USMCA United States-Mexico-Canada Agreement Implementation Act
On January 29, 2020, the United States-Mexico-Canada Implementation Act (“USMCA Implementation Act” or “Act”) was signed into law, ratifying the USMCA and implementing its provisions. Section 202A of the Act, codified at 19 U.S.C. 4532, provides that a covered vehicle is eligible for preferential tariff treatment when imported into the United States only if the producer has provided a certification that the production of the covered vehicle meets the LVC requirements, including the high-wage components. See 19 U.S.C. 4532(c)(1)(A). The producer must have information on record to support the calculations on which its certification is based, and maintain records supporting such calculations. See 19 U.S.C. 4532(c)(1)(A). The Secretary, in consultation with the Commissioner of CBP, must review these certifications for errors or omissions before the certification can be considered properly filed. See 19 U.S.C. 4532(c)(1)(B).
The Act also describes the procedures for verification of preferential tariff claims, including preferential tariff claims for covered vehicles. Section 4532(e)(1) authorizes the Secretary of the Treasury, in conjunction with the Secretary, to verify whether a covered vehicle is in compliance with the LVC requirements. See 19 U.S.C. 4532(e)(1).
The Secretary is charged, in cooperation with the Secretary of the Treasury, with verifying whether the production of covered vehicles meets the high-wage components of the LVC requirements, including the high-wage material and manufacturing expenditures, high-wage technology expenditures, and high-wage assembly expenditures discussed above. See 19 U.S.C. 4532(e)(2).
As part of these verifications, the Act authorizes the Secretary to examine any record, and request information from any officer, employee, or agent of a producer of automotive goods that may be relevant with respect to whether the production of the covered vehicle complied with the high-wage components of the LVC requirements. See 19 U.S.C. 4532(e)(4)(A).
Relevant records and information include records and information relating to wages, hours, job responsibilities, and other information in any plant or facility relied on by the producer to demonstrate compliance with the high-wage components of the LVC requirements. See 19 U.S.C. 4532(e)(4)(B). The Act also prohibits retaliation against any person who discloses information relating to a verification or otherwise cooperates in a verification. See 19 U.S.C. 4532(e)(5).
Interim Guidance From USTR and CBP
CBP published its USMCA Interim Implementing Instructions on April 20, 2020, and on June 16, 2020 published a revised version (“CBP Implementing Instructions”). This guidance is intended to provide information as to how to make preferential tariff claims under the USMCA pending the issuance of applicable regulations.[5] T
hese instructions, which do not have legal or binding effect, provide general guidelines as to the rules of origin and regional value content requirements for goods imported into the United States from Canada or Mexico, how importers may claim preferential tariff treatment for imported goods, and the general process for submitting a certification of origin.[6]
The instructions also describe CBP’s general recordkeeping requirements for importers who have made a preferential treatment claim and for any person who has completed a USMCA certification of origin or provided a written representation for a good exported from the United States to another USMCA Country. They also provide information as to how CBP will conduct a verification of a claim to preferential tariff treatment and issue a determination conveying the verification results.
In addition to this general guidance on preferential tariff claims under the USMCA, the CBP Implementing Instructions provide more specific information about the additional requirements applicable to automotive goods. For example, the CBP Implementing Instructions provide, in part, information relating to the rules of origin for automotive goods and LVC certification procedures and requirements. Annex B of the CBP Implementing Instructions, developed in coordination with the Department, provides guidance on what certification information the Department will review for omissions or errors. This topic is discussed in more detail in this IFR. Certain aspects of the Department’s regulations may differ from the information provided in the CBP Implementing Instructions. If there are such differences, the Department’s regulations are controlling.
On April 21, 2020, USTR published the Procedures for the Submission of Petitions by North American Producers of Passenger Vehicles or Light Trucks Start Printed Page 39785To Use the Alternative Staging Regime for the USMCA Rules of Origin for Automotive Goods, a notice in the Federal Register providing guidance to vehicle producers for requesting an alternative to the standard staging regime for the USMCA rules of origin for automotive goods, including the LVC requirements. See 85 FR 22238.
The notice specifies the vehicle producers that are eligible to petition for an alternative staging regime and the requirements that must be met during and after the alternative staging regime. It sets forth the timeline for filing petitions for alternative staging and details the information that must be included in the petitions. The notice also describes the process that USTR will use to review and approve such petitions.
The notice also explains the process for requesting a modification of an approved alternative staging plan, which the vehicle producer must make whenever there are material changes to information contained in a petition that will affect the producer’s ability to meet any of the requirements set forth in Articles 2 through 7 of the Automotive Appendix after the alternative staging period has expired. The notice also specifies that vehicle producers that do not meet the requirements of the alternative staging regime are not eligible for preferential tariff treatment pursuant to the alternative staging regime.
Uniform Regulations
The USMCA provides that the parties to the agreement shall, by entry into force of the agreement, adopt Uniform Regulations regarding the interpretation, application, and administration of, in part, Chapter 4 (Rules of Origin) and other matters as may be decided by the parties to the agreement. See USMCA, Article 5.16. The Uniform Regulations regarding, in part, Chapter 4 (Rules of Origin) and Chapter 5 (Origin Procedures) adopted on June 3, 2020 represent a trilateral agreement between the United States of America, the United Mexican States, and Canada regarding the interpretation, application, and administration of Chapter 4 and Chapter 5 of the USMCA. The Department intends the regulations set forth in this IFR to be consistent with the Uniform Regulations.
Inapplicability of Notice and Delayed Effective Date Requirements Procedures
Pursuant to 5 U.S.C. 553(a)(1), public notice and comment procedures are inapplicable to these interim regulations because they involve a “foreign affairs function of the United States.” The delay caused by public notice and comment procedures would prevent these regulations from being in place on the date that the USMCA enters into force. A failure to have the regulations in place setting forth the procedures implementing important rules for preferential tariff treatment of automobiles would provoke undesirable international consequences by inhibiting the execution of the United States’ obligations under the USMCA and creating international uncertainty about the United States’ enforcement of tariff preferences.
In addition, the Department for good cause finds, pursuant to 5 U.S.C. 553(b)(B), that the public notice and comment requirements are impracticable and contrary to the public interest, and thus should not apply to these regulations. The USMCA’s LVC requirements, which the Department is tasked in part with enforcing, apply once the USMCA enters into force. See 19 U.S.C. 4532(h).
Accordingly, these regulations establish procedures that the public must know by the entry-into-force date in order to claim the benefit of a tariff preference under the USMCA. The Uniform Regulations, which required the agreement of the United States of America, the United Mexican States, and Canada, were only adopted on June 3, 2020. This IFR’s regulations, however, must be consistent with the Uniform Regulations and could not be completed and prepared for public notice and comment until the Uniform Regulations were adopted.
Given the recent adoption of the Uniform Regulations and the approaching date on which the USMCA enters into force, following public notice and comment procedures could prevent the implementation of these regulations by the entry-into-force date, leading to harmful consequences for stakeholders throughout the automotive industry. Furthermore, because these are interim regulations, the public will have an opportunity to comment and provide input for the final rule, reducing any impact from the lack of notice.
Finally, for the above-listed reasons, the Department has determined that good cause exists under 5 U.S.C. 553(d)(3) for dispensing with a delayed effective date.
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