For the automotive industry, the US-Mexico-Canada Agreement (USMCA) has made the rules on the content of a vehicle more complex. The regional value content (RVC) for passenger vehicles and light trucks will increase from 62.5% to 75% over the next three years. That means the content of the vehicles will require more parts and materials to originate from within North America to qualify for preferential treatment. For main components, the localised content increases to 70% from 65% over the same period, and for complementary parts the content moves from 60% to 65%. The added complication is that there are twice as many categories of parts required for compliance as before.

USMCA also includes a new labour value content requirement, meaning that to qualify for preferential trading terms, at least 40% of the content value of a passenger vehicle (and 45% for light truck) must be made in North American factories where workers make an average of at least $16 per hour.

“We went from one threshold of 62.5% RVC (regional value content) under NAFTA to several different rules: an overarching RVC rule, other thresholds that you need to meet for steel and aluminium core parts, core and complementary parts, and of course, a labour value content requirement – a wage rule for workers,” noted Leila Aridi Afas, director of international public policy at Toyota Motor North America (TMMA)