USMCA Takes Effect, With Potential Used Vehicle Tariff Impact

The U.S.-Mexico-Canada Trade Agreement went into effect on July 1, and serves essentially as a modified version of the North American Free Trade Agreement (NAFTA) that went into effect in 1993.

Late last month, the National Automobile Dealers Association learned that final version of the USMCA may lead to a broader imposition of tariffs on used vehicle imports from Mexico and Canada than had previously been anticipated. NADA and six other American-based auto retail advocacy groups sent a letter to the director of U.S. Customs and Border Patrol, urging the federal government to continue treating used-vehicle trade in the same fashion as it did under NAFTA.

Under NAFTA, used vehicles that were assembled in North America could be traded among the three nations without tariffs. According to NADA and the letter sent to the CBP, this provision allowed hundreds of thousands of used vehicles to be freely bought and sold across North America without tariffs raising the prices significantly.

As of today, NADA and the other groups have not heard a response yet from the federal government. If NADA receives any response, we will be sure to provide an update.

Other key provisions of USMCA include a requirement that 75 percent of a new vehicle’s components must be assembled in North America to qualify for tariff-free benefits, up from 62.5 percent under NAFTA. At least 40 percent of automobile parts must be made by workers earning at least $16 per hour by 2023, a move designed to increase Mexico’s labor standards and reduce the enticement of domestic automakers moving their assembly plants south of the border.

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