USMCA Automotive Rules of Origin: Congress and the White House Looking to Hear from Industry Leaders. Have They Been Effective? Are Producers Complying? What's Been the Impact on the Economy?
Thursday, November 30, 2023
On July 1, 2020, the United States-Mexico-Canada Agreement (USMCA) was implemented. A clear and significant negotiation objective was to position the North American vehicle and parts industries with a competitive advantage in a fast-growing global marketplace. Now, in its fourth year, Washington is seeking public feedback to determine if this objective is being realized.

In recent days, US Congress and the White House instructed federal agencies to monitor the progress of the USMCA and its impact on the US economy and to report back on their findings.

On November 21, 2023, two key agencies published official notices in the US Federal Register, providing details of that monitoring, actions, and investigations to be taken, public hearings to be held, and the opportunity for public comment from the vehicle and parts sector, which comprises heavy and light-duty vehicles, electric and clean energy vehicles, as well as internal combustion and diesel vehicles.

Both of these notices present important opportunities for corporate leaders and industry associations to share their views, express concerns, and demonstrate best compliance practices.

In the first notice, the International Trade Commission (ITC) announces the launch of its investigation to determine the economic impact of the USMCA automotive rules of origin (ROOs). The second notice, from the Office of the US Trade Representative (USTR), announces a public hearing and a request for comments. This information will help inform US Congress about the effectiveness of the USMCA ROO enforcement and compliance efforts.

The details for both notices, including deadlines and comment/input submissions, are provided below:

1. The US International Trade Commission, Findings for Congress and the White House are due by July 1, 2025.  

In the first notice, the ITC announces an investigation into the USMCA’s automotive ROO, their economic impact, and operation. The ITC plans to publish a survey on the Commission’s website and announce a public hearing at a later date. This ITC notice outlines the scope of the investigation:

  • The economic impact of the USMCA ROOs on US GDP, exports and imports, aggregate employment and employment opportunities, production, investment, use of productive facilities, profit levels in the US automotive industry, wages and employment of workers, and the interests of US consumers.
  • The operations of the ROOs and their effects on US competitiveness in production and trade, considering technological and production developments among other related matters.
  • The relevance of the ROOs in light of technological changes in the United States.
  • Other matters relating to the ROO economic impact, including prices, sales, inventories, patters of demand, capital investment, obsolescence of equipment, and diversification of production in the United States.

2. The US Trade Representative Office. Public Comments are due by January 17, 2024. This will be followed by a public hearing in Washington, DC, on February 7, 2024.

The second notice of the same day, was published by the USTR. It announces an opportunity for public comment on its required review for Congress[1] regarding the USMCA’s trade in automotive goods. The USTR is required to submit their findings no later than July 1, 2024.

In the notice, the USTR invites input from producers, labor organizations, and other interested parties regarding the “operation of the USMCA with respect to automotive goods,” including “the implementation and enforcement of the USMCA rules of origin for automotive goods.” Similar to the ITC notice, the USTR is seeking comments on whether the automotive provisions are “effective in light of technological and production advances.”

Specifically, the USTR’s Report to Congress is to include a summary of actions taken by producers to demonstrate USMCA ROO compliance, the use of “Alternate Staging Regimes” (ASR), enforcement of these rules, and other relevant matters. In addition, the USTR is tasked with determining whether the ROOs are effective and relevant in light of new technology and changes in content, production processes, and the character of automotive goods.

The USTR’s notice invites public comments on the following specific areas:

  • Overall operations of the automotive ROOs
  • Actions taken by automotive and parts producers to demonstrate compliance, including
    • The applicable “Regional Value Content” (RVC) requirements for passenger vehicles, light trucks, heavy trucks, other vehicles and parts thereof
    • The North American steel and aluminum purchase requirements
    • The Labor Value Content (LVC) requirements
  • The use of ASR by vehicle producers
  • Enforcement of the USMCA ROOs, including ASR enforcement and the automotive certification process for steel and aluminum content, LVC, and RVC
  • Whether the current USMCA ROOs are effective in light of technological advances and changes, such as
    • The large-scale transition to electric and other clean energy vehicles
    • The transition away for internal combustion and diesel vehicles
    • The automotive parts applicable to electric and clean energy vehicles and whether the ROOs remain effective for internal combustion or diesel vehicles or any other vehicle and part subject to the automotive ROOs
  • Whether the USMCA ROOs are effective in supporting the competitiveness of the North American competitiveness in light of global challenges, such as excess capacity of electric vehicles.
  • An update on supply chain challenges (such as semiconductor shortages)
  • The impact of the 2022 Inflation Reduction Act and similar legislation
  • Specific issues faced by producers of heavy trucks and other vehicles not previously mentioned
  • Other topics relevant to the trade in automotive goods

[1] Specifically, the Senate Finance Committee and the House Ways and Means Committee

 

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