The 3 components of USMCA’s automotive rules of origin
The automotive rules of origin of the Mexico-U.S.-Canada Agreement (USMCA) have three main components: regional value content (RVC), labor value content (LVC), and steel and aluminum purchase requirements.
According to the U.S. International Trade Commission (USITC), these standards are designed to replace those of the North American Free Trade Agreement (NAFTA) as follows, in part.
The CVR rules require manufacturers of vehicles and vehicle parts to use a certain amount of content originating in a USMCA country in order for those goods to receive preferential tariff treatment.
The level of TRQ requirements range from 75% (for light vehicles and their main parts) to 60% (for complementary parts for heavy trucks), which is an increase compared to NAFTA’s TRQ requirements.
The CVR rules also require that all light vehicle core parts (comprising passenger cars and light trucks) – or the average of the value of all light vehicle core parts added together – meet the 75% CVR requirement.
Automotive rules of origin
The CVL rules, first introduced in the USMCA, require all vehicle manufacturers to use a certain amount (40% for passenger vehicles and 45% for light and heavy trucks) of content produced with high-wage labor (average above $16 per hour) in order for the goods to receive preferential tariff treatment.
Steel and aluminum purchase requirements, also introduced for the first time in the USMCA, require all vehicle manufacturers to source at least 70% of their steel and 70% of their aluminum from USMCA countries to receive preferential tariff treatment.
At the same time, the CVL requirements for light vehicles are being phased in (phased in gradually) over three years, with full implementation scheduled for July 1, 2023.
CVL requirements for heavy trucks are being phased in over seven years, with full implementation scheduled for July 1, 2027.
While the steel and aluminum purchase requirements for all vehicles and CVL requirements for trucks (light and heavy) took effect immediately, the CVL requirements for passenger vehicles are being phased in over three years.
