[CTC] USTR has approved all but one USMCA alternative staging plan for auto companies

Wed Feb 3 12:41:02 PST 2021

Sources: USTR has approved all but one USMCA alternative staging plan for auto companies

By Maria Curi, Inside US Trade 
1/28/2021
The Office of the U.S. Trade Representative has approved nearly all auto companies’ proposals for additional time to reach full compliance with the U.S.-Mexico-Canada Agreement’s rules of origin, sources familiar with the process told Inside U.S. Trade on Thursday.
USMCA gives auto and auto-parts manufacturers three years to transition into full compliance with the new auto rules of origin. However, auto companies were given the opportunity to apply for an “alternative staging” arrangement that could extend that transition period up to five years from USMCA’s entry into force -- July 1, 2020 -- if certain requirements were met.
USTR gave companies until Aug. 31 to submit alternative staging regime proposals showing how they would meet those requirements for the agency to review.
A dozen companies’ plans were approved by Dec. 31, sources said, citing a deadline established by U.S. Customs and Border Protection.
Only one auto company has not had its plan approved, they added.
CBP gave auto companies <https://insidetrade.com/node/169022> until Dec. 31, 2020 to provide the government certifications and documentation needed to establish compliance with USMCA’s rules. The agency is operating under a USMCA informed compliance period <https://insidetrade.com/node/170008> for the auto industry until July 1 -- during which the agency cites violations and explains to companies why they occurred, but does not penalize them. Full USMCA enforcement began for all other industries on Dec. 31.
USTR is required by the USMCA implementing legislation to maintain a public list of auto companies for which plans have been authorized. That list has not yet been finalized and made public because of the one auto company still under review, according to a source familiar with the process. The list is “in the works” and “should be forthcoming” under the new Biden administration, the source added.
The Mexican Ministry of Economy announced this week <https://www.gob.mx/se/prensa/secretaria-de-economia-aprueba-solicitudes-de-regimen-transicion-alternativo-para-12-empresas-261975?idiom=es> that it had approved USMCA alternative staging regimes for a host of auto companies including Tesla, Volkswagen, Volvo, Mazda, Nissan and Ford. The U.S., Mexican and Canadian governments are responsible for approving individual plans that pertain to production in their respective countries. USTR has communicated the plans it has approved to its Mexican and Canadian counterparts, a source said.
Canada has yet to announce any plan approvals. The process has been slowed there because of the pandemic and the U.S. 2020 presidential election, Automotive Parts Manufacturers' Association President Flavio Volpe told Inside U.S. Trade. APMA is Canada’s national association representing auto parts, equipment, tools, supplies, advanced technology and services producers.
USTR, in the procedures it laid out <https://insidetrade.com/sites/insidetrade.com/files/documents/2020/apr/wto2020_0174.pdf> for submitting an alternative staging regime blueprint, said “a plan could include commitments to make additional investments in the United States and North America, or additional purchases of U.S. and North American parts.”
While reviewing those plans, an industry source said that “USTR was trying to squeeze more concessions out of some companies. They were told verbally that their plans would be acceptable, but then [former USTR Robert Lighthizer] didn’t sign off and said they wanted more concessions in U.S. investment and sourcing from domestic suppliers.”
Volpe lamented the Trump administration’s approach to automakers during USTR’s review of the alternative staging regime plans. Trump, Volpe said, “had a New York developer’s type of bullshit swagger and pressure tactics.”
“None of that pressure was put in writing,” he added. “The outgoing president [Trump] would say ‘Use the leverage we have for these plans to put mandates in the U.S.’ In essence, ‘We’ll give you concessions on plans in exchange for favoring the U.S.,’” Volpe said, describing what he called the Trump administration’s use of its “bully pulpit.”
Moreover, “officials at USTR responsible for negotiating the rules of origin resigned” last year, Volpe said, referring to two former senior USTR officials, Fred Fischer and Jason Bernstein, who were rebuked <https://insidetrade.com/node/169034> by some lawmakers and outside government-watchdog groups for setting up a consulting business focused on USMCA auto rules while still working for the government. “That took the wind out of the effort,” Volpe added.
But one of the sources familiar with the process called Volpe’s allegations “absolutely not true.”
The source said “it was important to get the plans done before the end of the year because that’s when” the CBP deadline was set for companies to provide the government certifications and documentation needed to establish compliance with USMCA’s rules.
Auto companies “would prefer not to do this,” the source acknowledged. “But the whole point was that in exchange for duty-free treatment, they were going to have to invest more.”
Lighthizer on Tuesday credited the USMCA auto rules of origin for boosting investment in the U.S.
“Before we renegotiated NAFTA, eight of the previous 11 auto plants built in North America were built in Mexico. Right? We haven’t seen that now,” Lighthizer said during an event <https://americancompass.org/event/trade-after-trump/> hosted by American Compass. “We’ve seen announcements and the beginning of a lot of auto plants being built in America, not only across Alabama and across that belt, but also even up in the Northeast, which is where I’m from.”
USMCA’s auto rules of origin “say you have to manufacture ... a substantial amount more of these automobiles in North America, and at least 40 percent in the United States,” he said. “Essentially, that’s how it is going forward. It could be Canada, but we all know it’s going to be the United States. That’s a very big change.”

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826

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