Canada joins Mexico in seeking consultation with US over USMCA content rules

Canada has joined Mexico in seeking formal consultation with the United States over the interpretation of content rules for automobiles set out in the North American trade pact, Mexico and Canada said on Friday.

Mexico on Aug. 20 requested the formal consultation over the interpretation and application of tougher content rules for cars under the United States-Mexico-Canada Agreement (USMCA), after voicing disagreement in May over the issue in a virtual meeting when it cited differences with the United States' methods.

Canada and Mexico use more flexible interpretations.

"We know how important the auto industry is to Canada's workers and the Canadian economy. Canada has advised the US and Mexico that it intends to join the consultations as a third party," said Patricia Skinner, spokeswoman for Global Affairs Canada.

Skinner said Canada continues to work with the auto industry on this and other important issues.

"We are pleased Canada has decided to join the request for consultations, which we requested on August 20, in relation to the interpretation the United States makes of the rules of origin in USMCA for the automotive sector," Mexico's economy minister, Tatiana Clouthier, said on Twitter.

The USMCA, the successor to the North American Free Trade Agreement, requires 75% North American content for a vehicle to be considered as being from North America.

The same percentage will apply for essential parts from July 1, 2023, up from 69% now, and compared with 62.5% under the previous trade pact. Mexico argues that once the level of essential parts hits 75%, it is considered 100% and should be counted as such toward the overall value of the automobile.

The request for consultation is the first non-contentious stage of a dispute resolution mechanism provided for in the trade pact.