Rep. Kind: USTR considering flexibility for USMCA’s auto terms

April 14, 2020

U.S. Trade Representative Robert Lighthizer is mulling how to allow for flexibility in the implementation of U.S.-Mexico-Canada Agreement auto rules of origin, as requested by many in the industry and by many lawmakers, Rep. Ron Kind (D-WI) said this week.

Kind added that the administration continues to push for the pact to enter into force by July 1.

Noting that he spoke with Lighthizer last week, Kind, a senior member of the House Ways & Means trade subcommittee, said USMCA should enter into force “sooner rather than later.” However, he added, the Trump administration should be flexible in establishing guidelines for how the rules of origin for automotive goods will be implemented.

“I think, and I think [Lighthizer] agrees, that if they need some more time for clearer guidance and regs to be put in place — fine. But let’s not hold up the whole agreement until we have everything perfectly set in it because there was a lot of good that was accomplished in it and until it gets implemented, we don’t see any of it.,” he told Inside U.S. Trade during an April 14 interview. “So, I’d like to see that done sooner rather than later and continue to work with the auto industry with the concerns they are raising right now. And I think that can be dealt with the flexibility from all three nations.”

Several industry groups and senators have warned that automakers and parts makers need more time to adjust to uniform regulations needed to guide the application of the complex automotive rules of origin. Those negotiations have faced delays due to technical issues as well as efforts to fight the COVID-19 pandemic, as some companies have shifted their focus to the manufacturing of medical goods. Many auto companies have also temporarily closed production facilities.

The new regulations will allow the three parties to address potential compliance issues. According to the U.S. implementing legislation, the regulations implementing the auto rules of origin must be issued by the date that USMCA enters into force.

The administration had been pushing for a June 1 entry-into-force date. However, as of last week, the U.S. had not yet notified Canada and Mexico that it had completed internal procedures required for the agreement to take effect. July 1 remains the earliest the pact can enter into force, according to language in the protocol of amendment.

Earlier this week, a group of more than 30 House lawmakers urged USTR to allow the auto sector some flexibility in implementing USMCA’s rules of origin. The lawmakers said more time was needed “to allow the auto industry an appropriate adjustment period and account for delays caused by the COVID-19 pandemic.”

For Kind, an adequate transition period for automakers would be a “logical approach” to allow the USMCA implementation process to move forward in a rational way.

Noting USTR’s hope for entry into force in July, he said, “And if there is a way to do it even sooner, I think we ought to be exploring that as well along with some enhanced flexibility for the auto [sector]. I can’t imagine that the three countries working together can’t accommodate that and provide some flexibility for it. But in the meantime, there are a lot of things that we ought to be moving forward and implementing right away.”

“I would hate to have one or two sections hold everything else up, especially now when we are looking for greater economic cooperation in the middle of this crisis,” Kind added.

Senate Finance Committee Chairman Chuck Grassley (R-IA) told reporters on Tuesday he believed Lighthizer was working to accommodate the auto industry’s concerns.

“Since I had a private conversation with him, I will not divulge the conversation itself, but I sense that he’s got a pretty good understanding of some of the problems that originally we didn’t think he did,” Grassley said. “And he’s trying to accommodate those problems, particularly in the automobile industry.” — Isabelle Icso (iicso@iwpnews.com) with Hannah Monicken (hmonicken@iwpnews.com)