Bipartisan Letter to USTR Asks for Delay on USMCA Auto Rules of Origin
A group of 31 House lawmakers, led by Rep. Haley Stevens, D-Mich., and Rep. Jackie Walorski, R-Ind., is asking the U.S. trade representative to delay the switch-over to the U.S.-Mexico-Canada Agreement auto rules of origin (ROO), even as the USMCA takes over from NAFTA. The group's letter, sent April 10, said the delay “is necessary to allow the auto industry an appropriate adjustment period and account for delays caused by the COVID-19 pandemic. Alternatively, we ask that you seriously consider other accommodations or flexibilities that will allow the automotive sector to avoid being penalized by the new requirements upon the agreement’s entry into force.”
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A period of “informed compliance” is likely, according to NAFTA expert Dan Ujczo (see 2002190028). In a phone interview April 13, he said an official delay of the start of the auto rules of origin staging process or informed compliance, as a practical matter, are the same thing. There's only one exception, he said, and that's how you enter data into ACE or the neighboring countries' single window system after the date of entry into force. “The quiet whispers are there are concerns in CBP that they’re going to be ready to go” on July 1, he said. “The machinery of the bureaucracy is at least pushing back on a speedy implementation date for USMCA, at least for autos.”
Ujczo said that for political reasons, the administration wants a date of entry into force in July, and that Canada's decision to certify on April 2 means the USTR can no longer argue that Canada is foot-dragging to avoid dairy concessions. But he said that with the economic challenges the auto industry is facing with coronavirus response shutdowns and a huge decline in sales, “the only rational choice is to delay implementation of the new rules until January 1.”
The lawmakers wrote: “Amidst the economic hardship created from the current public health crisis, the industry is attempting to modify their production to comply with new ROO requirements in the USMCA. In order to comply, companies must complete complex and extensive solicitations throughout their multi-tiered supply chains. Manufacturers also need to invest in new training and software systems necessary to certify compliance with the new ROO requirements. We understand that companies throughout the auto supply chain have made substantial progress in conducting the necessary solicitations and investments. However, a substantial lack of clarity remains around the Uniform Regulations that are necessary for the U.S. auto industry to determine whether their supply chains comply with the USMCA.”
Ujczo said he's seen draft regulations on the auto rules of origin, and he said “they still need a lot of work. This was done by people that don't know how a car is put together. There's going to be so much nipping and tucking.”
He said he knows USTR argues that there's a phase-in process, but he said that auto companies need to know what will be included to get tariff benefits to make procurement decisions. He said it's in USTR's own interest to do in-depth consulting with auto companies over the next six months, to find out how the rules could be shaped to make it worth it to those companies to move production from China to Mexico.
Rep. Terri Sewell, D-Ala., who also signed the letter, said through a spokeswoman: “As we all continue to battle the ongoing COVID-19 pandemic, auto manufacturers and suppliers in Alabama are halting production to protect our auto workers. Our manufacturers should be provided some flexibility, so they can fully focus on their response to the COVID-19 pandemic.”
Email ITTNews@warren-news.com for a copy of the letter.