US trade commission launches review of USMCA automotive rules of origin

By David Shepardson

WASHINGTON, Feb 19 (Reuters) - The U.S. International Trade Commission has initiated an investigation into the automotive rules of origin under the United States-Mexico-Canada trade agreement, the commission said in a statement on Thursday.

The probe will examine the "impact on the U.S. economy, effect on U.S. competitiveness, and relevancy considering recent technology changes," the statement said.

The rules of origin under USMCA boosted the regional value content requirements in order for manufacturers building cars in any of the three countries to qualify for free-trade status. This required North American manufacturers to source more inputs from within the USMCA region, fundamentally altering their supply chains.

The rules require 75% North American content for manufacturers to get duty-free access to the U.S. market, and require 40% of a passenger car's content to be manufactured in the U.S. or Canada, based on a list of "core parts" including engines, transmissions, body panels and chassis components. The threshold for pickup trucks is 45%.

The ITC plans to hold a public hearing later this year and will issue the report by July 2027.

USMCA is the modern, trilateral free-trade agreement that took effect in 2020, replacing the 1994 North American Free Trade Agreement.

USMCA has shielded Mexico and Canada from the bulk of President Donald Trump's tariffs, as goods that comply with its rules of origin can enter the U.S. duty-free.

The U.S. Trade Representative's Office said last month that possible reforms for USMCA include stronger rules of origin for industrial goods.

Major automakers including General Motors GM.N, Tesla TSLA.O, Toyota 7203.T and Ford F.N have urged the Trump administration to extend USMCA, which they call crucial to American auto production.

Stellantis STLAM.MI said vehicles made outside North America should follow rules on component origin to "mirror or effectively match those imposed by the USMCA" or the Trump administration should drop tariffs on Mexican and Canadian USMCA-compliant passenger vehicles.

The automaker added that under 15% tariffs with Japan, U.S. vehicles complying with North American content rules "will continue to lose market share to Asian imports, to the detriment of American automotive workers."