U.S. Loses Case in Auto Rules of Origin Dispute
A panel ruled for Mexico and Canada on how the USMCA auto rules of origin should be interpreted, saying the U.S. is in breach of its agreement by conditioning a longer period to comply for auto exporters, known as an alternative staging regime, on requirements that are not in the USMCA text or the uniform regulations.
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At issue is how originating core parts are counted toward a vehicle's overall regional value content. The U.S. had argued that only North American content in those core parts counted -- in other words, for an engine or a transmission that was 75% or 80% Mexican, only that portion of the value would count toward the vehicle as a whole. The panel said there was no evidence that Canada and Mexico agreed to that interpretation, and said the evidence it reviewed suggested that the U.S. expected roll-up to be an option for producers, just as it had been under NAFTA.
The decision will make it easier for imported vehicles to qualify for tariff benefits, the panel report says.
Mexico, which brought the dispute, said in the coming days it will initiate dialogue with the U.S. and Canada to address the report's conclusions. It also noted that the panel agreed producers have a number of methodologies they can use to determine if core parts are originating.
"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," Canada's trade minister said.
The U.S. trade representative did not issue a statement about the panel in the first hour after its publication.
The results of the report leaked before its official release late in the day Jan. 11 -- it had been completed since Dec. 14.