USMCA Comes into Effect on July 1st
Add to my favorite
After 3 years of negotiation, articles revision, and Parliaments approval procedures in USA, Mexico, and Canada, the all-new United States-Mexico-Canada Agreement (USMCA) has officially become effective since July 1st, 2020. The purpose of this new Agreement is to exempt relevant tariffs and lift certain trade barriers in the N. American region to facilitate trade activities amongst USA, Canada, and Mexico and reinforce the competitiveness of businesses in these countries.
The new Agreement includes specific requirements for the origins of certain automotive components and materials used, which clearly states that above a certain percentage of automotive components must be produced in USA, Canada, or Mexico, which could cause a significant impact on the automotive industry. Below are the detailed requirements:
- At least 75% of certain automotive components assembled on a car must be produced in N. America. (The NAFTA period was 62.5%).
- At least 70% of steel and aluminum materials used on a car must be produced in N. America.
- Over 40-45% of automotive components produced in N. America must be produced by workers each with the hourly pay of US$ 16.
The requirement stating “at least 75% of certain automotive components assembled on a car must be produced in N. America” was specifically formulated for 7 major automotive components, including chassis, engines, axles, transmissions, bumpers, sensors for steering wheels, and electric vehicle cells. If any of these items on a car is not produced in N. America, it won’t be considered “a car produced in N. America” and cannot enjoy the tariff-free benefit. With these requirements coming into effect, suppliers will be required to submit their origin documents and manufacturers will be also required to provide relevant copies. However, automotive fasteners are not included in the list of items subject to the requirements.