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    • USMCA

    The USMCA has strengthened the foundation for North American trade by promoting regulatory certainty, deeper supply chain integration, and sustained regional economic growth.

    What is USMCA?

    The United States-Mexico-Canada Agreement (USMCA) is a trade agreement between the U.S., Mexico, and Canada entered into force on July 1, 2020. It replaced the North American Free Trade Agreement (NAFTA), which had been in place since 1994.

    The USMCA established more stringent rules for how vehicles must be made to qualify for duty-free trade within North America. These rules were designed to encourage more manufacturing within the United States and North America. Consistency in these rules allows automakers to optimize their production across borders while remaining globally competitive and lowering costs for consumers.

    What Are Automotive Rules of Origin?

    ‘Rules of Origin’ (ROO) dictate what percentage of a vehicle and its parts (by value) must be made in North America to qualify for duty-free treatment. For a vehicle to be imported duty-free, the USMCA says a certain high percentage of its parts must be made within the three member countries. This is designed to encourage companies to keep manufacturing jobs in North America.

    The USMCA contains the most complex and stringent ROOs of any trade agreement ever negotiated:

    • Higher Regional Value Content (RVC) Requirements: NAFTA stipulated that vehicles only needed 62.5% of the vehicle’s value to be made in North America to receive preferential treatment. The USMCA raised this requirement to 75% of a vehicle’s value.
    • Labor Value Content (LVC): USMCA requires that 40% of a vehicle’s value must be produced by workers earning at least $16 per hour, encouraging higher wages in all three countries.
    • Steel and Aluminum Requirements: USMCA requires at least 70% of a vehicle manufacturer’s steel and aluminum purchases to originate in North America.
      • And by July 2027, steel used in automotive production must be melted and poured in North America.

    Why Does USMCA Matter for the U.S. Auto Industry?

    For more than 25 years, NAFTA – and later USMCA – served as the backbone of the highly integrated North American automotive industry, enabling manufacturers to optimize production across borders while remaining globally competitive. USMCA preserved the trilateral framework while improving incentives toward higher wages and increased North American content. Vehicles assembled in the United States routinely contain engines, transmissions, electronics, and components that cross borders multiple times before final assembly. This integration has:

    • Lowered costs for consumers
    • Supported millions of U.S. jobs
    • Strengthened North America’s ability to compete with Asia and Europe

    What Are the Auto Industry's Objectives?

    • Maintain USMCA’s Trilateral Partnership, which is essential to the success of the U.S. automotive industry and its competitiveness against China and other regions.
    • Refrain from adding new product specific rules that may result in higher costs and lower compliance.
    • Return to preferential treatment for qualifying goods.

    USMCA Has Encouraged Investment and Production in the United States

    USMCA Timeline

    July 1, 2020:

    USMCA goes into effect.

    July 1, 2026:

    Mandated review by the three parties. If a decision is reached, the agreement is extended for sixteen years. If no decision is made, annual reviews begin.

    2027-2036:

    Annual reviews will continue for 10 years.

    July 1, 2036:

    If no decision is reached by the parties within 10 years, USMCA expires.

    At any point:

    A party may withdraw with a six months’ notice.

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