The United States Mexico Canada Agreement (USMCA) includes major changes for the automotive industry – presenting both opportunities and challenges. The USMCA replaces NAFTA and will initially start to take effect beginning July 1, 2020.

For example, regarding country of origin rules, vehicles now need 75 percent of their components manufactured in the United States, Mexico, or Canada to qualify for zero tariffs. Under NAFTA, it was 62.5 percent.

New labor conditions have also been introduced under USMCA in terms of “LVC” (Labor Value Content), which requires 40 to 45 percent of auto parts be produced by workers earning a minimum wage of $16/hour by 2023. Mexico will likely implement new labor laws to comply with USMCA. 

Any automotive company that imports or exports components or vehicles needs to learn about the new USMCA, how it will impact their business, and how to ensure they will qualify for its benefits. AIAG is developing practitioner level content reporting training to help members and other industry stakeholders ensure a successful transition to USMCA. Please watch for additional information coming soon or contact AIAG Customer Service at (248) 358-3003.