New USMCA treaty extends seven-year deadline to adjust content of truck auto parts | AmericaEconomy



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Mexico City. The Treaty between Mexico, the United States and Canada (T-MEC) will grant a period of seven years to adjust the rule of origin of auto parts used in the production of heavy trucks.

This is a longer period than the transition to the three-year rule of origin for passenger cars and trucks.

For parts used in heavy trucks, the rules of origin will be divided into two categories. The first corresponds to the main automotive parts, with a regional content value (VCR) of 70%, and the second covers the complementary parts, with a regional content value of 60%.

Among the main automotive parts are: engines, pistons, engine parts, fuel pumps, fans, air pumps, air conditioners, transmission shafts, gearboxes, steering wheels, chassis, bodyworks, bumpers, seat belts , brakes, control axles with differential, wheels, shock absorbers, radiators, mufflers, exhausts, clutches, airbags and seats.

In 2017, Mexico produced auto parts worth US $ 92 billion, while in the same segment exports totaled US $ 73.5 billion and imports reached US $ 49.1 billion.

Beginning in 2019, heavy-duty truck manufacturers will have to buy steel and aluminum in the region to achieve 70% North American content and meet retroactive certification of the automotive rule of origin as stipulated in the new treaty.

Some of the complementary automotive parts are hydraulic hydraulic fluid pumps, electronic brake systems including ABS and ESC systems, clutch and shaft couplings, lithium ion batteries and ignition equipment.

The VCR is a percentage that indicates to what extent a commodity was produced in the producer's local region. The origin of the components or materials of the commodity, the location of the commodity's production and other factors influence that percentage.

In general, the rules of origin refer to the criteria agreed in a free-trade agreement to define when goods are considered as originating (because of their level of regional content) in order to benefit from tariff preferences.

The world's leading manufacturers of trucks with factories, spare parts workshops and maintenance workshops in Mexico are: Cummins, Daimler Commercial Vehicles, Detroit Diesel Allison of Mexico, Dina of Mexico, Freightliner Mexico, Foton Mexico, Isuzu of Mexico, Kenworth Mexicana, Mack Trucks Inc, Man Truck and Bus, Volkswagen Mexico, Mexico Scania and Volvo Mexico.

Lastly, passenger bus manufacturers have the longest manufacturing tradition in Mexico, with several manufacturing facilities across the country.

Rule for trucks. From 2019, heavy truck manufacturers (Daimler, Hino, Kenworth, Volvo, Man, among others) will have to buy steel and aluminum in the region to reach 70% of North American content and meet the retroactive certification of the automotive rule of origin, as stipulated in the Treaties between Mexico, United States and Canada (T-MEC).

Miguel Elizalde, president of the National Association of Truck, Trucks and Trucks Producers (ANPACT), said that Mexico, the US and Canada should certify the regional value of steel and aluminum retroactively in order to begin the purchase of inputs from the region.

The purchase of 70% of steel and aluminum to be made by heavy truck plants in the three countries will come into operation one year before the entry into force of the T-MEC, so that the heavy goods industry and the Secretariat Economics must complete the definition of the fractions of tariffs of the metals inputs before the signature.

In an interview, the ANPACT leader explained that in the case of Mexico, there is no big problem because 98% of its truck production is exported to North America, but the US needs to reconfigure its purchases.

In the coming days, Economy will define the steel and aluminum tariff fractions (only supplies) used by the automakers, not including auto parts, to meet the rule of origin, as of January 1, 2019 – if the T-MEC takes effect in 2020. "In two months, mills will have to buy steel and aluminum from the region, because it is a retroactive year to start the next year (with the Treaty)."

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