Rules of origin will attract greater automotive investment to Mexico in 2023: INA

The rules of origin established in the Treaty between Mexico, the United States and Canada (T-MEC) would attract more investment in the automotive industry in 2023, since it will be the year in which they will be applied at their highest ceiling for passenger vehicles and trucks light.

Francisco González, president of the National Auto Parts Industry (INA), highlighted that nearshoring is estimated to have the potential to attract some 70 billion dollars in trade and a similar amount in investment in Latin America, with Mexico accounting for more than 50%. of those possibilities.

The Regional Value Content (RVC) requirement requires motor vehicles to meet a defined threshold of North American content in order to be considered “originating” and receive the duty-free benefits of USMCA.

Under this agreement, the RCA for passenger vehicles and light trucks increased to 75%, compared to the RCA of the North American Free Trade Agreement (NAFTA) of 62.5 percent.

The higher RCA is applied in equal annual stages over three years and will be fully applied on July 1, 2023. As of July 1, 2022, the RVC for passenger cars and light trucks is 72 percent. .

For heavy and light electric trucks, the NAFTA VCR of 60% will be maintained as of the entry into force of the T-MEC. However, the VCR for these trucks will increase to 64% on July 1, 2024, and to the final rate of 70% on July 1, 2027.

The Covid-19 pandemic has been an important factor, as has the conflict between Russia and Ukraine and the China-United States conflict, and let’s not forget that distance is another factor that we do not consider, the sustainability part and bringing products on the other side of the world has a significant carbon footprint,” said González.

From January to October 2022, Mexico exported automotive products to the United States for 124,752 million dollars, of which 59,870 were auto parts. Of the total auto parts imported by the United States, 39.1% came from Mexico.

Several North American producers have applied for the Alternative Transitional Regime (RTA) for electric and hybrid electric vehicles due to the current unavailability of North American lithium-ion batteries and related consumables (for example, cells) necessary to meet the standards of standard origin.

An RTA allows for a tailored plan to gradually meet regional content levels over a maximum of five years before meeting standard requirements.

This topic of relocation has anglicisms that allow it to be more specific, it ranges from offshoring (exiting the plants to other parts of the world from where the company’s headquarters are), reshoring (returning the production of products to the original country of the company ) and nearshoring (transferring a business operation to a nearby country), to friendshoring and ally-shoring (building supply chains only where you have strong alliances).

“This whole package is causing geolocation to be more regionalized; globalization is not dying, it is simply changing its intensity”, said González.

roberto.morales@eleconomista.mx