U.S. International Trade Commission launches CUSMA rules-of-origin auto investigation

The U.S. International Trade Commission has launched an investigation into rules-of-origin regulations for automobiles under the Canada-U.S.-Mexico agreement on trade.

A news release on the commission's website says the investigation will analyze the regulations' "impact on the U.S. economy, effect on U.S. competitiveness, and relevancy considering recent technology changes."

It's the third investigation of the rules since the trilateral trade pact, widely known as CUSMA, was adopted during the first administration of U.S. President Donald Trump. The commission is required to conduct an investigation every two years until 2031.

The report on automobiles must be delivered to Trump and the U.S. Senate by July of next year.

The deeply integrated North American automobile market has been upended by Trump's 25 per cent tariffs on automobiles and separate duties on steel and aluminum.

Automobiles and parts were a critical factor in the negotiations that led to CUSMA replacing the North American Free Trade Agreement. The trilateral trade deal increased the regional value content requirements for allowing vehicles to be traded tariff-free.

CUSMA generally requires that a vehicle have 75 per cent North American content before it can cross the border without tariffs. Forty per cent of a car has to be manufactured in either Canada or the United States for it to obtain tariff-free status; for trucks, that percentage increases to 45 per cent.

The deal also increased North American content requirements for auto parts and raw materials and enhanced the rules on what employees must be paid.

Automotive Parts Manufacturers' Association president Flavio Volpe said American content in Canadian vehicles increased from 38 per cent under NAFTA in 2019 to 50 per cent under CUSMA in 2024.

"So (CUSMA) has been a tremendous gain for the U.S. parts sector and the U.S. raw material sector in automotive," Volpe said.

It doesn't come at a cost to Canada, Volpe added, because the Canadian content has stayed roughly the same.

The U.S. International Trade Commission's 2025 report on the rules-of-origin regulations tracked an increase in total investment in U.S. automotive manufacturing under CUSMA. Auto parts makers also saw a surge in revenue and jobs.

The report did note an increase in production costs for companies seeking compliance under the trade agreement, which caused competitiveness concerns about imports of foreign non-CUSMA cars.

The president has said repeatedly he doesn't want cars from Canada or Mexico. Members of the Trump administration have claimed CUSMA has been detrimental to the United States automobile industry.

"It's been tremendously accretive," Volpe said. "And the difference between what I'm telling you and what the administration has been saying over the last year is I'll acknowledge it."

CUSMA is up for review this year but some experts have said Trump is undermining his own agreement through his massive tariff agenda. The president also has called into question whether the U.S. might pull out of the trade pact altogether.

Picture Courtesy: AP Photo/Evan Vucci