Borderlands: USMCA panel rules in favor of Mexico, Canada over US

Borderlands is a weekly rundown of developments in the world of U.S.-Mexico cross-border trucking and trade. This week: USMCA panel rules in favor of Mexico, Canada over US; Lineage Logistics unveils plans for Texas cold storage facility; Mexico extends deadline again for Carta Porte tax document; and Volkswagen halts production of Jetta and Taos models.

USMCA panel rules in favor of Mexico, Canada over US

Mexico and Canada recently won a trade dispute over the U.S. on car-content rules governing auto manufacturing, according to Bloomberg.

The dispute resolution panel set up under the United States-Mexico-Canada Agreement (USMCA) made a preliminary ruling on Nov. 14, but the report hasn’t been made public yet.

Alejandro Encinas Najera, Mexico’s undersecretary of foreign trade, said during a news conference Wednesday the USMCA ruling is ready and would be made public in January.

The dispute concerns different interpretations for calculating a vehicle’s regional value content. The USMCA categorizes certain automotive parts for passenger vehicles and light trucks into core parts, principal parts, and complementary parts. Each applies different sets of originating rules.

Mexico and Canada favor more flexible calculations for the regional value content of core parts, while the U.S. has been applying a more strict interpretation.

Mexican authorities said U.S. officials were improperly interpreting stricter regional content rules under the pact. The USMCA raised the regional content requirement to 75% of a vehicle’s value of components. The requirement was 62.5% under the now replaced North American Free Trade Agreement.

The rules-of-origin requirements allow vehicles manufactured in North America to receive duty-free treatment under the USMCA. The USMCA automotive rules of origin regulations are intended to drive automotive investment into North American production.

Mexico requested the dispute settlement panel in January, with Canada joining Mexico’s request the same month.

The automotive production sector is one of Mexico’s most significant industries, comprising 3.5% of the nation’s GDP and 20% of its manufacturing GDP, as well as employing over a million people across the country, according to the International Trade Administration.

Mexico is also the largest export market for U.S. automotive parts and the fourth-largest producer of automotive parts worldwide, generating about $94 billion in annual revenues.

Jorge Molina, an international trade consultant, told El Financiero that the USMCA trade panel’s ruling will benefit consumers in all three countries. They will be able to access a greater number of cars at a lower price since the vehicles won’t be subjected to tariffs that are currently applied by the U.S.