USMCA. Automotive and Auto Parts
The USMCA, or Treaty of Mexico, the United States and Canada, is an agreement signed by the countries of North America, with the objective of promoting trade and exchange in these nations.
The governments of these three countries seek to strengthen trade interactions, strengthen regionalization and reduce globalization.
The Automotive industry is the main manufacturing industry in Mexico, representing 20% of the country's Manufacturing GDP.
How are auto parts classified in the USMCA?
The Rules of Origin for the automotive industry establish specific Regional Value Content (RVC) requirements for different parts of automobiles, light trucks or heavy trucks.
For cars and light trucks, consider:
- Essential Auto Parts: engines, transmissions, bodywork and chassis, axles, suspension system, steering systems and advanced battery.
- Main auto parts: seats, belts, compressors, brakes, pulleys, radiators, wheels, fans, flywheels.
- Complementary Auto Parts: headlights, windshield wipers, stereo, pipes, valves and more.
For heavy trucks:
- Main auto parts: inflatable bags, bodywork and chassis, seat belts, brakes, engines, wheels, steering wheels, etc.
- Complementary Auto Parts: couplings, lithium ion batteries, electronic starting devices, electronic braking systems and more.
Unlike the previous treaty, the USMCA requires that a vehicle meet four requirements to be considered an original vehicle.
1) A higher Regional Content Value (RVC) of the vehicle that will gradually increase until reaching 75% within a period of 3 years from its entry into force on July 1, 2020;
2) a 75% RVC on essential auto parts, such as axles, transmissions, bodywork, and engines;
3) a minimum of 70% of steel purchases and 70% of aluminum purchases in the region must originate, and
4) a Labor Content Value (LCV) of 40% in passenger vehicles and 45% in light commercial trucks
These changes allow the automotive business to be more competitive for the countries involved.
Do you want to know more about the rules of Origin of the Automotive Industry? Enroll in the Course “USMCA. Challenges in the rules of origin of the Automotive Industry". https://bit.ly/3BhfZ4t
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