Upcoming International Changes: USMCA, Packet Rates, and More
New changes are reshaping international shipping. As part of the Universal Postal Union’s (UPU) Extraordinary Congress in late 2019, the framework for what countries pay each other to deliver inbound packet shipments has changed. This change better reflects cost structures. Inbound shipments entering the United States will now be set at a rate of 70% of a US domestic equivalent rate. Many other national posts will also charge the United States more. That is, unless the terms of a bilateral agreement can moderate prices between the United States and the other country in question. This change goes into effect July 1st. Additionally, the NAFTA agreement is now called the United States-Mexico-Canada Agreement, or USMCA for short.
International packet rate change
To be clear, the USPS is not raising international rates across the board on July 1st. The only rates changing due to the outcome of the UPU Extraordinary Congress are for packet services. Also, Customers who use ShipStation’s international shipping rates or single package international shipping labels will not see a rate increase on July 1st.
All inbound packet shipments into the US will pay higher postage on July 1st. Only commercial/bulk outbound rates are changing. The retail rates will not change on July 1st. This is because the UPU agreement allows reciprocating countries to charge the USPS self-declared rates as well. This results in higher prices for US export (outbound) packets to about 30 countries. The United States’ move to self-declared rates requires negotiation of new bilateral and multilateral agreements with foreign postal entities. Some of these agreements are still in negotiations (as of July 1st).
Many shippers might see that fewer countries have a tracked packet solution as of July 1st, 2020. At the moment, only 23 countries have a tracked packet solution and the list is missing such common destinations as Brazil and Italy. USPS also said these negotiated solutions with foreign postal operators should improve service and reduce cost for US origin mail.
What does this mean for you?
It is important to check your account’s specific rates as of July 1st to see if anything has changed. Please note that the retail rate itself is not changing, and ShipStation rates are not changing. Normal USPS price increases will occur at a later time in early 2021. The current change affects only bulk mailers and shippers. It is important to note that the GlobalPost product has its own agreements with international carriers to weather price increases like the ones coming July 1st. As a result, most merchants will not see a price increase as of July 1st.
On July 1st, a major change to the United States’ relationship with two of its most common trading partners will occur. The United States will now have a new trade relationship with Mexico and Canada—the United States-Mexico-Canada Agreement (USMCA). The major change to the USMCA that impacts merchants is the de minimis threshold. De minimis is the minimum value of goods item below, where no duties and/or taxes are assessed by Customs. The thresholds below are for shipments entering through an express/commercial clearance method. This is not for standard postal ones, where the threshold remains $20 CAD. The new de minimis value thresholds for commercial shipments into Canada (CA) and Mexico (MX):
- Mexico de minimis threshold is $117 USD for duty and $50 USD for taxes.
- The new Canada de minimis threshold is 150 CAD for duty and 40 CAD for taxes, only for shipments exported directly from the US or MX (for CA only).
- The US threshold for importation remains at $800USD.
For shipments traveling via a postal method (i.e., USPS), it is important to note that the threshold is $300.
- If the value of the merchandise is $300 USD or less, it is free of any tax or duty under most circumstances. A commercial invoice is preferable, but not required for merchandise valued up to $300 USD.
- For merchandise with a value over $300 USD and up to $1,000 USD, duties and taxes may apply, and a commercial invoice is required.
These changes should result in US and Canadian merchants being able to sell more products at a higher price point with greater ease.
What does this all mean for me?
The changes represent a shift in international shipping. It is important to check with your carriers and understand how they might affect you. Lastly, it is important to understand how changes to trade agreements can create more opportunities to sell to more customers in the US, Mexico, and Canada.