Carmakers Warn of High Compliance Costs for Updated NAFTA

Auto industry groups are warning that the complex local content rules proposed under the revised North American Free Trade Agreement will add costs and erode competitiveness, Automotive News reports.

The new standards under the proposed U.S.-Mexico-Canada Agreement (USMCA) will raise the local content needed to qualify for duty-free shipping within the bloc to 75% from 62.5% required under NAFTA.

A new stipulation introduced by USMCA requires 40% of the content of such vehicles be made by workers within the region who are paid a minimum average $16 per hour. The Center for Automotive Research in Ann Arbor, Mich., has pointed out that calculating that figure may require carmakers to ask for labor cost data from their suppliers.

Such requirements will add new compliance procedures, impose “unnecessary complexity” on the industry and make the region less competitive with the rest of the world, the Assn. of Global Automakers complains.

The more optimistic American Automotive Policy Council, which represents the traditional Detroit carmakers, believes the USMCA provides enough flexibility while coping with the deal’s “challenges.”