The tariff threat hangs over used cars

Under the USMCA, light passenger vehicles that violate trade rules are subject to a 2.5 percent duty. But that drops to 25 percent for trucks, including pickup trucks, which are popular and often very profitable for dealers in both countries.

“If dealers are trying to get used trucks or freight vehicles out of Canada, it can have a huge impact,” said Kristin Dziczek, senior vice president of research at the Center for Automotive Research in Ann Arbor, Michigan.

US trade groups are lobbying federal trade and customs officials to change the way USMCA rules are applied to used vehicles. They argue that cars and trucks manufactured while NAFTA was in place should be subject to the rules of the NAFTA era.

In a June 26, 2020 letter to Robert Perez, Assistant Commissioner of Customs and Border Protection for the United States, US industry groups argued that the government’s interpretation could “effectively lead to the assessment of tariffs on all used car trade ”.

The letter was signed by the presidents and CEOs of seven groups that represent manufacturers and dealers, including the National Automobile Dealers Association and the American Automotive Policy Council. A letter making similar points was sent to U.S. Trade Representative Katherine Tai on March 24, 2021.

All used vehicles could be subject to tariffs “because, in practice, it is impossible at this stage to determine whether a vehicle built before the USMCA meets the new USMCA requirements,” the letter said. Perez.

The groups say this is because “there are no records or documentation” for older vehicles that could “possibly establish that they comply” with the new rules of origin requirements. The method for determining whether a vehicle meets regional content value levels is different under the USMCA than it was under NAFTA.

The USMCA also includes labor, steel and aluminum content requirements that NAFTA did not have.

“Thus, US importers will not be able to prove that vehicles built in the NAFTA region prior to the USMCA are eligible for duty-free treatment,” the letter said. “Such a result would have a devastating impact on the used vehicle trade between the United States, Mexico and Canada. And that negative result could be further exacerbated if Canada and / or Mexico were to retaliate by rendering used vehicle imports from the United States ineligible. for preferential tariff treatment. “