Mexico and Canada won a dispute settlement panel against the United States on rules of origin in the automotive sector under the free trade agreement between

those three countries (T-MEC). This Wednesday the Final Report of the United States-Rules of Origin controversy in the Automotive Sector (USAMEX20223101) was released.

The panel determined that the T-MEC allows vehicle manufacturers to consider the essential parts of a finished vehicle (engine, transmission, bodywork, etc.) as originating, once, separately, said auto parts have complied with the percentage minimum regional content (75%), using the alternative methodologies that the same treaty establishes.

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In the dispute process, the delegations of Mexico and Canada advocated above all the use of "roll-up" methodologies, while the delegation of the United States opposed it with respect to certain parts incorporated into finished vehicles. , with its intention to limit the use of foreign content in automotive production that is exported regionally.

The dispute settlement case is important for the three countries because the automotive sector covers the largest flow of intraregional trade, and also because new provisions of the USMCA are being tested to resolve conflicts between the parties.

Roll-up methodologies allow materials (for example, automotive parts) that have acquired origin by meeting a regional value content (RVC) threshold to be considered fully originating when used as inputs in a subsequent manufactured product. (for example, a finished vehicle).

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Roll-up methodologies provide additional flexibility for finished product producers to satisfy the applicable CVR and thus obtain preferential tariff treatment.

Shipowners had asked the US government to drop its defense in the dispute settlement panel, in a statement prior to the hearing held on October 13 as part of the dispute settlement process. The companies are: BMW, Honda, Hyundai, Kia, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Subaru, Toyota and Volkswagen.

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