May 2, 2018—Mexico’s auto manufacturing industry this week rejected a proposal presented by U.S. authorities that would impose new rules on the origin of parts sold tariff-free under the North American Free Trade Agreement.
As reported by MarketWatch, U.S. NAFTA negotiators presented a proposal requiring 40 percent of the parts used in light vehicles and 45 percent of parts used in pickups to originate in high-wage countries. Such parts and materials would have to be made in locales where wages are currently at least $16, “which means it must be made in the U.S. or Canada,” according to Eduardo Solis, the president of the Mexican Automotive Industry Association (AMIA).
The U.S. proposal requires that 75 percent of all components in a vehicle be North American-made in order to qualify for tariff-free importation under a new agreement, which would be up from the current 62.5 percent. Solis claimed the U.S. is asking for an additional 75 percent North American content requirement for many core parts, including transmission, chassis, engines, suspension, batteries for electric cars, and 70 percent of aluminum and steel used in vehicles must be from North America under the proposed rules.
Auto manufacturers in North America would have four years to comply with the new rules for light vehicles and two years for trucks.
Solis said Mexico is working on a counterproposal and is hoping to have it prepared in a matter of days. Ministerial talks resume on May 7, in Washington, D.C.