The commercial dispute resolution panel prepared to resolve the conflict between the United States, Mexico and Canada, regarding the interpretation of the rules of origin for automobiles in the T-MEC, stands in favor of Mexico and Canada.

The panel issued a preliminary opinion on November 14 of this year, which explains, according to people familiar with the decision, that it is in favor of the interpretation that Mexico and Canada have regarding the rules of origin for automobiles in the Treaty between Mexico, the United States, Canada (T-MEC).

Nations will be able to provide feedback on the report before a final version is released in 30 days.

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Let us remember that in January 2022, Mexico requested the help of the panel for the first time to resolve the interpretation of the nations on how to calculate the percentage of a vehicle that comes from the three countries under the T-MEC.

Both Mexico and Canada believe that the T-MEC stipulates that a higher percentage of regionally produced parts should be considered for duty-free shipping than the United States wants to allow.

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The United States was insisting on a stricter method than Mexico and Canada agreed to for the origin of core parts, including engines, in the overall calculation. This action makes it difficult for the plants in Mexico and Canada to reach 75% regional content.

The countries comment that if this is achieved under the USMCA, it allows them to round up to 100% in order to meet a second, broader requirement for the regional content of the car, but the United States does not allow rounding, which prevents reaching that tax-free threshold for the vehicle.

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Original note