Canadian, Mexican Diplomats Encourage Auto Industry to Lobby on USMCA Roll-Up

At issue is how companies calculate the regional value in super-core parts and in the vehicle as a whole. Canada, Mexico and most automakers said that once a lower-level part qualified as originating in North America, all of its value counted toward the 75% regional value content threshold (see 2301120008), a process called "roll-up," which is the way it worked under NAFTA. The panel agreed in January 2023 that roll-up continued under USMCA, but the U.S. has not followed that ruling.

Consul General Colin Bird told the Automotive Industry Action Group conference attendees that if industries are disadvantaged by the U.S. interpretation of auto rules of origin, they need to let politicians know.

"When we renegotiated the USMCA, governors played a tremendously important role down here, private industry played a tremendously important role in determining the final outcome of those negotiations," Bird said. "And there is a power in a room like this to really make sure that the terms of trade work effectively for American business, Canadian business, Mexican business."

Bird said he was in Washington during the NAFTA renegotiation -- he was Canadian minister-counselor for trade -- and he said the roll-up methodology for auto rules of origin is what was negotiated at that time.

"Conversation happened at the ministerial table, with USTR [Bob] Lighthizer, our respective ministers, where you were actually talking at that level about the roll-up rules," he said. "So it's not as if our two countries haven’t had an exhaustive conversation at the most senior level about these rules."

An audience member asked Bird if Canada accepts vehicles duty free that only meet the 75% threshold when using roll-up, and he said he'd have to look into it. The Global Affairs department in Canada also wasn't able to answer this question by press time.

U.S. Trade Representative Katherine Tai has never admitted that the U.S. won't comply with the ruling, but instead, talks about negotiating a settlement with Canada and Mexico to bolster North American supply chains. Most recently, she suggested that treating USMCA panel rulings as binding would violate U.S. sovereignty. It was "never meant to be something you can shove down the throat of the other side," she said at a think tank appearance.

Bird, in describing those "settlement" talks, said: "There has been little movement on the issue by the U.S. to date."

Bird and Mexican Consul General in Detroit Roberto Nicolas Vazquez said their governments could work with President Donald Trump when he returns to office. Trump has talked about putting a global tariff on imports to put a "ring around the economy," and has not said that free-trade partners such as Canada, Mexico and South Korea will be exempt. He also has talked about imposing an escalating tariff on Mexican exports, starting at 25%, to force that country to curtail drug trafficking and migrant crossings.

Vazquez did not address that threat directly. Bird said that while there is a place for tariffs, to counter trade distortions, imposing them on everyone, as President Richard Nixon did for a few months, doesn't work. Bird said Canada is up for talking about combating transshipment, and said no country is as aligned with the U.S. in keeping Chinese overcapacity out of its market as Canada is.

"Our prime minister has worked closely with President Trump in the past," he said. "They had a good phone call yesterday talking quite a bit about trade."

Bird acknowledged that when Trump imposed Section 232 tariffs on Canadian steel and aluminum, that "was a challenging file," and that Canada had to reciprocate with tariffs, but eventually, the U.S. allowed Canadian steel and aluminum to return to duty-free status.

Vazquez and Bird both said the 2026 review of their free-trade agreement should not be a renegotiation. Vasquez said T-MEC, as Mexicans call the NAFTA replacement, has led to a lot of auto industry investment -- and Bird said the same is true in Ontario.

"The biggest challenge for us is the Asian automotive industry that is way ahead of us in electrification," Vasquez said, referring to North American auto production. "If we don’t do it together, if we don’t control costs, if we don’t make it efficient, we won’t be able to compete in the world in general."