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Apr 05, 2023 233 likes •647 views

This meeting is being recorded. The recording will be posted later today on the committees web page at csgmidwest .org. To reduce background noise, all participants will enter in listen-only WELCOME mode . Please mute your line when not

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SLIDE 1

WELCOME THE MEETING WILL BEGIN PROMPTLY AT 10:00 A.M. CDT

This meeting is being recorded. The recording will be posted later today on the committee’s web page at csgmidwest.org. To reduce background noise, all participants will enter in “listen-only”

  • mode. Please mute your line when not speaking to reduce noise.

We will take questions periodically throughout the meeting. Click on the “raise hand” button Type questions using the “chat” pane For audio access, we will unmute lines. If you self-muted, you also will need to unmute. We will open the line for telephone users to ask questions. A copy of the meeting materials can be found as an attachment in the chat panel. If you lose your Zoom connection, try these options (1) Close Zoom and reconnect with the meeting link (2) Reboot your computer and reconnect with the meeting link (3) If you cannot reconnect electronically, you can call in: 312-626-6799

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SLIDE 2

The US-Mexico-Canada Agreement (USMCA) and Its Impact on the Region’s Exporters and Cross-Border Supply Chains

A Virtual Meeting of the MLC Midwest-Canada Trade Subcommittee

Tuesday, October 13, 2020 | 10:00 – 11:15 a.m. CDT

MODERATORS Senator Karen Tallian | Indiana | Co-Chair, MLC Midwest-Canada Trade Subcommittee MPP Percy Hatfield | Ontario | Co-Chair, MLC Midwest-Canada Trade Subcommittee Representative Mark Huizenga | Michigan | Co-Chair, MLC Midwest-Canada Trade Subcommittee PRESENTERS

  • Mr. Edward Alden | Senior Fellow | Council on Foreign Relations
  • Mr. Dan Ujczo | Chair | International Practice Group at the Dickinson Wright Law Firm
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SLIDE 3

MLC MIDWEST- CANADA TRADE SUBCOMMITTEE VIRTUAL MEETING HOUSEKEEPING

This meeting is being recorded. The recording will be posted soon on the committee’s web page at csgmidwest.org. To reduce background noise, all participants will enter in “listen-only”

  • mode. Please mute your line when not speaking to reduce noise.

We will take questions periodically throughout the meeting. Click on the “raise hand” button Type questions using the “chat” pane For audio access, we will unmute lines. If you self-muted, you also will need to unmute. We will open the line for telephone users to ask questions. A copy of the meeting materials can be found as an attachment in the chat panel. If you lose your Zoom connection, try these options (1) Close Zoom and reconnect with the meeting link (2) Reboot your computer and reconnect with the meeting link (3) If you cannot reconnect electronically, you can call in: 312-626-6799

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SLIDE 4

HOUSEKEEPING ZOOM TOOLBAR

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SLIDE 5

HOUSEKEEPING ZOOM TOOLS

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SLIDE 6

MLC LC MIDWEST- CANADA TRADE SUBCOMMITTEE OFFICE CERS

Senator Karen Tallian Indiana MLC Midwest-Canada Trade Subcommittee Co-Chair MPP Percy Hatfield Ontario MLC Midwest-Canada Trade Subcommittee Co-Chair Representative Mark Huizenga Michigan MLC Midwest-Canada Trade Subcommittee Co-Chair

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SLIDE 7

ML MLC MIDWES EST- CANAD NADA T A TRADE SUBCOMMI MMITTEE VIRTUAL M MEETING NG THE U E US-MEXICO CO- CANAD NADA AGR A AGREEMENT (USM USMCA CA) A ) AND ITS TS IMPAC ACT O ON T THE REGION’S E S EXP XPORTE TERS S AND C CRO ROSS-BORD RDER R SUPPLY C CHA HAINS

Today’s meeting will include:

  • The current state of trade between Canada and

the U.S. and a look at U.S. trade policy more generally

  • Some of the key provisions of the USMCA and

how it differs from NAFTA

  • What the impact of the USMCA is likely to be
  • n industries in the region
  • Questions and answers
  • Discussion with participants
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SLIDE 8

