WashingtonThe North American Free Trade Agreement will take effect on July 1, which means that carmakers will have to start fighting a new set of trade rules as they try to stay afloat during the coronavirus pandemic. .

On Wednesday, the trade rules that motorists have been playing since 1994 will be replaced by a new pact requiring car manufacturers to produce cars with 75% of parts originating in the United States, Canada or Mexico, from 62.5% within five years to qualify for duty-free treatment. The pact, known as the Canada Agreement of the United Mexican States, was signed into law by President Donald Trump in January.

In addition to the new U.S. requirements for parts, known as “origin rules,” the new pact requires 40-45% of an auto content to be made by workers earning at least $ 16 an hour. Vehicles that do not meet the requirements will be subject to a 2.5% duty. Automakers and other companies will also need to ensure that 70% of the steel and aluminum they use come from North American enterprises.

The US Trade Representative recently issued uniform rules for the trade pact agreed by the US, Canada and Mexico. Trump administration officials expressed confidence Tuesday that enough information has been circulated with U.S. companies to ensure movement for affected businesses, including vehicles.

“We have made a significant amount of communications and communications,” Brenda Smith, Executive Assistant Commissioner, Office of Trade, Customs and U.S. Border Protection, said in a press release. She noted that her agency has issued three sets of implementation guidelines since April, including one set to monitor and implement procedural guidelines that were released to the public on Tuesday.

Smith said vehicle manufacturers will have about a six-month transition period to expedite the new rules, followed months after the “informed compliance” in which regulators will keep an eye on their documentation to ensure that things are in line with the new rules expectations. But they avoid harsh punishments. She acknowledged that carmakers will be in a whole new trading world, starting Wednesday.

“Every time you’ve trained and built processes around a set of 25-year-old rules, any change will be a challenge,” Smith said.

“We’re not going to be in a gotcha state, but we certainly want to make sure the industry is in line with the agreement,” she continued. “Overall, the government’s expectation is that if you make a request for preferential treatment, your production and content is in line with the agreement.”

Smith said she was not worried about the possibility that the coronavirus pandemic and international travel restrictions that have been in place in recent months will hinder companies’ ability to meet demand, noting that the new rules will be phased out and much of the compliance documentation will be submitted electronically.

“As far as essential workers are concerned, they are able to cross the border,” she said. “We don’t think travel restrictions that are currently in the right space on our ability to implement this agreement.”

In a statement, Ford Motor Co.it said it “has long supported USMCA as a model for future US trade agreements and is pleased it is now officially in force.” The company added that “it will continue to work closely with (US Trade Representative) to ensure that its implementation fosters innovation and keeps the US vehicle industry globally competitive.”

General Motors Co. declined to comment and Fiat Chrysler Automobiles NV did not immediately respond to a request for comment.

Jennifer Safavian, president and CEO of Here for America, which lobbies in Washington for U.S. operations of international motor vehicle manufacturers, said in a statement the implementation of USMCA is an important step because “an integrated North American automotive market has been essential to expanding the operations of international automakers in the United States, which together build nearly half of all the cars and trucks produced here and support over 2.4 million U.S. jobs. ”

Charlie Chesbrough, an old economist and old director of industry knowledge for Cox Automotive, said vehicle manufacturers will make a lot of competitive demands between new trade rules and pandemics.

“The industry is so concerned now that the implementation of USMCA is just being thrown into the cake,” he said. “There are likely to be some issues with documentation and documentation with the new deal that will take time to resolve. But the industry is more focused on supply and demand issues before them today. Factories are trying to maintain compliance.” COVID and take inventory levels turn into more powerful levels ”.

He added: “With the closures in March, inventory has fallen and this could hamper sales in June and July. If buyers can’t find exactly what they want, they may decide to delay the purchase.

“Inventory for traders has dropped significantly in recent weeks as demand has improved while supply has been limited,” Chesbrough said. “This issue is likely to have more pressure for OEM, but of course supply chain outages due to COVID, or USMCA compliance, would not be. Helpful now.”

Joseph Semsar, Deputy Secretary of State for International Trade for the US Department of Commerce, said at a Washington-based webinar, DC-based Wilson Center, a non-partisan political forum on Tuesday, USMCA modernizes NAFTA’s critical provisions and sets the stage for creation of the automotive industry of the future in North America. “

He defended provisions in the trade pact that increase demands on the number of parts of North America and wage demands for motorists as a seminal achievement for the Trump administration, which has promised to rewrite trade agreements, the president considered unfair to U.S. workers during the campaign. his for 2016.

“According to estimates by the U.S. Trade Representative’s Office, the new capital investment in the U.S. could be attributed to USMCA by vehicle manufacturers and battery suppliers will reach approximately $ 34 billion over five years,” he said. new purchases of automobile parts in the US within five years ”.

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