Mexico asks U.S., Canada to grant automakers transition for USMCA rules

Mexico asks U.S., Canada to grant automakers transition for USMCA rules

© Reuters. FILE PHOTO: Morning traffic drives on the 405 freeway in Los Angeles

MEXICO CITY (Reuters) – Mexico’s government on Tuesday asked the United States and Canada to grant its automotive industry extra time to adapt its supply chains as the deadline for implementing a new North American trade deal approaches.

“We have absolute understanding of what the industry is facing and we’re willing to have a transition period specifically for the auto sector as it has been requested,” Deputy Economy Minister Luz Maria de la Mora said at a webcast event hosted by the Wilson Center think tank in Washington.

Mexican auto lobby AMIA said on Monday that 90 days is not enough time for carmakers to adapt supply chains to meet rules of origin requirements in the United States-Mexico-Canada Agreement (USMCA), which could take effect on July 1.

AMIA has urged authorities to postpone until January 2021 the start of the sectoral rules in the new trade pact, which will replace the 26-year-old North American Free Trade Agreement (NAFTA).

“We have put this issue on the table many times. But unfortunately, this is not a Mexican decision, this is a trilateral decision. And we are still in discussions with our counterparts to see if there will be any kind of flexibility on their part,” said de la Mora.

Last month, groups representing automakers and suppliers in the United States backed delaying the entry date for USMCA to give them more time to prepare for the changes.

The new USMCA trade deal will require 75% North American content compared with 62.5% under NAFTA, and 40%-45% content from so-called “high wage” areas.

This is to be phased in over three to four years, but automakers have to certify compliance with the initial requirements when the agreement takes effect.

Canada and Mexico recently said they have completed their internal legal processes for the treaty to go into force, but the United States must still follow suit.

The Mexican economy ministry has told the auto industry the USMCA allows for an alternative transition scheme that could give some companies more time to comply, AMIA says.

“We can very well see a scenario in which we have USMCA in place, entering into force in July, August, September, in the very near future and at the same time we could also have a transition period for the automotive sector,” said de la Mora.

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