A recent report from the Office of the U.S. Trade Representative’s on the operation of the U.S.-Mexico-Canada Agreement with respect to automotive goods indicates that the U.S. is interested in further changes to the USMCA’s automotive rules of origin.
The USMCA’s auto ROOs include higher regional value content thresholds, mandatory requirements to produce core parts in the region, mandatory steel and aluminum purchasing requirements, and a labor value content requirement. The USMCA also allows vehicle manufacturers to request an alternative staging regime for these requirements that would permit a longer period of transition to help ensure that future production is able to meet the new rules.
USTR’s report states that in the six years since the USMCA’s entry into force the auto ROOs have had a positive impact on the U.S. automotive sector, noting in particular that producers continue to make significant sourcing and production investments in the U.S. and North America. At the same time, USTR states, the industry has faced external supply chain shocks, increased competitive pressures from China, and the imposition of U.S. tariff increases as well as retaliatory tariffs by Canada. Further, evidence shows that U.S. content in vehicles produced in Mexico and Canada is declining and that the U.S. automotive trade deficit with Mexico remains persistently large.
In response to these challenges, the report states, the U.S. will seek to (1) assess and strengthen the automotive ROOs to incentivize the use of additional U.S. and North American content, (2) streamline and simplify these ROOs to help ensure that the benefits of the USMCA are more easily achievable, especially by small and medium-sized suppliers, and (3) mitigate risks posed to the North American automotive supply chain by non-market-economy third parties.
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