Canadian Legislative News

After 14 months of negotiations, and a few hectic final weeks, the United States, Canada, and Mexico reached a deal on the new and revised North American Free Trade Agreement named the U.S.-Mexico-Canada Agreement (USMCA). The new deal was secured by Ottawa on October 1.

USMCA includes revised automotive rules-of-origin requiring higher levels of North American content in order to incentivize production and sourcing in North America. More robust rules-of-origin for the automotive sector will help keep the benefits of the agreement in North America. For example, the new agreement includes an increase in the USMCA regional value content threshold for cars. (Also see U.S. Legislative News in this newsletter.)

Furthermore, the agreement includes stronger content requirements for core car parts such as engines and transmissions and a 70 percent North American steel and aluminum requirement. A new labor value content provision requires by 2023 that 40 percent of a car producer’s activities be carried out by workers who earn at least $16 USD an hour.

With this new deal, the threat of auto-specific tariffs by the United States has been ameliorated. Ottawa has negotiated an exemption under Section 232 tariffs that would allow auto exports to the U.S. - tariff-free - up to a certain amount which is well above the current level. The only tariffs that remain despite negotiations are those on Canadian aluminum and steel which continue to negatively impact the auto industry.