THE U E US-MEXICO CO- CANAD NADA AGR A AGREEMENT (USM USMCA CA) A ) AND ITS TS IMPAC ACT O ON T THE REGION’S E S EXP XPORTE TERS S AND C CRO ROSS-BORD RDER R SUPPLY C CHA HAINS

PRESEN ENTER ERS

Edward Alden Senior Fellow Council on Foreign Relations ealden@cfr.org Dan Ujczo Chair International Practice Group at the Dickinson Wright Law Firm dujczo@dickinsonwright.com

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SLIDE 9

USMCA PHASE I

CSG Midwest

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SLIDE 10
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SLIDE 11

PHASE I IMPLEMENTATION

  • 1. USMCA Effective Date was July 1, 2020
  • Reasonable Care
  • Certification and Recordkeeping
  • “Satisfactory Progress” & “Good Faith Effort”
  • 2. US-CBP “Show Restraint in Enforcement” / “Maximum

Flexibility”

  • 3. Exceptions are the three new certifications for automotive:

(a) labor value content (LVC), (b) steel, and (c) aluminum

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SLIDE 12

Strategies-Checklist

Assemble documents from purchasing/procurement, customs brokers, financial team./accounting on how currently using USMCA (Certificates of Origin a great start) Look at all Purchase Orders, Standard Terms and Conditions Review IP Portfolio Look at 3PL, transportation (incl. reverse logistics), and broker contracts Independent Customs Self-Assessment – Check China Adopt a Know My Supplier’s Suppliers Mindset

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12

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SLIDE 13

The “Renovation” of NAFTA to USMCA

13

Templates

(“Fresh Coat of Paint”)

Modernize

(“Upgrade the Fixtures and Appliances”)

Rebalancing

(“Knocking Down Walls”)

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SLIDE 14

Fresh Coats of Paint

  • 1. Small and Medium-Sized

Enterprises

  • NAFTA Trilateral SME Dialogue
  • 2. Competition
  • 3. Technical Barriers to Trade

4. Anti-Corruption

  • 5. Good Regulatory Practices

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14

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SLIDE 15

Fresh Coats of Paint

  • 6. Sanitary and Phyto-Sanitary

Measures (SPS)

  • 7. Telecommunications
  • 8. Environment
  • 9. Financial Services

10.Chemical and Food Patents/Formulas

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15

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SLIDE 16

USMCA – Chemicals, Polymers, etc.

Chapters 28-32 Chemicals, Polymers, etc.

Eight new rules pursuant to which specific production processes that occur within the region are sufficient to confer origin (with some exceptions): (1) the Chemical Reaction Rule; (2) the Purification Rule; (3) the Mixtures and Blends Rule; (4) the Change in Particle Size Rule; (5) the Standards Materials Rule; (6) the Isomer Separation Rule; (7) the Separation Prohibition Rule; and (8) the Biotechnological Processes Rule.

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SLIDE 17

“Upgrading the Fixtures”

  • 10. Digital Trade in Goods and Services
  • “TPP Plus Proposal”
  • 11. Customs and Trade Facilitation
  • “Platinum Standard”
  • Locks In Beyond the Border and

Technology/Risk Assessments

  • 12. Energy

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17

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SLIDE 18

Knocking Down the Walls

PRIORITY #1 PRIORITY #2 PRIORITY #3 Close the Back Door to China through Mexico and Canada Rebalance Trade with Mexico Settle All of the Family’s Business in North America

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SLIDE 19

USMCA IMPLEMENTATION: LABOR

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SLIDE 20

USMCA brings much needed certainty but it also presents important challenges, particularly, related to labor issues

  • Chapter 23: the most ambitious labor chapter ever negotiated in an FTA
  • New labor obligations: strengthened dispute settlement mechanisms and possible trade sanctions for:

̶ The governments of Mexico, US and Canada ̶ Enterprises of the three member countries (on a facility-specific basis)

  • Rapid Response Labor Mechanism allows sanctions on covered facilities, including:

̶ Suspension of preferential tariff treatment, penalties and denial of entry of goods / services

