• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » U.S. Clashes With Mexico, Canada on Auto Parts Trade Rules

U.S. Clashes With Mexico, Canada on Auto Parts Trade Rules

Automakers Manufacturing
July 19, 2021
Bloomberg

The U.S. is clashing with Mexico and Canada over rules for cars shipped across regional borders, with automakers and governments telling the Biden administration that it’s imperiling the success of their new trade pact.

The dispute focuses on how to calculate the percentage of a vehicle that comes collectively from the three countries under the U.S.-Mexico-Canada agreement, according to people familiar with the matter, who asked not to be named because conversations are private. The deal took effect last July, replacing the North American Free Trade Agreement, or Nafta, but the new so-called rules of origin are designed to be phased in over several years.

The U.S. insists on a stricter way than Mexico and Canada believe they agreed to for counting the origin of certain core parts including engines, transmissions and steering systems in the overall calculation, the people said. That makes it harder for plants in Mexico and Canada to meet the new threshold of 75% regional content, up from 62.5% under Nafta, in order to trade duty-free, the people said.

For example, if a core part uses 75% regional content, and thus qualifies under that requirement for duty-free treatment, Mexico and Canada argue that USMCA allows them to round the number up to 100% for the purposes of meeting a second, broader requirement for an entire car’s overall regional content. The U.S., however, doesn’t want to permit rounding up, making it tougher to reach the duty-free threshold for the overall vehicle.

That’s how the issue is summarized in a note written by Mexico’s Automotive Industry Association, known as AMIA, and obtained by Bloomberg News.

USTR spokesman Adam Hodge said in an email that the U.S. “remains committed to the stronger regional value content requirements that the countries agreed to in the USMCA,” without elaborating.

The press office of Mexico’s economy ministry declined to comment immediately. A spokesperson for Canadian Trade Minister Mary Ng declined to comment.

U.S. Trade Representative Katherine Tai, appointed by President Joe Biden, has repeatedly stressed in recent weeks that the administration is pursuing a “worker-centered” trade policy and has sought friendly ties with the nation’s trade unions. Last month she addressed the largest U.S. labor federation in a move that its head heralded as a historic first.

United Auto Workers spokesperson Brian Rothenberg said in an email that the group, the largest U.S. auto union, supports the Biden administration’s stricter interpretation of the USMCA.

Surprise Stance

For Mexico, the Biden administration’s demand came as a surprise, because the nation believed that the issue had been settled in talks with then-President Donald Trump’s administration in 2018 and 2019, the people said. Cars are at the heart of the USMCA, and Mexico views the U.S. demand by the Biden administration as an attempt to renegotiate a key aspect of the deal, the people said.

Mexico, together with Canada, is considering filing a formal complaint against the U.S. under the year-old USMCA, which could result in a dispute panel to hear arguments for the nations, the people said.

Mexican Economy Minister Tatiana Clouthier plans to travel to Washington this week and discuss the issue with Tai, the people said.

A quarter century after Nafta went into effect, Trump demanded rules to require more regional content and a minimum hourly wage in car production to incentivize companies to manufacture more in North America and the U.S. Tai, as a lawyer for House Democrats, played a key role in negotiating changes to the USMCA in 2019 to win broad bipartisan support in Congress.

Making the rules too cumbersome could cause automakers to forgo applying for duty-free treatment and instead pay tariffs that the U.S. charges under World Trade Organization rules, said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association.

That would make the free-trade deal irrelevant for preferential tariff purposes. Motor vehicles are the top manufactured product traded between the U.S., Mexico and Canada.

Under WTO rules, the U.S. could apply a 2.5% tariff on passenger vehicles from its neighbors if the USMCA weren’t in place, though the duty for light trucks is higher at 25%.

“We had to find a balance in the Nafta negotiation: how hard could you push for local supply,” Volpe said. “There is a point where you turn a screw too hard and you break the threads. If it’s too onerous, automakers will just pay the 2.5% tariff.”

The dispute comes after the car industry was already forced to close last year due to COVID-19 and is dealing with a crisis due to a shortage of computer chips for vehicles.

Mexico and Canada constantly jockey with China for the status of America’s top trade partners, with more than $1 trillion in goods crossing the borders annually. The two North American neighbors are key to U.S. efforts to convince companies to invest and return manufacturing to the region to be able to compete with China. The Trump administration fought a trade war with the Asian nation, including placing tariffs on more than $300 billion of imports, which Biden has so far kept in place.

RELATED CONTENT

RELATED VIDEOS

Global Trade Management Global Supply Chain Management Global Trade & Economics Regulation & Compliance Automotive
  • Related Articles

    Canada, U.S. Auto Industries Co-Ordinating on Trump Response

    Trump Announces Separate U.S.-Mexico Trade Agreement, Says Canada May Join Later

    Senate Passes U.S.-Mexico-Canada Free Trade Agreement

Bloomberg

Germany to Introduce Cheap Nationwide Public Transport From May

More from this author

Wake up to live
“Supply Chains in Crisis”
updates and the latest Supply Chain News!

Subscribe to our Daily Newsletter

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • A PERSON HOLDS UP A TABLET COMPUTER IN A WAREHOUSE, SUPER-IMPOSED BY A GRAPHIC SHOWING A COMPLEX WEB OF SUPPLY CHAIN ELEMENTS

    Three Post-Pandemic Actions for Repairing Global Supply Chains

    Data Management (Big Data/IoT/Blockchain)
  • A MAN IN A SUIT SHAKES HANDS WITH A WOMAN IN A HARD HAT, NEXT TO A STACK OF CONTAINERS

    Three Procurement Technology Evolutions for 2023

    Sourcing/Procurement/SRM
  • The blank stare of a child's eye who is standing behind what appears to be a wooden frame

    The Alarming Continued Rise of Modern Slavery in Supply Chains: How Procurement Can Help Reverse the Trend

    Sourcing/Procurement/SRM
  • A GROUP OF WORKERS RANGED IN AN OFFICE, OF DIVERSE RACE, GENDER, AGE AND PHYSICAL ABILITY

    Podcast | The Supply Chain Workforce of the Future Is Already Here

    HR & Labor Management
  • A YELLOW AND BLACK TRAFFIC SIGN THAT READS "VOLATILITY AHEAD"

    Four Strategies for Addressing Supply Chain Disruption

    Sourcing/Procurement/SRM

Digital Edition

Scb nov 2022 sm

2022 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • New Revenue for Cloud-Based TMS that Embeds Orderful’s Modern EDI Platform

  • Convenience Store Client Maximizes Profit and Improves Customer Service

  • A Digitally Native Footwear Brand Finds Rapid Fulfillment

  • Expanding Apparel Brand Scales Seamlessly with E-Commerce Technology

  • How a Global LSP Scaled its Security Program and Won More Business

Visit Our Sponsors

Orderful Yang Ming Alithya
Barcoding Blue Yonder BNSF Logistics
CoEnterprise Data Capture Deposco
E2open GAINSystems Generix
Geodis GEP GreyOrange
Here Honeywell Intelligrated IFM
Infor Inmar Keelvar
Kinaxis Korber Lean Solutions Group 2H
Liberty SBF Locus Robotics Logility
LogistiVIEW Lucas Systems MCA Connect
MPO Nvidia Old Dominion
OpenText ORTEC Overhaul
Parsyl PMMI QIMA
Redwood Logistics Ryder E-commerce by Whiplash Saddle Creek Logistics
Schneider Dedicated Setlog Holding AG Ship4WD
Shipwell Tecsys TGW Systems
Thomson Reuters Tive Trailer Bridge
Vecna Robotics Verity
Verusen
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2023 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing