Ministry of Economy Approves 12 Alternative Transition Regimes

The Ministry of Economy approved Alternative Transition Regimes for 12 automotive companies, according to a press release from Jan. 22, 2021. The companies granted this to Tesla, Volkswagen Mexico, Volvo Car USA, FCA Mexico, Hyundai Motor America, Mazda Motor Mexico, Toyota, Kia Motors Mexico, Kia Motors Manufacturing Georgia, Nissan, Ford and Cooperation Manufacturing Plant Aguascalientes.

USMCA’s new rules of origin for automotive goods include changes to essential auto parts requirements and the implementation of a Labor Content Value, among other provisions. To adhere to these requirements, these 12 companies applied to an Alternative Transition Regime that provides a longer period of time to guarantee the proper implementation of new criteria. Under NAFTA, the automotive industry had to comply with a Regional Content Value (RCV) of 62.5 percent. USMCA gave a three-year period for companies to gradually increase this RCV to 69 percent in 2021, 72 percent in 2022 and 75 percent in 2023, reported MBN.

The Alternative Transition Regime was established in the Appendix to Annex 4-B of Chapter 4 of the USMCA so automobile producers in Mexico, the US and Canada could ask for additional time to fully comply with the treaty’s news Rules of Origin, reports El Economista. Vehicle producers asked for this measure to be able to keep benefitting from tariff preferences, in accordance with USMCA’s application criteria. Before the treaty’s ratification last year, Asian companies like Mazda, Honda, Nissan, Toyota, Kia and Subaru operated under the American Automobile Labeling Act, which allowed for a Regional Content Value of 59 percent, reports El Economista.

This transition regime is valid for five years after the treaty was made effective. After the regime ends, all preferential tariffs must comply with the rules of origin that were agreed in USMCA, reports el Economista.