USMCA Background

The U.S.-Mexico-Canada Agreement (“USMCA”) is a free trade agreement that replaced the North American Free Trade Agreement (“NAFTA”) and entered into force on July 1, 2020. The USMCA enjoyed significant bipartisan support and was widely considered a successful effort at “modernizing” NAFTA.

From a labor perspective, the USMCA contains much stronger provisions than its predecessor. Rather than comprising enforceable labor provisions, NAFTA was accompanied by a labor side agreement which only listed guiding principles pertaining to workers’ rights. On the other hand, the USMCA comprises an enforceable chapter dedicated to labor containing strong provisions in favor of workers rights.

A key provision in the USMCA’s labor chapter is a provision which mandates Labor Value Content (“LVC”) rules which require that 30% of work performed on automobiles manufactured in North America should be performed by workers earning at least $16 per hour in order to qualify for duty-free treatment. The LVC requirements apply to passenger vehicles, light trucks, and heavy trucks and applies exclusively at the automotive manufacturing (original equipment) level. This LVC threshold will be gradually elevated to 40% by July 1, 2023.

According to the implementing legislation of the USMCA, the U.S. Department of Labor (“DOL”) issued regulations necessary to administer the high-wage components of the labor value content requirement. The implementing legislation requires importers who claim preferential tariff treatment under the USMCA for goods imported into the United States from Canada or Mexico to create and retain records for examination. 

Comment Opportunity

On December 1, 2020, DOL announced in the Federal Register that it will receive comments submitted by the public regarding the scope and manner in which DOL’s Wage & Hour Division intends to collect from respondents. Comments are due by December 31, 2020. According to the announcement, DOL estimates that its information collection activities will affect 9,455 respondents and require 205,911 hours of these respondents’ collective time (an average of 21.8 hours per respondent).

DOL specifically requests comments responding to the following questions:

  1. Whether the collection of information is necessary for the proper performance of the functions of the Department, including whether the information will have practical utility;
  2. If the information will be processed and used in a timely manner;
  3. The accuracy of the agency’s estimates of the burden and cost of the collection of information, including the validity of the methodology and assumptions used;
  4. Ways to enhance the quality, utility and clarity of the information collection; and
  5. Ways to minimize the burden of the collection of information on those who are to respond, including the use of automated collection techniques or other forms of information technology.

Contact Us

Diaz Trade Law has extensive expertise on USMCA tariff matters and in preparing and submitting comments. Please reach out to us if you would like to submit comments to DOL in order to inform the agency of how to best collection USMCA LVC information. Diaz Trade Law can be reached at info@diaztradelaw.com and 305-456-3830.