  • It is critical for firms with a presence in Mexico to:

̶ Design and implement a plan to mitigate labor risks before they occur; and ̶ Be able to respond quickly if they materialize

  • Complying with USMCA will depend not just on the company

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SLIDE 21

Priority sectors for surveillance of RRLM labor compliance in Mexico

10 priority sectors subject to the Rapid Response Labor Mechanism USMCA – Annexes 31-A / 31-B

Aerospace products & components Autos and auto parts Industrial baked products Steel & Aluminum Cosmetic Products Glass Pottery Plastic Forgings Cement

8 priority subsectors for surveillance and compliance of the US’ Interagency Labor Committee

US’ Implementing Bill

Aerospace Auto parts y auto assembly Industrial bakeries Steel & Aluminum Electronics Call centers Mining

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SLIDE 22

USMCA – Textiles and Textile Apparel

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SLIDE 23

USMCA – Autos

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SLIDE 24

The New Rule of Origin (ROO) for autos and pick ups Four requirements:

1. Regional Value Content percentage (RVC) 2. Originating Core parts for passenger vehicles and light trucks 3. Labor Value Content percentage (LVC), which includes high wage transportation services 4. Originating purchases of Steel and Aluminum

NAFTA rules:

  • RVC and
  • Tracing

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SLIDE 25

Regional Value Content Percentage (RVC)

A. The RVC increases from 62.5% to 75% B. Four year transition period C. Maintains Net Cost methodology D. Eliminates tracing E. Eliminates “Deeming Originating” F. Allows “averaging” as in NAFTA

On the date entry into force or January 1, 2020*

66%

One year after entry into force or January 1, 2021*

69%

Two years after entry into force or January 1, 2022*

72%

Three years after entry into force or January 1, 2023*

75%

*Whichever is later

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SLIDE 26

ROO for the Automotive Sector

Light Vehicles Heavy Vehicles Labor Value Content (LVC) 40% cars (4 increases) / 45% pick-ups (EIF) Labor Value Content (LVC)

45% (EIF)

Core Parts* RVC / Net Cost / 4 increases

66% 69% 72% 75%

Engine, transmission, body and chassis, axle, suspension system, steering system, and advanced battery

* 7/7 must be originating

Steel and Aluminum

≥70% vehicle producer’s purchases must be

  • riginating

Regional Value Content (RVC)

75% / Net Cost 4 increases

Material and manufacturing expenditures ≥25% cars / ≥30% pick-ups

Technology and assembly expenditures1/ ≤15% cars and pick-ups

Average hourly base wage rate ≥$16/hour

Steel and Aluminum

≥70% vehicle producer’s purchases must be

  • riginating

Regional Value Content (RVC)

70% / Net Cost / 3 increases 7 years

Material and manufacturing expenditures ≥30%

Technology and assembly expenditures 2/ ≤15%

2/ Technology expenditures include R&D and IT expenditures related to prototype development, design, engineering, testing, or certifying operations; software development, technology integration, vehicle communications, and information technology support operations. Assembly expenditure includes engine assembly, transmission assembly or an advanced battery assembly plant (PC of 20,000 OG) 66% 69% 72% 75%

60% 64% 70%

Average hourly base wage rate ≥$16/hour

1/ Technology expenditures include R&D and IT expenditures related to prototype development, design, engineering, testing, or certifying operations; software development, technology integration, vehicle communications, and information technology support operations. Assembly expenditure includes engine assembly, transmission assembly (PC of 100,000 OG)

  • r an advanced battery assembly plant (PC of 25,000 OG)

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SLIDE 27

ROO for Autoparts

Heavy Vehicles Net Cost / 3 increases 7 years Light Vehicles Net Cost / 4 increases Other Vehicles Current ROO

Core* Principals Complementary 66% 69% 72% 75% 62.5% 65% 67.5% 70% 62% 63% 64% 65%

* 7/7 must be originating

Principals Complementary

60% 64% 70% 50% 54% 60%

Super Core

Key Parts (Table A.1)

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SLIDE 28
  • 5 years light vehicles
  • 7 years heavy vehicles
  • 10% of production
  • Case by case

