The Customs zone of Canada-United States-Mexico Agreement (CUSMA) presents an exciting opportunity for foreign companies looking to explore international trade. With a market volume covering over 487 million people and a combined GDP of approximately 23 trillion USD, CUSMA is the largest free trade region in the world. It is a vast market waiting to be tapped into by foreign companies.
While the countries that trade with CUSMA the most are China, Japan, South Korea, and the European Union, there is untapped potential for companies from any part of the world to enter the market and establish themselves as key players. By partnering with local counterparts, foreign companies can identify areas of demand and build relationships with businesses in the region.
- what a foreign company should know about CUSMA
The managing body of CUSMA is the United States-Mexico-Canada Agreement Commission (USMCA), which oversees the implementation and enforcement of the trade agreement. This commission consists of a representative from each member country. Each country within CUSMA brings its own advantages to the table. The United States, with its status as the world’s largest economy and its proximity to the other CUSMA countries, makes it an ideal logistics hub. Canada ideal for placing your R&D center as well as gaining access to advanced automation and technology systems. Mexico appears to be turning into a manufacturing hotspot due to low wages. Mexico’s strategic location provides easy access to both the Atlantic and Pacific oceans, making it an attractive destination for shipping and logistics.
With the implementation of the Canada-United States-Mexico Agreement (CUSMA), foreign companies now have an unprecedented opportunity to expand their businesses in North America. The CUSMA customs zone offers simplified trade regulations and lowered barriers to entry, making it an advantageous environment for foreign producers looking to tap into the vast North American market.
To do business in CUSMA, foreign companies must follow a few guidelines. As such, they must ensure their products meet the CUSMA’s rules of origin, obtain a CUSMA Certificate of Origin, and comply with the CUSMA’s intellectual property laws, environmental standards, and labor regulations.
For more information about CUSMA, please visit the website of the Secretariat.
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how foreign manufacturers can improve their supply chain under CUSMA
Foreign producers can enhance their supply chain management by considering strategic approaches as follows:
(1) They can keep their headquarters in the country of origin so to be able to make strategic management and marketing decisions across the supply chain from there.
(2) Founding or moving a research and development (R&D) center in/to a CUSMA country can provide numerous benefits, all depending on available government support and industry clustering.
(3) Exporting resources, materials and parts from the country of origin to Mexico can help meet the 75% value-added requirement and reduce transportation costs.
(4) Manufacturing or processing in Mexico can take advantage of lower labor costs and fulfill the value-added requirement.
(5) By operating a warehouse and distribution center in the US and then selling products in both the US and Canada at a premium price, foreign companies can further streamline their operations and logistics.
As we can see to succeed in CUSMA, foreign companies should approach the region strategically, considering the unique opportunities and limitations of each country within the customs zone. By investing in R&D, sourcing locally, and manufacturing in Mexico, foreign producers can benefit from preferential tariffs and thrive in one of the largest free trade regions in the world.