Alternative Staging Regime for Passenger Vehicles and Light Trucks Under the USMCA

We know that, as the internal ratification procedures for the United States of America–Mexico–Canada Agreement (“USCMA”) have concluded, the trade agreement will enter into force on July 1, 2020.

It is clear that the sector that underwent the greatest changes was the automotive sector, especially in relation with rules of origin.

Particularly regarding passenger vehicles and light trucks, significant changes were brought in order to consider such goods as originating:

• Higher percentages of regional value content.
• Particular requirements for essential parts 
• Requirements for regional steel and aluminum purchases
• Requirements regarding labor value content 

USMCA holds that for a period ending five years after the entry into force of the USMCA, this is July 1, 2025, the Parties shall provide that a passenger vehicle or light truck may be originating in accordance with an alternative staging regime to the standard three-year transitional period foreseen in the USMCA itself.

Through said alternative staging regime, producers of passenger vehicles and light trucks would benefit from extended deadlines to request preferential tariff treatment with differentiated rules of origin, although limited to certain volumes.

On April 30, 2020, the Mexican Ministry of Economy issued the rules that govern the procedure so that domestic producers could avail themselves of said benefit. The Ministry set the deadline for submitting the application as no later than July 1, 2020. The information submitted with the application may be amended no later than August 31, 2020.

It is important to note that a detailed plan and various documentation that demonstrates its feasibility must accompany said application, for which the participation of various areas of the company will be essential.