USMCA Trade Deal Is Now In Force–And Mandating Higher Wages, More Paperwork

NAFTA is no more. As of today, the North American Free Trade Agreement that took effect Jan. 1, 1994 has been replaced by the U.S. Mexico Canada Agreement (USMCA) . For automakers and suppliers the new law sparks strict new regulations on the amount of North American content in each vehicle and for workers, especially in Mexico, it means a higher minimum hourly wage. It also means a mountain of paperwork and documentation. 

Specifically, with regard to the automotive industry, the USMCA calls for:

• Regional Value Content: Vehicles must contain 75% North American content. The requirement under NAFTA was 62.5%.
• Labor Value Content: 40%-45% of auto content be made by workers earning at least $16 per hour. 
• At least 70% of a producer’s steel and aluminum purchases must originate in North America.
• Eliminates the “deemed origination” loophole in NAFTA. Under that treaty producers were allowed to ‘deem’ non-North American content as originating, regardless of origin.

In a webchat with the Automotive Press Association in June, General Motors Corp. GM Chairman and CEO Mary Barra said her company was working to be in compliance with the new treaty explaining, “There are small shifts we need to make to be compliant. We have, and will, over the timeframe we have to implement. I not aware of any specific issues we have with suppliers. I think everybody’s working to make sure we’re compliant with USMCA in an appropriate fashion.” 

The head of the American Automotive Council (AAPC), the lobbying group for GM, Ford Motor Co. F and Fiat Chrysler Automobiles, said his group is a strong supporter of USMCA as it “achieved our goals when negotiations restarted.” 

Source: Forbes