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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 free trade agreement between the U.S., Mexico, and Canada that officially started 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 cars must be made to qualify for duty-free (tax-free) trade within North America. These rules were designed to encourage more manufacturing within the United States. Consistency in these rules allows automakers to optimize their production across borders while remaining globally competitive and lowering costs for consumers.

    What Are 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 sold without extra taxes, 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: Previous trade agreements stipulated that vehicles only needed 62.5% of their parts to be made in North America to avoid tariffs. The USMCA raised this requirement to 75% of a vehicle’s value must be sourced in North America.
    • Labor Value Content (LVC): USMCA requires that 40% to 45% of a vehicle’s value must be produced by workers earning at least $16 per hour, encouraging companies to produce cars in the United States.
    • 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 to automotive production must be melted and poured in North America.

    USMCA Has Allowed International Automakers to Become Leaders of the U.S. Auto Industry

    USMCA Timeline

    July 1, 2020:

    USMCA goes into effect

    July 1, 2026:

    Mandated review by the three parties

    2026-2027:

    Decision on renewal or start of annual reviews

    2027-2026:

    Annual reviews if no agreement is achieved

    July 1, 2036:

    USMCA expires if no renewal

    At any point:

    A party may withdraw with a six months’ notice

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