Canada and Mexico challenge US interpretation of CUSMA

Canada joins Mexico in challenging how the United States interprets new CUSMA provisions on “rules of origin” in the automotive sector.

Mexico last week requested the creation of a dispute settlement panel to challenge the strict US interpretation of the rules of origin under the Canada-United States-Mexico Agreement (CUSMA) — the new NAFTA . Canada now joins this Mexican request.

The “rules of origin” under the agreement dictate how much of a product must come from the region to qualify for duty-free treatment. CUSMA requires passenger vehicles and light-duty vehicles to have 75% regional content, compared to 62% under the old NAFTA.

Canada claims that the United States is violating the agreement by adopting a stricter formula for meeting these thresholds.

Second major litigation

This is the second major dispute to arise since the entry into force of CUSMA on 1er July 2020. A dispute settlement panel ruled last week on the filing of a U.S. complaint about how Canada allocates its dairy import quotas.

“Canada, Mexico and the United States would all benefit from certainty that CUSMA is implemented as negotiated, and Canada is optimistic that a dispute settlement panel will help ensure a rapid resolution of the matter,” Federal Trade Minister Mary Ng said in a statement on Thursday.

Ottawa’s move comes after deputy U.S. Trade Representative Jayme White held virtual meetings on Wednesday with his Canadian counterpart, David Morrison, deputy minister of trade. The pair were due to continue their talks behind closed doors on Thursday with their Mexican counterpart, Luz María de la Mora.

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