T-MEC: requirements for Alternative Transition Period

The T-MEC establishes requirements for the automotive industry to be entitled to the Alternative Transition Period in the rules of origin of the automotive sector, said the Ministry of Economy in a decree published this Thursday.

Alternative Transition Period

Pursuant to paragraph 2 of Article 8 of the Automotive Appendix, eligible passenger vehicles or light trucks will be considered originating under the T-MEC, provided they meet the following requirements:

First

A Regional Content Value (VCR) of not less than 62.5 percent, under the net cost method, for eligible passenger vehicles or light trucks.

Second

A VCR of not less than 62.5 percent, under the net cost method or 72.5 percent under the transaction value method if the corresponding rule includes a transaction value method, for the parts listed in Table A.1 of the Appendix Automotive, except for batteries of subheading 8507.60, used in the production of such eligible passenger vehicles or light trucks.

Third

At least 70 percent of the vehicle producer’s steel purchases and at least 70 percent of the vehicle producer’s aluminum purchases, in value, must originate in accordance with the requirements described in Article 6 of the Automotive Appendix.

Now, if the vehicle producer demonstrates the existence of contracts, memoranda of understanding or other similar types of agreements between companies or information to comply with this requirement during the alternative transition period, that producer will be exempt from having to certify this requirement during the alternative transition period.

The vehicle producer must provide this information in the application described in Section III.

Fourth

A Labor Content Value (VCL) of at least 25 percent, consisting of at least 10 percentage points of high salary in materials and manufacturing expenses, not more than 10 percentage points of high salary in technology expenses, and not more than 5 percentage points of high salary in assembly expenses.

Fifth

All methods and calculations for the aforementioned requirements or percentages must be carried out in accordance with the applicable provisions of Chapter 4 of the Agreement.

However, these requirements or percentages, the other product-specific rules of origin and the other requirements applicable under the Agreement will apply to those products during the period of the alternative transition regime, with the exception of the essential parts requirement described in the paragraph. 7 of Article 3 of the Automotive Appendix.

Sixth

Passenger vehicles and light trucks deemed eligible for the alternative transition regime will be exempt from the essential parts requirement during the alternative transition period.

Concessions

This facility does not replace any other rules of origin, nor provisions of general application for said merchandise, for the purposes of requesting preferential tariff treatment under the T-MEC.

Importers of certain passenger vehicles or light trucks will have an additional two years, that is, five years instead of three, to meet the requirements, and the vehicles will have different percentages of Regional Content Value and Labor Content Value.

The T-MEC also establishes that the quantities of passenger vehicles or light trucks eligible for an alternative transition regime will be limited to no more than 10% of the total production of a producer of passenger vehicles or light trucks, in the territory of the Parties, for a complete period of 12 months before the entry into force of the T-MEC, or the average of that production during a complete period of 36 months before its entry into force, whichever is greater.