The Ministry of Economy reported in a statement the approval of the applications of 12 companies in the automotive sector that under the Treaty between Mexico, the United States and Canada (USMCA), requested a «Alternative Transition Regime» which extends the transition period from 3 to 5 years, (unless the producer of the vehicle requests a longer period and is accepted by the Ministry of Economy) and will allow them to comply with the new rules of origin for automotive goods.
Which are the modifications to the USMCA rules of origin?
Currently, the USMCA establishes that it will apply the tariff benefits for cars that meet the following conditions in 3 years with a Standard Transition Regime or in 5 years or more with an Alternative Transition Regime:
- The Regional Content Value for light vehicles should increase from 62.5% to 75.
- For heavy duty vehicles, the Regional Content Value will increase from 60% to 70%.
- On the side of Labor Content Value, a minimum of 40% of the vehicle’s value should be produced using wages of at least $16 per hour.
In addition, since July 1st, 2020, 70% of steel and aluminium should come from the North American region.
Which companies will be able to use the Alternative Transition Regime?
- Tesla Inc.
- Volkswagen de México S.A. de C.V.
- Volvo Car USA
- FCA México, S.A. de CV
- Hyundai Motor America
- Mazda Motor de Mexico, S. de R.L. de C.V.
- Toyota Motor de México, S. de R.L. de C.V.
- Kia Motors Mexico
- Kia Motors Manufacturing Georgia, Inc.
- Nissan Mexicana, S.A. de C.V.
- Ford Motor Company S.A. de C.V.
- Cooperation Manufacturing Plant Aguascalientes, S.A.P.I. de C.V. (alliance between Renault-Nissan and Daimler)
It is worth mentioning that both Honda and General Motors are the only automakers to follow the Standard Transition regime.
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