U.S. Floats Option to Modify NAFTA Local Content Demand

U.S. trade negotiators working to update NAFTA are proposing to replace their call for more local content in vehicles with a range of targets for different components, sources tell Bloomberg News.

The plan would scrap a Trump administration demand that the North American Free Trade Agreement’s current 62.5% local content rule be hiked to 85%. Complying with NAFTA’s so-called rules of origin defines which vehicles built in North America qualify for duty-free shipping between Canada, Mexico and the U.S.

Bloomberg suggests that it isn’t clear whether any cars currently made in the region have 85% local content. Under the new scheme, vehicle components would be organized under five categories, each with its own content requirement. The thresholds would range from zero percent local content for parts such as nuts and bolts to 85% for high-value assemblies such as engines and transmissions.

None of the NAFTA members have commented on the proposal. But all have expressed optimism lately about finding a way to modify rather than abandon the agreement.