a priority during the next round of NAFTA negotiations.

The full text of the Governors letter:

The Honorable Robert Lighthizer
Ambassador
United States Trade Representative
600 17th Street, NW Washington, DC 20006

The Honorable Chrystia Freeland, P.C., M.P.
Minister of Foreign Affairs House of Commons
Ottawa, ON K1A 0A6

November 21, 2017

Dear Ambassador Lighthizer and Minister Freeland:

As Governors of U.S. States, we are keenly interested in protecting and enhancing the vibrant trading relationship between the United States and Canada.

During his recent address to the National Governors Association, Prime Minister Trudeau pointed out that 37 U.S. States count Canada as their top export destination. Similarly, Statistics Canada reports that U.S. states are the top export destination for all 10 of Canada's provinces and represent more than 75% of Canadian exports.

It is in the spirit of this strong economic interdependence that we write urging you to use the upcoming renegotiation of the North America Free Trade Agreement (NAFTA) as an opportunity to modernize and increase the long-standing C$20 (US$15) de minimis level for low value goods entering Canada.

In global trade, de minimis levels are important, because they permit small international transactions to take place without the lengthy delays, high costs, and red tape associated with larger scale commercial importing. When a de minimis level is too low, the combined effects of the tariffs and the administrative collection process inflate the total cost of otherwise inexpensive goods. Low de minimis levels are particularly burdensome for consumers, small businesses, and manufacturers who rely on sourcing small components from a variety of suppliers. As you know, the United States recently raised its de minimis threshold on imported goods to $800, while Canada's C$20 (US$15) threshold remains among the lowest in the industrialized world. As the global economy continues to see increased online sales that result in direct shipments to purchasers, Canada's low threshold for the collection of duty and tax creates unnecessary price increases for Canadian consumers and hinders North American manufacturers' supply chains on both sides of our shared border. A modernization of the Canadian de minimis level would be beneficial to both countries. By reducing the cost of goods that Canadian manufacturers obtain from U.S. suppliers, they can obtain timely and cost effective delivery of necessary business inputs.

A modernization of the de minimis level would give Canadian consumers much needed relief from prices that have been inflated by 30 year old tariffs on goods that may not be available domestically. The policy change would also benefit U.S. suppliers and small businesses who are anxious to provide their Canadian customers with products that are affordable and readily available.

We are proud of the strong trading relationship between our states and Canada, and believe that the modernization of NAFTA will only further enhance this relationship. Raising the Canadian de minimis threshold will strengthen the North American supply chain. It will benefit businesses and consumers in both Canada and the United States so that commerce between our two countries can continue to prosper.

Sincerely,

Gary Herbert, Governor of Utah
Kate Brown, Governor of Oregon
Larry Hogan, Governor of Maryland
Charlie Baker, Governor of Massachusetts
Daniel Malloy, Governor of Connecticut
Paul LePage, Governor of Maine
Steve Bullock, Governor of Montana
Terry McAuliffe, Governor of Virginia
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About the NFTC

Serving America's Global Businesses Since 1914- The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules- based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.
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