Auto Parts Makers Express Hope July 1 USMCA Can Work

Although the auto industry appears to have lost the fight to delay a switchover from NAFTA to the U.S.-Mexico-Canada Agreement, an executive at the organization that represents parts suppliers said they now hope that with give-and-take on the implementing rules and perhaps some flexibility, the industry will be able to make a July 1 entry into force date work.

Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association, said in a phone interview April 27 that MEMA had tried to argue against “an early entry into force to both the administration and to Capitol Hill.”

“There were always going to be some challenges with compliance with USMCA,” she said, but now suppliers of all sizes have furloughs or layoffs because of the closures of auto plants and the sharp decline in demand for new cars and trucks. In the case of tier 2 and tier 3 suppliers, she said, they often don't “have internal customs and trade staff.”'

While Wilson said “the insistence to move it forward so quickly is going to make it very difficult for this industry,” she also expressed some hope that the administration would listen to industry views on the interim implementing instructions (see 2004090049), and said that MEMA is now focused on making this timeline work.

She said Office of the U.S. Trade Representative staff and industry representatives are having conversations she characterized as deliberative and good. “We’ll probably be in a good place” if those conversations continue to be productive, she said.

“There is a definite path forward as long as we make sure everyone is focused on getting to July 1 with as much transparency as possible,” Wilson said.

Customs lawyers who work with the auto industry have said they think a period of informed compliance could soften the blow (see 2002190028). Wilson said she thinks “that there’s a possibility that our members will have some time to assess where their compliance issues are, and to report at a later date whatever duties are due.”

House Ways & Means Chairman Richard Neal issued a read-out of a call with USTR on April 27 that said that they asked how "the COVID-19 pandemic will affect nations’ ability to implement USMCA’s requirements."

In addition to the complexities of the new auto rules of origin, and the severe worldwide economic slump, the auto industry is concerned about the possibility that U.S. auto assembly plants will be reopening with new safety protocols but their Mexican suppliers will be shuttered to protect workers from the coronavirus outbreak.

Mexico said in a press release April 24 that workers' health is the government's top priority. “There are health-related challenges to reopening the auto industry, and the governments of the three countries are designing a coordinated strategy that will prioritize public health during the current pandemic,” the release said. “In Mexico, the government will be particularly emphatic in protecting the health of workers, their families and their communities, which is why the authorities involved will ensure the reopening is orderly, gradual and cautious.”

Currently, the 1 million workers in the Mexican auto supply sector are not in factories, as they are considered non-essential workers. “The reopening plan will take into account ... the fact that each country has areas and locations with different health conditions, degrees of spread of COVID-19, demographic characteristics, and risks and vulnerabilities in the population, and local public health systems with varying capacities for responding to the emergency,” Mexico said. The government said that the three countries will release more information about a reopening plan in “coming days.”

Wilson said, “This week is going to be a critical week for the industry as we try to get all three countries aligned on reopening.” When asked if they are not in agreement on timing, she said, “There is a lot of work to still be done.”