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News Release 23-059
Inv. No(s). 332-592
Contact: Lawrence Jones, 202-205-1819
The U.S. International Trade Commission (USITC) today released its first report on the economic impact on the United States of the United States-Mexico-Canada Agreement (USMCA) automotive rules of origin (ROOs), their operation and effects on the U.S. economy and U.S. competitiveness, and whether the rules remain relevant in light of technological changes in the United States.
The report, USMCA Automotive Rules of Origin: Economic Impact and Operation, 2023 Report, is required by section 202A(g)(2) of the USMCA Implementation Act (the Act) (19 U.S.C. § 4532(g)(2). The Act requires the USITC, an independent, nonpartisan, factfinding federal agency, to submit five biennial reports to the President, the House Committee on Ways and Means, and the Senate Committee on Finance. The next four reports are due in 2025, 2027, 2029, and 2031.
Detailed highlights of the Commission's findings can be found in the report's Executive Summary.
Select findings are detailed below.
- As the USMCA has only been in force since July 1, 2020, and many of the ROOs have not been fully implemented due to staging, or phasing in, of requirements over a period of years, the full impact will likely not be apparent until the agreement is fully implemented, in 2027, or later.
- For the period July 2020 through December 2022, the Commission’s economic modeling analysis indicated that the ROOs reduced U.S. imports of vehicle parts and increased U.S. revenues, employment, wage payments, and capital expenditures related to light vehicle and automotive parts production. The model also indicated that the ROOs increased the cost of producing light vehicles in the United States. The higher costs of U.S. vehicle production increased U.S. sales of imported light vehicle models from the rest of the world. Lower tariff preference utilization reduced U.S. imports of light vehicles from Canada and Mexico. These economic effects were concentrated in the automotive industry and had a negligible economy-wide impact.
- Production, trade, employment, and investment data trends from 2018 to 2022 showed few signs of changes in the overall competitiveness of the U.S. automotive industry after USMCA’s entry into force in 2020. Production shutdowns due to the COVID-19 pandemic and semiconductor chip shortages were likely the main factors in the aggregate declines in U.S. vehicle and parts production in 2020 and 2021 that occurred despite the positive estimated impact of the ROOs on U.S. production described above.
This report also identified two technological changes in the United States that have created a divergence related to the tariff classification or tariff treatment of similar goods in the USMCA automotive ROOs. These technological changes involved a new production process related to aluminum vehicle bodies and the increased production of electric and hybrid pickup trucks.
USMCA Automotive Rules of Origin: Economic Impact and Operation, 2023 Report (Investigation No. 332-592, USITC Publication 5443, June 2023) is available on the USITC website at: https://usitc.gov/publications/332/pub5443.pdf.
About factfinding investigations: USITC general factfinding investigations, such as this one, cover matters related to tariffs, trade, and competitiveness and are generally conducted under section 332(g) of the Tariff Act of 1930 at the request of the U.S. Trade Representative, the House Committee on Ways and Means, or the Senate Committee on Finance. The resulting reports convey the Commission’s objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the USITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public unless they are classified by the requester for national security reasons.
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