By Nick Lung    Photo：CANVA

The abbreviation of USMCA (United States-Mexico-Canada Agreement) is a trade agreement officially entered into force by the United States, Mexico and Canada on July 1, 2020, to replace the North American Agreement that took effect in 1994. Free Trade Agreement (NAFTA). It has had a multi-faceted impact on the logistics business in North America, especially on cross-border transportation, supply chain management and operational efficiency. These impacts are mainly due to changes in the rules of origin in the agreement, improvements in labor and environmental standards, and the strengthening of digital trade.

USMCA’s main impact on logistics

Simplification and standardization of cross-border logistics processes:

Facilitation of cross-border flow of goods: USMCA retains some of the mechanisms in NAFTA to facilitate the flow of goods between the three countries, and further strengthens the standardization of the flow of goods, especially in the fields of auto parts and agricultural products. This makes the customs clearance and inspection process of goods between the three countries smoother, reduces administrative barriers, and improves logistics efficiency.

Fast customs clearance and digital procedures: The digital trade provisions in the agreement strengthen the free flow of data and standardize the digital customs clearance process, which will help speed up the customs clearance procedures for goods. In particular, the logistics of e-commerce and high-tech products can be transported across borders faster through digital trade regulations.

The automotive industry supply chain has increased demand for logistics:

Impact of rules of origin on logistics needs: USMCA has stricter rules of origin requirements for automobiles and their parts (at least 75% from North America), resulting in the need for automobile manufacturers and parts suppliers to travel between the United States, Mexico and Canada More intra-regional transport. This increases logistics demand within the region, driving truck, rail and sea transport activities between the three countries.

Increased regionalization of production chains: Due to the origin requirements of the automotive industry, companies may need to redesign their supply chains to make them more reliant on parts supply within North America, thereby increasing the frequency of cross-border transportation. This change has promoted the development of North American logistics networks, especially the importance of trucking and rail transportation.

Potential increase in logistics costs:

Increased wages and labor standards: The USMCA requires a minimum wage of $16/hour for some workers in the manufacturing process, especially in the automotive industry. This may push Mexican factories and logistics providers to raise wages, thereby increasing overall logistics costs. In addition, these cost increases may prompt companies to re-engineer their logistics networks to find lower-cost solutions.

Higher compliance costs: The new agreement has improved environmental standards and labor standards, which requires logistics companies to comply with stricter regulations during transportation and may need to take more measures to ensure compliance (such as reducing emissions, improving working conditions etc.), which may increase compliance costs and have a certain impact on operational efficiency.

Impact on agricultural product logistics:

U.S. Dairy Products Access to Canadian Market: The United States has expanded access to the Canadian dairy market, which will increase demand for agricultural product logistics between the two countries. In particular, demand for cold chain logistics has increased, as dairy products require fast and efficient refrigerated transportation.

The continuation of the stable supply chain of Mexican agricultural products: Mexico still maintains the right to export agricultural products to the US market, especially fresh fruits and vegetables. This ensures the stability of the agricultural supply chain between the two countries and supports the continuation of logistics needs. Trucking between Mexico and the United States will continue to play a key role in the agricultural supply chain.

Promotion of digital trade and e-commerce:

Enhanced digital trade provisions: USMCA promotes the free flow of digital goods and reduces barriers to data flow in cross-border trade. This has a positive impact on e-commerce platforms and supply chains that rely on digital products, making cross-border e-commerce logistics more efficient.

Increased demand for e-commerce logistics: As digital trade rules strengthen, cross-border e-commerce transactions will increase, which will drive rising demand for logistics, especially in "last mile" distribution and express delivery services.

Dispute settlement mechanism protects logistics stability:

Guarantees for the resolution of trade disputes: USMCA provides a stronger dispute resolution mechanism, which guarantees the stable operation of supply chains and logistics and avoids the risk of logistics disruptions caused by trade disputes. This is critical to the continued operation and cost control of multinational supply chains.

The impact of USMCA on the logistics industry is manifold. Changes in the agreement's rules of origin and labor and environmental standards have promoted the reorganization of supply chains in the region, leading to increased demand for cross-border logistics. At the same time, the promotion of digital trade terms has made cross-border e-commerce logistics more convenient. However, logistics costs are likely to increase as wages and compliance requirements rise. For logistics companies, how to adapt to these changes to improve efficiency and control costs will be key.

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