Experts Say Details Lacking on USMCA Labor Enforcement, Difficult to Assess Risk to Importers

Ted Posner, a partner at Weil, Gotshal & Manges, said having a dispute panel that is a trier of fact is unprecedented, and that there are a lot of unanswered questions about how these binational panels will investigate facilities to decide whether a company was violating workers' rights to organize.

“Is it looking at documents? Does [the panel] get to interview witnesses? What kind of rules of evidence apply?” he asked. He said all these questions are left unanswered in the text.

Carol Pier, managing director for international labor at IMPAQ International, said there could be thousands of complaints from Mexican workers, so she thinks it's important that the Office of the U.S. Trade Representative starts with those involving a supplier that sells to a company with name recognition in the United States, and is a large employer. “It's going to be incredibly important that the first cases that come up under this are strategically important and impactful,” she said. The U.S. needs to have “very clear criteria for selecting which are the ones where a request for review is made.”

She said many freedom of association cases are “incredibly complicated,” so it would be better to choose a case with a clear fact pattern.

Pier said this isn't the first time the U.S. has tried to improve labor standards at the factory level through trade policy. She pointed to the US-Cambodia textile agreement in 1999, before the end of textile quotas, and the HOPE II, a preference program for Haiti's apparel and textile sector.

She said those were simpler because “the sectors were relatively small. It was manageable to actually monitor the different factories,” which the International Labor Organization did.

But this will be complicated, because various sectors in Mexico are under federal jurisdiction, others are under state jurisdiction, and she's not clear on which Mexican authorities will decide whether the denial of rights happened. The Mexican government has a chance to investigate the case, and the case can be resolved without ever resorting to a binational panel. If the Mexican government agrees there was a violation, it can suggest a remedy, and if the complainant is satisfied, it would stop there. She asked, “Is the remedy that is going to be recommended, or imposed, going to be the remedy that would be called for under Mexican law?”

Ricardo Ramirez, founder of RRH Consultores in Mexico, said that since the standard of what is a violation under the pact is looser, and the burden of proof has shifted, “It will be easier to bring a labor case than a dumping case.”

Posner said it's difficult to advise companies that buy goods from Mexican factories or companies that produce in Mexico.

“We don't know how this is going to work until we see some examples,” he said, “until we know what the volume looks like, what a typical petition looks like; how the U.S. and Mexican government engages....” For instance, he says, what would it take for the U.S. government to decide there had been a denial of rights?

Both Ramirez and Pier think the most significant use of the rapid enforcement mechanism may come later. While the enforcement mechanism is tailored to collective bargaining and freedom of association only, there is language in the USMCA protocol that says if a case is sustained under the broader labor chapter on child labor or forced labor, then future child or forced labor cases could be prosecuted through the rapid response teams.

If there is a decision that there was a violation, Posner asked how the denial of tariff benefits would be administered if it's an input to a good that is traded -- or even a good that's not traded.

Posner said it will be hard for CBP to identify with precision which facility a good came from, and so, in his view, “suspension of liquidation is of marginal utility.”