Mexico will beat the US in a panel on rules of origin: auto parts companies

Mexico and Canada will win the panel of controversies regarding the rules of origin of the automotive sector to the United States next June, when the ruling is announced and the existence of the ease rule in the regional content value in manufacturing is ratified. of a vehicle, confided Alberto Bustamante, president of the National Auto Parts Industry (INA).

The discrepancy between the United States and its two partners has to do with how to account for the regional value content (RCA) of motor vehicles that are produced in the North American region to be exported within it.

The VCR measures the percentage of parts produced in the region that contains a vehicle produced, whether in Mexico, the United States and Canada, and whether or not the VCR is complied with in the Treaty of Mexico, the United States, Canada (T-MEC), depends that this vehicle enjoys the tariff preferences of the treaty.

The VCR in force in the previous North American Free Trade Agreement (NAFTA) was 62.5% and for the T-MEC it was agreed to gradually raise it up to 75% for essential parts, that is, engine, chassis and body, axle , suspension, steering system and battery.

The T-MEC entered into force on July 1, 2020 with a VCR of 66%, which rose to 69% this year. Compliance with the 75% rate will be mandatory as of July 1, 2023.

Regarding the accounting of the VCR of a vehicle, Mexico and Canada argue that, once an essential part complies with the agreed 75%, it must be considered as totally original (100%) for purposes of calculating the RVC of the unit, a rule that it is known as “facility” or Roll up, and that was specified in the text of the T-MEC, said Bustamante.

The United States, on the other hand, considers that for purposes of calculating the RVC of the vehicle, the specific RVC of each essential part must be taken, without the possibility of considering the component as 100% originating.

When participating in the panel Linking suppliers for compliance with the rules of origin of the T-MEC, the director of the INA assured: “Yes, we are going to win that panel, because it is under the agreement (T-MEC). This is in T-MEC texts. This is not the invention of Canada or Mexico, the United States simply ignored it because it says it is the United States and it can do whatever it wants and it ignored it.”

Before businessmen and suppliers of the automotive industry, Alberto Bustamante insisted that the rule is a benefit of the T-MEC, without the EU it is foolish that lithium batteries have 75% of the regional content (that is, they are made with raw material and in the region), as well as the engine and the rest of the essential parts.

“If we have 7 Core Parts and we are going to multiply them by 75%, it will give us a number that is 525% Regional Content Value. The roll up says if you have already fulfilled, you will have 100% until you add 700%. It is averaging. It is the ease rule. Now, if I bring a semi-finished engine from Germany, because it is for a premium and turbo car, I cannot set up an engine factory in Mexico, because for it to be profitable I need 6,000 engines. So little is sold and the numbers don’t, it gives us to put a plant in the region, that’s why it is imported”, mentioned the president of INA.

He abounded: if it is purchased at 75%, but if I comply with 100% transmission, 100% chassis, 100% axles, steering systems, except for lithium batteries, and I have 525%, but they tell me it must be 75% , I am going to use the roll up rule and it averages me, and that goes from 75 to 100%. “That rule says I don’t care how you do your percentages, you have to give me 525% VCR.”

What is the VCR?

• The VCR measures the percentage of parts produced in the region that contain a vehicle assembled in North America.

• The compliance or not of the VCR agreed in the T-MEC, depends on whether that vehicle enjoys the tariff preferences of the treaty.

• The VCR in force in NAFTA was 62.5% and for the T-MEC it was agreed to gradually raise it to 75% for essential parts, that is, engine, chassis and bodywork, axle, suspension, steering system and battery.

• Regarding the accounting for the VCR of a vehicle, Mexico argues that, once an essential part complies with the agreed 75%, it should be considered as totally originating (100%) for purposes of calculating the unit’s RVC.

• The EU, on the other hand, considers that for purposes of calculating the VCR of the vehicle, the specific VCR of each essential part must be taken, without the possibility of considering the component as 100% original.

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Reference-www.eleconomista.com.mx

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