Trade Body Sides With Canada, Mexico In Auto Parts Case

While a final ruling has not been issued, the United States reportedly has lost a case before a trade dispute resolution panel regarding rules for the composition of cars that are shipped across regional borders to Canada and Mexico. According to Transport Topics, the ruling “potentially” offers “more incentive to make auto parts in” Canada and Mexico instead of the United States.

As a North American trade group, MSCI has not taken a position on this case. Connecting the Dots is reporting on this matter for members’ information only.

The dispute focuses on the three countries’ disagreements about how to calculate the percentage of a vehicle that comes collectively from the three countries that are part of the United States, Mexico, Canada Agreement (USMCA), the trade agreement that replaced NAFTA. As Transport Topics noted, Mexico and Canada believe the USMCA stipulates that more regionally produced parts should count toward duty-free shipping than the United States wants to allow.

The United States prefers a stricter method of calculation. If the U.S. preference is adopted, it would be more difficult for plants in Mexico and Canada to meet the new threshold of 75 percent regional content, up from 62.5 percent under NAFTA, in order to trade duty-free.

Each country has an opportunity to give feedback on the report before a final version is issued within 30 days.