Automakers bloc asks Biden to relax stance on car origin rules

Eleven assembly companies requested that the US government abandon its defense in the dispute settlement panel on automotive rules of origin within the framework of the Treaty between Mexico, the United States and Canada (T-MEC).

The automakers are part of the Autos Drive America organization, which submitted that request to the United States Trade Representative (USTR) in a statement prior to the hearing held on October 13 as part of the dispute settlement process.

Las 11 empresas son: BMW, Honda, Hyundai, Kia, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Subaru, Toyota y Volkswagen.

“For USMCA to fulfill its potential to create jobs and transition to new, greener technologies, the Administration (of President Joe Biden) should reconsider and abandon its defense of the previous administration’s unilateral reinterpretation of the roll-up provisions, which would allow automakers to seamlessly implement the billions of dollars of investments they have planned for the United States and the region,” Autos Drive America requested.

Within the framework of the T-MEC, on January 6, 2022, Mexico submitted a request for the establishment of a dispute resolution panel related to the rules of origin in the automotive industry, arguing that the United States applies and interprets them in a correct manner. More strict. Then Canada joined the same request.

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

By the time that reinterpretation took place, he added the organization “in the name” of its 11 member companies, the automakers had already developed and begun to implement extensive plans to modify their operations, change their supply chains and identify new suppliers to meet the new rules.

This included a commitment of billions of dollars in new investment in the United States and the rest of the region, investment that will translate into billions of dollars in new parts supplied in the region annually, thousands of new jobs in the United States States and expanding research and development.

Those investments will ensure that the most advanced vehicles are built in North America with the highest level of regional value content of vehicles built versus anywhere in the world.

The new situation presented companies with the option of reallocating limited resources to comply with the unilateral reinterpretation or abandoning the effort for some vehicles.

“This would provide consumers with fewer or higher cost options and could force automakers to move some production lines out of the United States due to costs,” Autos Drive America added.

Opposite appreciations

The discrepancy between Mexico and the United States has to do with how to account for the regional content value (RVC) of motor vehicles that are produced and traded in North America. The VCR in force in NAFTA was 62.5% and for the T-MEC it was agreed to gradually raise it to 75% for essential parts, that is, engine, chassis and bodywork, axle, suspension, steering system and battery.

Regarding the accounting for the VCR of a vehicle, Mexico argues that, once an essential part complies with the agreed 75%, it must be considered as totally originating (100%) for purposes of calculating the unit’s RVC. The EU, on the other hand, considers that for purposes of calculating the VCR of the vehicle, the specific VCR of each essential part must be taken, without the possibility of considering the component as 100% original.

roberto.morales@eleconomista.mx