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Canada joins Mexico in auto dispute against U.S.

Christian Fernsby |
Canada united with Mexico on Thursday to officially dispute the U.S. stance on vehicle manufacturing that the two countries say violates terms of the three-country free-trade agreement.

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Topics: CANADA    MEXICO    U.S.   

The dispute concerns a U.S. decision that 75% of a vehicle and some key parts must be manufactured in the U.S. by 2025 or be subject to tariffs.

The position of the two countries is that if a vehicle uses 75% of regional manufacturing, it qualifies the entire vehicle to be duty-free. If not, it could make the car subject to tariffs when imported by the U.S., raising the price of the vehicle and thereby hurting Canadian and Mexican manufacturers.

Canada’s International Trade and Export Promotion Minister Mary Ng said: “The CUSMA rules of origin for passenger cars and light-duty trucks are aimed at encouraging production and sourcing in North America. The outcome was the result of negotiations and close consultations with automotive stakeholders, which ensured that these new rules of origin would deepen regional integration and support the competitiveness of automotive producers in North America.

“Canada is joining Mexico’s request to establish a dispute settlement panel to address the United States’ interpretation of the rules of origin governing the regional value content calculations that must be performed for a vehicle to qualify for CUSMA duty-free treatment. The interpretation that the United States adopted in July 2020 is inconsistent with CUSMA and the understanding shared by the parties and stakeholders throughout the negotiations."

In the timeline provided under CUSMA, the dispute settlement panel would be expected to issue a report in the summer of 2022.

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