Daimler Trucks Suggests Changes to USMCA Steel/Aluminum Purchasing Rules, Accumulation Flexibility

Daimler Trucks North America is raising alarms on changes to the steel and aluminum purchases requirement, the ability to use accumulation for regional value content with non-originating parts, and the treatment of returned goods within the USMCA. The company also identified ambiguities with the labor value content rule, and errors and omissions in tariff classifications in Note 11 that cause problems for compliance.

Daimler is represented by law firm Page Fura, which submitted 21 pages of comments Aug. 24 on the interim final rule for the USMCA rules of origin. Comments in the docket are due Aug. 31 (see 2006300066).

Several of Daimler's concerns relate to how vendors and purchasers interact. Suppliers are allowed to use either net cost data or transaction value data when they use accumulation, as long as it's not prohibited for a specific tariff line, but original equipment manufacturers like Daimler are only eligible for net cost methodology. Under NAFTA, only net cost was allowed, but Daimler was expecting more flexibility under USMCA, due to lengthy discussions with representatives of the Office of the U.S. Trade Representative on auto rules of origin, and after USTR checked with CBP.

Daimler says that they already planned on how to qualify based on the transaction value approach, because using net cost for accumulation purposes on non-originating parts would require Daimler's suppliers to tell the truck company cost detail for each part number, and note what proportion of that cost was non-originating, rather than just giving a total value of non-originating material in the part as a whole. “This is very specific financial detail that experience indicates suppliers are unlikely to share with their OEM customers,” it said.

So, they argue, “by adopting this requirement, ... the incentive to source within the USMCA territory will be diminished since no overall benefit under the Agreement will be realized” when buying parts produced in Mexico or Canada that do not qualify as originating from those countries. They say the change is not consistent with how the USMCA text treats accumulation. In that text, not only are OEMs not restricted, but suppliers have both options. Under the uniform regulations, suppliers will only be able to use transaction value if their suppliers also do.

Daimler also is asking that body stampings be removed from the steel and aluminum purchase requirements, because if a company is buying a stamping from an unrelated firm, that supplier is not going to want to disclose the value of the metal in the stamping as it “could compromise a supplier's ability to negotiate effectively over the price to be paid for any purchased body stamping.”

If CBP continues to include body stampings under Harmonized Tariff Schedule of the United States subheading 8708.29 or 8708.99 in the metal purchase requirement, then Daimler needs clarification. Does the stamping company just need to show its total purchases for the year, or does the metal need to be traced back to the part? Does metal that ends up as scrap at the manufacturer count toward the 70%? What is the denominator for the calculation? “For example, if the body stamping producer states that $450.00 of the value of a $700.00 body stamping is from originating steel/aluminum, with another $100.00 sourced from outside of USMCA, is the total report out for the vehicle producer $550.00 with a split between the $450.00 that is originating and the $100.00 that is not or is the total report out based on the overall $700.00 cost of the body stamping?” the company asked.

Daimler would like a return to NAFTA rules on treatment of returned parts, rather than the “recovered material” lens CBP has applied. Daimler says if you don't treat disassembly as an action that confers origin, you're making it very difficult to manage border-crossings of used parts. For instance, nearly all motor vehicle, tractor and construction equipment manufacturers ask that customers send back a used core when they get a replacement core. While the OEMs would like to see if they can recondition those cores, they don't know at time of entry whether they will be able to be restored to “sound working condition,” as is required in the recovered material approach.

Daimler also asked for more clarity on how to calculate the labor value content. The company would also like flexibility on how annual averaging starts out. Currently, CBP is asking that companies either always average from July 1 to July 1, or they do one 18-month average for this year, and then go to a calendar year in 2022. Daimler says it would be helpful if they're allowed to do a six-month average this year, instead, because contracts and wages will change next year. They also ask that CBP explicitly say that where companies determine averaging based on estimates, they be given six months to do a year-end reconciliation on USMCA eligibility, as they were allowed to do under NAFTA.