Under the U.S.-Mexico-Canada Agreement (USMCA) trading partners may qualify for zero tariffs on cars and trucks if 75 to 80 percent of their component parts are manufactured in Canada, Mexico, or the United States.
The USMCA, signed in 2018 to replace the North American Free Trade Agreement (NAFTA), provides rules that guide producers of several types of goods on a determination of whether their goods qualify as “originating” and if they are eligible for reduced tariff treatment.
A year ago, Canada and Mexico filed a claim against the United States due to their inconsistency with the rules of the USMCA.
MEXICO USMCA POSITION ON AUTOMOBILES
The complaints differed between Canada and Mexico where Mexico argues strongly for the “interpretation of the United States and the application of the United States,” calling the method costly to companies, counterproductive to the continent’s car industry, and damaging.
The U.S. argued that solely North American core parts counted which meant an engine or transmission that was 75 to 80 percent Mexican, only that portion of the value would count toward the whole vehicle.
CANADA USMCA POSITION ON AUTOMOBILES
On the other hand, Canada stated that the “U.S. interpretation regarding core parts and its application to vehicle producers through various legal instruments, including the Alternative Staging Regime (ASR) letters, are the measures at issue in this dispute.”
However, both Canada and Mexico see eye-to-eye that the United States acts inconsistently with the agreement and disagree with the U.S. interpretation.
USMCA PANEL RULING
The panel ruled in Mexico and Canada’s favor on how the USMCA auto rules of origin should be interpreted, saying the U.S. was in breach of its agreement by going against the regulations and taking a longer period to comply for auto exporters, known as ASR.
The panel decided that this will make it easier for imported vehicles to qualify for tariff benefits.
In a statement released by the honorable Mary Ng, Minister of International Trade: “Canada welcomes the findings of the panel’s report, which reaffirm our understanding of the negotiated outcome on the rules of origin for automotive products.”
Mexico said in the coming days it will initiate a conversation between the U.S. and Canada to address the report’s conclusion, which brought the dispute. Additionally, it noted that producers have several methodologies they can use to determine the core parts are originating which was agreed upon by the panel.
For more detailed information on the USMCA and dispute, please visit the links below: https://s3.amazonaws.com/warren-news.com/pdf/863937
Stay up-to-date on freight news with Green’s Weekly Freight Market Update by following us on Facebook, Instagram, and LinkedIn. For continuous updates, make sure to check out our website at greenworldwide.com.
