Mexico, Canada to Win USMCA Rules of Origin Dispute

The USMCA dispute panel evaluating the rules of origin dispute favored the position held by Mexico and Canada, according to sources who asked not to be identified.

Sources who know the decision of the preliminary ruling made in November told Bloomberg of the panel’s decision. Countries will be able to provide feedback on the decision before the final result is released in 30 days. Mexico’s Minister of Economy, the Office of the US Trade Representative and an official spokesperson for Canada’s Trade Minister declined to comment until the official outcome of the ruling is made publicly available. 

The USMCA increased the Regional Value Content (RVC) for light vehicles and trucks to 75 percent. Automakers considered this an important change, as the previous North American Free Trade Agreement (NAFTA) had a 62.5 percent requirement of RVC. Mexico and Canada consider that if an auto part complies with the minimum required RVC it can be considered to have a 100 percent of RVC in the total sum of the RVC inside a vehicle. However, the US argued that the RVC value of an auto part cannot be rounded up to 100 percent, as reported by MBN. 

The USMCA plays a critical role in Mexico’s economy and the agreement has brought countless opportunities to the country’s manufacturing industry. The changes in rules of origin, the dispute regarding energy policies and the rapid response mechanism are three of the most important modifications that the agreement introduced.

Earlier this week, Mexico’s Minister of Economy Raquel Buenrostro said that the country would present an agenda to solve the energy policies dispute in January 2023 to the North American Leaders’ Summit (NALS), which will be held in Mexico City. Buenrostro presented this plan to the federal government on Dec. 6, according to El Financiero. 

Buenrostro said that these type of panels are a normal part of countries' relationships, but highlighted that it is a priority to find a resolution for the energetic dispute. “We have had about 57 panels, more than 50 percent have been won, others have been lost, it is normal in a relationship, it is like that in all countries, but in the energy sector we want to solve it as soon as possible because that gives investments certainty,” Buenrostro said.