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U.S. loses panel on rules of origin in the automotive industry

The United States lost a dispute settlement panel on rules of origin in the automotive industry under the Mexico-U.S.-Canada Agreement (USMCA).

The Panel, constituted under the USMCA, released its Final Report on Wednesday in the U.S.-Automotive Rules of Origin dispute (USA-MEX-2022-31-01).

The Panel determined that the USMCA allows vehicle manufacturers to consider the essential parts of a finished vehicle (engine, transmission, body, etc.) as originating, once, separately, such auto parts have met the minimum percentage of regional content (75%), using the alternative methodologies that the same treaty establishes.

“In the coming days, Mexico will initiate a process of dialogue and cooperation with its trading partners for the attention of the Final Report,” said the Ministry of Economy in a press release.

Rules of Origin

Previously, In the framework of the USMCA, on January 6, 2022, Mexico filed a request for the establishment of a dispute settlement panel related to the rules of origin in the automotive industry, arguing that the United States applies and interprets them in a stricter manner. Canada then joined the same request.

Autos Drive America considered that the “unilateral reinterpretation” of the previous administration (of President Donald Trump) “severely disrupted” the investment plans of automotive companies, and that this will have the unintended effect of “diverting limited investment resources from critical areas such as research and development of electric vehicles and autonomous vehicles.”

By the time that reinterpretation was given, the organization added “on behalf” of its 11 member companies, automakers had already developed and begun implementing extensive plans to modify their operations, change their supply chains and identify new suppliers to meet the new standards.

The 11 companies are: BMW, Honda, Hyundai, Kia, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Subaru, Toyota and Volkswagen.

This included the commitment of billions of dollars in new investments in the United States and the rest of the region, investments that will translate into billions of dollars in new parts supplied in the region annually, thousands of new U.S. jobs and expanded research and development.

These investments will ensure that the world’s most advanced vehicles-including electric vehicles and autonomous vehicles-are manufactured in North America with the highest level of regional value content of vehicles built versus anywhere in the world.

 

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