Ministry of Economy Presented USMCA’s Uniform RegulationsBy Alejandro Enríquez | Thu, 06/04/2020 - 11:06
The Mexican Ministry of Economy informed the conclusion of the negotiations regarding uniform regulations on USMCA’s rules of origin and origin procedures. Both documents have only made available to the public for information purposes and will be subject for legal revision by all three parties. The final texts will be published on July 1.
"These uniform regulations have the objective to provide practical and useful orientation to a better complement of the referred USMCA's rules and procedures, while providing legal certainty and clarity on the application of USMCA's guidelines," said the Mexican Ministry of Economy on a statement.
Uniform regulations are twofold. The first document refers to the specific methods to comply with the provisions established by USMCA on Chapter 4: Rules of Origin and Chapter 6: Textile and Apparel Goods. The second document focuses on the interpretation, application and administration of procedure provisions established in Chapter 5: Origin Procedures, Chapter 6: Textile and Apparel and Chapter 7: Trade Facilitation.
Three new rules of origin were introduced in USMCA. First, the treaty establishes a three-year period for automakers to reach a regional value content (RVC) of 75 percent for light vehicles and a seven-year period to reach 70 percent RVC for heavy vehicles. Second, companies have a three-year period to reach a 40 percent labor value content (LVC), which includes 25 percent high-wage material and manufacturing, 10 percent high-wage technology and 5 percent high-wage assembly. Third, 70 percent of steel and aluminum must be purchased in North America.
The industry was expectant about the details of the LVC rule. The document, provides definitions for high-wage assembly plants for passenger vehicle or light truck parts, high-wage assembly plants for heavy truck parts, high-wage labor costs, high-wage technology and high-wage transportation or related shipping costs. High wage is only defined as the "provider paying an average base hourly wage rate to direct production employees performing these services of at least: (a) US$16 in the United States; (b) CA$20.88 (US$15.4) in Canada; and (c) MX$294.22 (US$13.4) in Mexico." (Sec.12-1)
Other relevant provisions for OEMs are included in Part VI of the first document which includes the following:
Part VI. Automotive Goods
- Section 12. Definitions and Interpretation
- Section 13. Product-Specific Rules of Origin for Vehicles and Certain Auto Parts
- Section 14. Further Requirements Related to the Regional Value Content for Passenger Vehicles, Light Trucks and Parts Thereof
- Section 15. Further Requirements Related to the Regional Value Content for Heavy Trucks and Parts Thereof
- Section 16. Averaging for Passenger Vehicles, Light Trucks and Heavy Trucks
- Section 17. Steel and Aluminum
- Section 18. Labor Value Content
- Section 19. Alternative Staging Regime
- Section 20. Regional Value Content for Other Vehicles
- Tables A.1, A.2, B and C that define the core, principal and complementary parts for passenger vehicles and light trucks.
- Tables D and E that define the principal and complementary parts for heavy trucks.
- Table S that describes the steel and aluminum rule.
On an interview with Mexico Business News, former AMIA President Eduardo Solis, had already explained the relevance of these legal instruments. "Having uniform regulations at the beginning of June will mean having less than three weeks to understand them and to apply them. These regulations are the guidelines under which rules of origin will be applied," he mentions.
You can read the full documents in English here.