LONDON, Jan. 7, 2020 /PRNewswire/ -- On 10 December, House Democrats announced their support on a revised version of the USMCA, a deal that was signed by all three countries in November 2018. The revised deal, which includes changes made to labour and environmental standards and enforcement thereof, was quickly signed by Mexico, but must now pass through US Congress and Canada's Parliament for approval.
The US Aluminium Association was quick to endorse the new USMCA but stated that "strong import monitoring and trade enforcement are vital to effective USMCA implementation." Of particular concern is a massive increase in Chinese aluminium sheet and plate exports to Mexico, which are up 94% YTD October 2019 compared to the same period in 2018, and up more than 220% compared to 2017.
One area of concern among US producers is transshipment of aluminium products from China through Mexico and into the US. However, this is not happening in the form of unwrought aluminium and semis, where US imports from Mexico have declined in recent years. The larger and more tangible concern lies within automotive components and finished vehicles, where Mexico is a major exporter to the US. When comparing USMCA to the existing NAFTA, there are some significant changes and new requirements as it relates to automotive rules of origin. These requirements differ by vehicle type and will be implemented using a phased approach as shown in the table below.
In addition to the vehicle and part specific content requirements, USMCA also includes a new requirement that auto OEM must source 70% of their aluminium and steel from North America, certified on an annual basis. A point of concern raised by the US and Canada is the absence of a "melted and poured" requirement for aluminium, which was a last-minute addition for the steel industry. Under the new rules, steel must be melted and poured within North America, while no such clause was added for aluminium. Aluminium industry officials fear that Mexico will become "a back door for China to push aluminium into the US." It's important to note that the "melted and poured" requirement was not part of the existing NAFTA and will only enter into force seven years from the USMCA implementation date. Nonetheless, the 70% aluminium requirement includes direct purchases, purchases through service centres, and purchases contracted through a supplier. This requirement is applied on a fleet-wide, company/account basis for the auto OEM, and pertains specifically to purchases of aluminium and aluminium products classified under the HS Chapter 76.
Read the full story:
https://www.crugroup.com/knowledge-and-insights/insights/2020/usmca-should-support-regional-aluminium-demand-but-not-without-complications-and-risks/
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