Brady: Lack of Roll-Up in Auto ROO Unikely to Change

Mexico's economy secretary met with trade leaders in Congress from both parties, and with auto groups, to argue that U.S. Trade Representative Katherine Tai's interpretation of auto rules of origin is counterproductive (see 2107230026), but lawmakers don't necessarily agree.

Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, told International Trade Today in a hallway interview at the Capitol July 27 that since he wasn't in the room for the negotiations, he doesn't know -- as the Canadian auto stakeholders and Secretary Tatiana Clouthier claim -- if the U.S. hid its intention to change how regional value content would be calculated. Under NAFTA, if an engine or a transmission qualified as originating in North America, the entire amount of its value would count toward the vehicle's North American content. But that kind of roll-up is not accepted in USMCA. If a transmission is 80% North American, then the 20% that is not cannot be added up to reach the ultimate 75% regional value content for the vehicle.

He said he is surprised "we haven't heard much lately from our auto manufacturers," since they were vocal during negotiations that they needed clarity early so they could plan for changes, and they needed plenty of time to implement the changes. That makes him think they are satisfied with how USMCA is being implemented.

Brady said he's neutral on whether roll-up should be allowed. "I've just been encouraging all sides to stay at the table, to work this thing out," he said, but added, "I think this will be difficult to change, given that both [the Trump and Biden] administrations agree on the interpretation."

Sen. Mike Crapo, R-Idaho, told International Trade Today he's still educating himself on the issue. The trade group that represents foreign automakers, such as BMW, Mercedes, Toyota and Honda, issued a statement in the name of its CEO, Jennifer Safavian. "As the auto industry continues to navigate the complexities of the new United States-Mexico-Canada Agreement (USMCA), we appreciated the opportunity to meet with Mexico’s Secretary of Economy to receive an update on this important trilateral agreement. We will continue to work with all stakeholders to ensure the success and growth of the U.S. auto industry and remain hopeful that the three government authorities can resolve issues with the agreement quickly,” the Autos Drive America statement said.