The Canada-United States-Mexico Agreement (CUSMA or USMCA) will introduce new and complex requirements for the automotive industry.Not only will vehicle producers face increased Regional Value Content requirements starting July 1, 2020, but they will be required to meet the following requirements:
1. minimum purchase requirements for North American steel and aluminum;
2. labour value content requirements requiring that a certain portion of each vehicle be produced using high-wage labour (US $16/C $20.88 average wage rate); and
3. certain parts (Super Core Parts) incorporated into a vehicle must be originating.
Both the CUSMA Uniform Regulationsposted on June 3, 2020 and the non-binding guidance issued by the U.S. Customs Authority (CBP)in the form of Interim Implementing Instructions, have started to provide some clarification regarding how the new requirements will work, at least from the U.S. perspective.However, the Uniform Regulations are not yet final.The posted version includes the following statement: “Subject to Legal Review in English, Spanish and French for Accuracy, Clarity and Consistency Subject to Authentication of English, Spanish and French Versions”.
Canada has provided helpful clarification on the new CUSMA certification of origin and certain other import requirements.However, there does not appear to be much information on their CUSMA Webpage regarding implementation of the new automotive rules.Questions remain regarding the implementation of the new automotive rules, including what will be required from automotive parts makers to support a vehicle producer's Labour Value Content certification.
The updated version of the U.S. issued Interim Implementing Instructions provides the following direction;
- U.S. Customs & Border Protection (CBP) understands that the trade may need time to adjust business practices to comply with the new requirements under the USMCA (CUSMA), particularly relating to the preferential tariff treatment of goods.It goes on to state that during the first six months after entry into force, CBP will focus on supporting the trade's efforts to fully comply with the USMCA requirements, including providing webinars and other outreach efforts to educate the trade;
- Importantly, it states that Importers, generally, are required to exercise reasonable care when making a claim under USMCA (CUSMA), including ensuring that they are in possession of a complete and valid certification of origin at the time of making a claim and meeting all recordkeeping obligations;
- However, it then goes on to provide that In order to provide the trade sufficient time to adjust to the new requirements and in consideration of the business process changes necessary to achieve full compliance, CBP may in appropriatecases show restraint in enforcement during the six-month period after USMCA's entry-into-force.Note that it does not say that the RVC and certification of origin requirements will be delayed;
- In connection with a vehicle producer's requirement to meet minimum Labour Value Content requirements it suggests that vehicle producers will be required to submit details about their auto parts suppliers (including the average hourly wage rate),if they rely on that supplier to meet the Labour Value Content requirement.The auto parts industry, wanting to support their vehicle producing customers, may find this requirement quite challenging; and
- Automotive producers, exporter, and importers will be allowed until December 31,2020 to obtain and submit necessary certification and documentation to support their Labour Value Content certification, steel certification, and aluminum certification for passenger vehicles, light trucks, and heavy trucks.
With just over a week before CUSMA/USMCA comes into effect, we will continue to watch for developments and clarifications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.