Automotive rules of origin summary
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Rules of origin are the criteria used to determine whether a good has undergone sufficient production in the Canada-United States-Mexico Agreement (CUSMA) region to be eligible for preferential tariff treatment. They ensure that the benefits of the agreement accrue primarily to producers located in CUSMA countries.
The new automotive rules of origin include elements that will require increased levels of North American content in order to incentivize production and sourcing in North America. The final outcome builds on many ideas consistent with Canada’s goal of strengthening the North American production platform, incentivizing production in North America and encouraging the use of North American steel and aluminum. Throughout the negotiations, Canada focused on modernizing the automotive rules of origin while seeking to maintain the competitiveness of the North American auto industry. This outcome achieves that objective.
The rules of origin for autos will support Canadian companies in the sector and the Canadians they employ. They will also strengthen Canada’s competitive advantage, help keep facilities in Canada and promote good, well-paying jobs for Canadians.
While automotive companies in Canada and their industry associations were not actively seeking significant changes to automotive rules of origin, they have been actively engaged in the modernization process and are supportive of the final outcome.
Technical summary of negotiated outcomes: Automotive rules of origin
- The outcome on automotive rules of origin includes:
- a 75% regional value content requirement;
- strong content requirements for core parts such as engines and transmissions;
- a 70% North American steel and aluminum requirement; and
- a labour value content requirement.
- The labour value content requirement means that a significant percentage of the value of a vehicle must be produced by workers earning the equivalent of at least US$16 per hour. This provision has the potential to improve Canadian automotive manufacturing’s competitiveness compared to that of Mexico.
- The outcome also strengthens rules of origin for auto parts and ensures that all parts used in the production of a vehicle are taken into consideration in determining whether it qualifies as originating.
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