Alternative Staging Regime

RVC Vehicle LVC

Steel Aluminum

RVC Core parts

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SLIDE 29

USMCA IMPLEMENTATION: COMPLIANCE

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SLIDE 30

De Minimis & Low Value Entry

De Minimis

  • Good is considered
  • riginating if all non-
  • riginating materials

are less than 10% of the cost

  • HTS Chapters 1-27 +

textiles & apparel have different de minimis rules

Low Value Entry

  • Canada
  • CAD $150, but

CAD $40 for GST

  • United States
  • USD $800
  • Mexico
  • USD $117, but

USD $50 for taxes

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SLIDE 31

Certification of Origin

  • NAFTA Form 434 expired on June 30, 2020 for new entries.
  • This becomes critical as importers of record will need to investigate entire supply chain; particularly

autos, textiles and imports from third countries such as China.

  • US-CBP is redefining USMCA advance rulings and substantial transformation in a series of recent

rulings relating to 301.

  • US-CBP also is revoking past decisions on Chapter 98 (repairs, alterations, returns) (e.g., wheel

grinding).

  • Effect is what was NAFTA may not be USMCA duty-free

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SLIDE 32

STATE/PROVINCIAL ISSUES

  • Creating an environment for that recognizes USMCA favorable businesses such as advanced

technology vehicles, energy, chemicals, polymers, food processors and tech

  • Developing cross-border strategic partnerships with states/provinces to collaborate on pro-USMCA

areas and “GAPS”

  • Major GAP is in the procurement space. Look for neighboring state/reciprocal procurement

partnerships because it’s going to be about INFRASTRUCTURE.

  • Workforce, Workforce, Workforce
  • Private Sector Assistance to Your Efforts

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SLIDE 33

Contact Information

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DANIEL UJCZO International Trade and Customs Attorney Email: dujczo@dickinsonwright.com Phone: 614.744.2579

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SLIDE 34

100,000 200,000 300,000 400,000 500,000 600,000 Ambassador Bridge Blue Water Bridge Peace Bridge Lewiston-Queenston Detroit-Windsor Tunnel Seaway International Bridge

April Car Traffic at Selected Crossings 2019 vs 2020 Source: Bridge and Tunnel Operators Association

2019 2020

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SLIDE 35

100,000 200,000 300,000 400,000 500,000 600,000 Ambassador Bridge Blue Water Bridge Peace Bridge Lewiston-Queenston Detroit-Windsor Tunnel Seaway International Bridge

June Car Traffic at Selected Crossings 2019 vs 2020 Source: Bridge and Tunnel Operators Association

2019 2020

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SLIDE 36

100,000 200,000 300,000 400,000 500,000 600,000 Ambassador Bridge Blue Water Bridge Peace Bridge Lewiston-Queenston Detroit-Windsor Tunnel Seaway International Bridge

August Car Traffic at Selected Crossings 2019 vs 2020 Source: Bridge and Tunnel Operators Association

2019 2020

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SLIDE 37

50,000 100,000 150,000 200,000 250,000 Ambassador Bridge Blue Water Bridge Peace Bridge Lewiston-Queenston

April Truck Traffic at Selected Crossings 2019 vs 2020 Source: Bridge and Tunnel Operators Association

2019 2020

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SLIDE 38

50,000 100,000 150,000 200,000 250,000 Ambassador Bridge Blue Water Bridge Peace Bridge Lewiston-Queenston

June Truck Traffic at Selected Crossings 2019 vs 2020 Source: Bridge and Tunnel Operators Association

2019 2020

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SLIDE 39

50,000 100,000 150,000 200,000 250,000 Ambassador Bridge Blue Water Bridge Peace Bridge Lewiston-Queenston

August Truck Traffic at Selected Crossings 2019 vs 2020 Source: Bridge and Tunnel Operators Association

2019 2020

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SLIDE 40

MLC M MIDWE DWEST- CAN ANAD ADA T A TRADE ADE SUBCOMMI MMITTEE VI VIRTUAL M MEETING DISC SCUSSI SION

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