Canada: Are You Ready For The New CUSMA/USMCA/NAFTA 2.0 Auto Rules Of Origin?

Last Updated: July 16 2019
Article by Heather Innes

On September 30, 2018, Canada, the United States and Mexico announced the conclusion of the Canada-United States-Mexico Agreement (the “CUSMA” or “USMCA” or “NAFTA 2.0”), a modernized free trade agreement that will replace the existing North American Free Trade Agreement (“NAFTA”).  On November 30, 2018, the CUSMA was signed by each country.  While each of the three countries is moving through their respective domestic ratification procedures and Mexico has ratified NAFTA 2.0, it is unclear when that process will be completed for all three countries. 

On May 25, 2019, Canada tabled Bill C-100 "An Act to implement the Agreement between Canada, the United States of America and the United Mexican States" in the House of Commons. On June 20, 2019, Bill C-100 passed second reading and was sent to Committee.  The House of Commons has risen for the summer and Canada has an election in October 2019.  It is not expected that CUSMA will be implemented into Canadian law this year.  However, the House of Commons may be recalled in the U.S. Congress takes all necessary steps to implement USMCA.

Notwithstanding the absence of the actual implementation date, auto producers and their parts suppliers should understand the new rules of origin and how they will impact their operations, their costs and their competitiveness.

The new rules of origin for vehicles and automotive parts are complex, requiring auto producers to conduct several calculations and meet several requirements before their vehicles will be eligible for duty-free treatment when they move within North America (Canada, Mexico and the United States).

Vehicle manufacturers must ensure that the automotive parts sourced for their vehicle production also satisfy new North American content requirements found in the CUSMA.  If your currently sourced parts don’t provide enough North American content to ensure that your finished vehicles will qualify for duty-free treatment under the CUSMA, the time to address any shortfall is now.

Both automotive manufacturers and automotive parts suppliers need to be ready to meet and confirm the CUSMA requirements.

As you prepare for CUSMA you may wish to consider the following:

  1. Have you reviewed your Bill of Materials for each vehicle and/or part to assess whether the parts that you manufacture or purchase for use in vehicle production meet the North American content requirements set forth in the CUSMA?  Keep in mind that the amount of North American content required varies based on the part and the type of vehicle into which the part will be incorporated.  If you are a vehicle producer, you need to know which parts will qualify as “originating” under the CUSMA rules. Without this information, you may not have what you need to ensure that you meet the minimum North American content requirements for the vehicles that you are producing.  If you are an automotive parts manufacturer, your purchasers will want you to confirm/certify the status of your parts – i.e. will they meet the CUSMA requirements as “originating”.  If you are selling your parts to purchasers in one of the other CUSMA countries, you will only enjoy the benefits of duty-free treatment under CUSMA if your parts qualify as “originating” when this new agreement comes into force.
  2. Will you be able to meet the requirement that certain parts used in the production of passenger vehicles and light trucks must be “originating” if you want your finished vehicle to qualify for duty-free treatment (i.e. as “originating”)?
  3. Does your finished vehicle meet the minimum North American content requirements to qualify for duty free treatment when exported to one of the other CUSMA countries?  Passenger vehicles and light trucks will need 66% regional value content (North American content) when the CUSMA enters into force.  That requirement will increase to 75% three years later.  Heavy trucks, on the other hand, will start at a 60% regional value content requirement, increasing to 70%, seven years after the CUSMA comes into force.
  4. How much steel and aluminum do you purchase, and does it “originate” in North America? To ensure that vehicles qualify for duty-free treatment under the CUSMA, vehicle producers must ensure that 70% of their steel and aluminum purchases “originate” in North America.
  5. Have you measured the Labor Value Content for your production?  When the CUSMA comes into force, passenger vehicle and truck producers will need to certify that a certain percentage of their production activities are carried out by workers earning at least US $16/hour.  The minimum requirements range from 30-45% depending on the type of vehicle produced, the production activity (e.g. assembly, manufacturing, research and development) and the timing of the certification.

The above questions provide an overview of some of the general requirements of the new autos rules of origin.  The specific detailed requirements including the calculation methods require a detailed assessment of the vehicle/part, the manufacturing operations and the timing of the calculation.  LexSage is able to help you with those calculations.

This is the time for auto manufacturers and auto parts makers to carefully review their sourcing, manufacturing operations and labour content.  The new rules of origin are complex but achieving “originating” status for your products will help to manage costs, preserve existing customer demand and generate new sales opportunities.

For more information about Canada's CUSMA rules, please refer to the refer to the LexSage website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions