Auto industry looking for USMCA delay

DETROIT – Players across the North American auto industry are seeking to delay implementation of the USMCA.

According to Kristen Dziczek, vice-president of the Center for Automotive Research in Detroit, now that the new U.S.-Mexico-Canada trade agreement has been ratified by all three countries, there would normally be a three- to six-month period in which the new rules would be implemented. However, because of the complexity of the new trade deal, there will be many new regulations that auto makers will need to comply with.

“This is a pretty complicated trade agreement with a lot of new provisions in it that automakers and suppliers have not dealt with before,” Dziczek said in a web call Tuesday.

“And while they’ve seen the broad contours of the agreement – they knew there was going to be a steel and aluminum purchasing requirement and a labour value requirement – they don’t yet know the exact specifics of how they certify that they have complied.”

The U.S. administration is pushing for a June 1st start date for the agreement, which is accelerated from the usual three-month time frame after all three parties notify each other that they have put the necessary procedures into effect. As of Tuesday, only Canada and Mexico had said they are ready.

“That’s putting it on the backs on an industry already reeling from supply chain disruptions and demand disruption, and health care issues and plant closures and generally financially struggling,” she said. “It’s going to cost more money to comply so the industry is asking for some breathing room.”

Dziczek said the industry fully intends to comply, they are just looking for a later enter-into-force date. Canada and Mexico have met together to put he agreement into force but delay the automotive rules to give the auto industry some room to get back into production before they figure out compliance.

“The biggest concern for the industry would be the implementation of provisional rules that would then later change,” Dziczek said. Having to align systems with one set of regulations then change them would be an expensive challenge.

She suggested that if the June 1 date goes ahead it might be easier for the auto makers to just pay the 2.5 percent tariff on parts and passenger cars. It might be less expensive to pay the tariff in order to delay the work the manufacturers need to do to enforce compliance within their own operation.

As well many will have to draw information from their supplier base in order to gain compliance which adds another level of complexity.

“It’s very difficult to imagine any automaker being able to eat the 25 percent tariff on imported pickup trucks,” she added.