Canada joining Mexico to dispute USMCA auto-rules

WASHINGTON - Canada is joining forces with Mexico to challenge how the United States is interpreting the new rules that govern duty-free cars and trucks.

CVMA welcomes the announcement that Canada will be joining Mexico as a party against the U.S. interpretation of the automotive rules of origin under CUSMA. The competitiveness of the North American automotive industry depends on CUSMA being implemented as negotiated. https://t.co/6d1kJDam5w

— Canadian Vehicle Manufacturers' Association (@cvma_ca) January 13, 2022

Mexico last week asked for a dispute resolution panel to challenge the stringent U.S. interpretation of the auto rules of origin enshrined in the U.S.-Mexico-Canada Agreement.

Rules of origin in the deal known as CUSMA in Canada dictate how much of a product must originate in the region in order to qualify for tariff-free status.

The new deal requires passenger vehicles to contain 75 per cent regional content, up from 62 per cent under NAFTA.

Canada says the U.S. is violating the terms of the agreement by adopting a stricter formula for how those thresholds are met

It's the second major dispute to arise since the deal took effect after a panel ruled last week in favour of a U.S. complaint about how Canada is allocating its quotas for dairy imports.

"Canada is joining Mexico's request to establish a dispute resolution panel," Trade Minister Mary Ng said in a statement today.

"Canada, Mexico and the United States would all benefit from certainty that CUSMA is being implemented as negotiated, and Canada is optimistic that a dispute settlement panel will help ensure a timely resolution of this issue."

News of the decision comes after virtual meetings Wednesday between deputy U.S. trade representative Jayme White and David Morrison, Canada's deputy trade minister.

The two are scheduled to continue their discussions behind closed doors today with Mexican counterpart Luz María de la Mora.