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Mexico and the US will discuss the Labor Content Value of the USMCA

Mexico and the United States will discuss a controversy over the Labor Content Value (LCV) of the USMCA.

The two countries have conflicting views on how to apply rules of origin in labor matters.

In the production of cars, the USMCA increases the Regional Value of Content (RVC) from 62.5% to 75%, with a new methodology. Likewise, it establishes a Labor Content Value of 40%. That is, 40% of the value of the vehicle must be produced using wages, at least US $ 16 per hour.

The rules of origin refer to the criterion agreed in a treaty to define when a good is considered originating (due to its level of regional content) in order to enjoy tariff preferences.

Previously, the three countries agreed to establish a three-year adjustment period for automotive companies to adapt to changes in the USMCA rules of origin. This period will count to go from 62.5 to 75% of regional content, as well as to comply with the labor component in the rule of origin.

The modifications will be carried out in four stages: upon entry into force of the agreement and in each of the following three years.

Labor Content Value

Fernando Ruiz Huarte, general director of the Mexican Council for Foreign Trade (Comce), affirmed this Monday that United States officials intend to apply stricter rules of origin in labor matters than what Mexico considers.

Tatiana Clouthier, Secretary of the Economy, will meet with Katherine Tai, United States trade representative, to address the issue of the interpretation of the rules of origin, among other issues.

Clouthier will make a working visit to the United States this Tuesday, with an agenda in Washington, D.C., from Wednesday, July 21 to Friday, July 23.

“The topics of the meetings will be related to our economy and its participation in the North American region such as agriculture, supply chains and their modernization, challenges and opportunities in the implementation of the USMCA and, the promotion of a solid automotive industry within the trilateral agreement between Mexico, the United States and Canada”, said the Ministry of Economy.

Ruiz Huarte said that while Mexico considers that in these rules origin can be accumulated between the three countries to comply with the labor content, the United States interprets that the part that the latter country contributes of labor content in Mexican exports should not be accumulated in the proceedings.

 

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