USMCA Faces Calls for Delay as U.S. Eases Some Car-Import Rules

President Trump signed the United States-Mexico-Canada Agreement (USMCA) on January 29, 2020. With Canada as the final signatory to ratify the agreement on March 13, the USMCA mandates that once the last party has ratified, the countries have three months to align their domestic laws and regulations to USMCA standards.

USMCA revises the North American Free Trade Agreement (NAFTA), with the most notable changes affecting the agricultural, automotive, and manufacturing sectors.

But as COVID-19 continues to spread and amid a “closed” global economy, many have called for a delay in the June 1 deadline. Under new USMCA rules, at least 70 percent of vehicle producers’ steel and aluminum purchases must originate in North America—and overall, USMCA requirements have been “estimated to increase U.S. production of automotive parts and employment in the sector.” But COVID-19 related disruptions have forced many automakers to halt production.

The U.S. automotive industry, for instance, issued a joint statement asking the Trump administration to delay its target date. In addition to supply chain disruptions and diverted resources, concerns have also arisen related to USMCA’s clarity: Mexican automakers, for example, have voiced a corresponding inability to adjust production chains.

Members of Congress have also urged the White House to delay the June 1 deadline. In a bipartisan letter to U.S. Trade Representative (USTR) Robert Lighthizer, Senate Finance Committee members stated that the USMCA “should not enter into force until it’s clear that all three countries have fulfilled their respective obligations.” The committee voiced concerns that COVID-19 has yielded few resources in preparing and ensuring a smooth transition from NAFTA to USMCA. 

More recently, an advisory panel for U.S. Customs and Border Protection also asked the Trump administration to delay the June 1 date, stating that auto and other industry groups require more time to prepare. The panel suggested that the earliest date the USMCA should go into effect is January 1, 2021 and called for a “transition period where customs would continue to accept qualifying goods that have existing NAFTA certificates of origin.”

President Trump has been pushing for “business as usual” and is still planning for a June 1 date while Canada and Mexico have both expressed a willingness to be flexible. Yet on April 20, the USTR announced that the U.S. would allow flexibility in USMCA car-import thresholds—giving an additional two years for importers of certain passenger vehicles to be in compliance.

This is a developing story. You can read ASME’s prior update on USMCA at: https://www.asme.org/government-relations/capitol-update/president-trump-signs-usmca-the-updated-nafta