- The high-wage material and manufacturing expenditures provision requires that, after the phase-in period ends on July 1, 2023, at least 25 percent of the annual purchase value or net cost of a passenger vehicle, or 30 percent of the annual purchase value or net cost of a light truck or heavy truck, come from parts and materials used in the production of those vehicles.
- The high-wage technology expenditure provision allows producers to claim a credit for expenditures for research and development or information technology wages.
- The high-wage assembly expenditure allows producers to claim a credit if the producer has an engine, transmission, or advanced battery assembly plant meeting certain production capacity standards.
A producer may satisfy the LVC requirement using only material and manufacturing expenditures or may claim credits of up to ten percentage points for its high-wage technology expenditures, and of up to five percentage points for its high-wage assembly expenditures.
U.S. Customs and Border Protection [85 FR 39690 (7/1/2020)] and the U.S. Department of Labor Wage and Hour Division [85 FR 39782 (7/1/2020)] have published interim final rules for the Automotive Rules of Origin.
Labor Value Content for Passenger Vehicles
In order to be originating, passenger vehicles must meet a labor value content, by July 1, 2023, of:
- 40 Percent of the value must meet high-wage expenditure requirements;
- 25 percentage points of high-wage material and manufacturing expenditures, no more than ten percentage points of high-wage technology expenditures, and no more than five percentage points of high-wage assembly.
Labor Value Content will be implemented in a three-year transition period for passenger vehicles. During this phase-in period, a passenger vehicle is originating only if the producer certifies that its production meets a LVC requirement of:
- 30 percent, consisting of at least 15 percentage points of high-wage material and manufacturing expenditures, no more than ten percentage points of high-wage technology expenditures, and no more than five percentage points of high-wage assembly expenditures, which began on July 1, 2020, the date of entry into force of the Agreement;
- 33 percent, consisting of at least 18 percentage points of high-wage material and manufacturing expenditures, no more than ten percentage points of high-wage technology expenditures, and no more than five percentage points of high-wage assembly expenditures, beginning July 1, 2021.
- 36 percent, consisting of at least 21 percentage points of high-wage material and manufacturing expenditures, and no more than five percentage points of high-wage assembly expenditures, beginning on July 1, 2022.
- 40 percent, consisting of at least 25 percentage points of high-wage material and manufacturing expenditures, no more than ten percentage points of technology expenditures, and no more than five percentage points of high-wage assembly expenditures, beginning on July 1, 2023, or three years after the date of entry into force of the Agreement.
Additionally, vehicle producers that were approved for an alternative staging regime are subject to a 25 percent labor value content requirement until the alternative staging regime period ends.
Labor Value Content (LVC) Increases for Passenger Vehicles
| Year | Materials and Manufacturing | Technology | Assembly | LVC Total |
|---|---|---|---|---|
| July 1 2020 – June 30, 2021 | 15% | 10% | 5% | 30% |
| July 1, 2021 – June 30, 2022 | 18% | 10% | 5% | 33% |
| July 1, 2022 – June 30, 2023 | 21% | 10% | 5% | 36% |
| Beginning July 1, 2023 | 25% | 10% | 5% | 40% |
Labor Value Content for Light Trucks and Heavy Trucks
In order to be originating, light trucks and heavy trucks must also meet a LVC upon USMCA implementation of:
- 45 percent of the value must meet high-wage expenditure requirements
- 30 percentage points of high-wage material and manufacturing expenditures, no more than ten percentage points of high-wage technology expenditures, and no more than five percentage points of high-wage assembly.
Labor Value Content for light trucks and heavy trucks was implemented without a phase-in period.
What Does This Mean?
- To include a North American assembly or production plant in its material and manufacturing expenditures calculation, workers engaged in direct production work at the plant must earn an average hourly base wage rate of at least USD16 per hour.
- This wage calculation does not include certain pay, such as benefits, bonuses, and overtime pay, and excludes salaries for executive, management, R&D, and certain engineering personnel, and workers not directly involved in the production of the motor vehicles or parts.
- Vehicle producers had the option to request additional time to meet the new requirements for passenger vehicles and light trucks, up to five years or by July 2025, and can request flexibility in meeting the LVC and steel/aluminum requirements.
- Heavy truck producers could request alternative staging up to seven years or July 2027. Electric light trucks also qualify for this period of extended staging.
- The LVC requirement is 25 percent during alternative staging, of which at least ten percent must be met using high wage materials and manufacturing expenditures.
- Alternative staging plan petitions had to be submitted to the U.S. Trade Representative by July 1, 2020, though producers could apply to make modifications to an approved plan. The deadline has now passed and all USMCA Parties must agree on accepting plan modifications.
- Additional guidance is available via the U.S. Trade Representative’s Federal Register notice on this subject [85 FR 22238 (4/21/20)].
Other Improvements in ROO and Origin Procedures Chapters
- Added provisions on remanufactured goods.
- Eliminated use of a required certificate of origin form (under NAFTA, the Customs Form 434)
- Importers must make a certification of origin, providing nine minimum data elements to certify origin.
Minimum Data Requirements to Claim USMCA Preferential Treatment
- Importer/exporter or producer certification of origin (indicate which is certifier)
- Name and address of certifier
- Name and address of exporter
- Name and address of producer
- Name and address of importer (if known)
- Description and HTS classification of the good
- Origin criteria*
- Blanket period (how long the certification is valid up to 12 months)
- Authorized signature and date
*Origin criteria under which the good qualifies, as set out in Article 4.2 (Originating Goods).
For more information on certification requirements and the data elements listed above, please see USMCA, Article 5 and Annex 5-A.
An importer is required to have a valid certification of origin in its possession at the time the USMCA preference claim is made. For more information, consult the USMCA’s Uniform Regulations [85 FR 39690 (7/1/2020)] and U.S. Customs and Border Protection’s USMCA Implementing Instructions (CBP Publication No. 1118-0620) and Implementing Instructions Addendum (CBP Publication No. 1358-0121), at www.CBP.gov (available in English, Spanish, and French).
Section 9: Remanufactured Goods- Remanufactured goods are products assembled in the territory of a USMCA Party that:
- Are entirely or partially comprised of recovered goods;
- Have similar life expectancies and meet similar performance standards as new goods; and
- Enjoy similar factory warranties as new goods.
- HS Chapters 84 through 90 or under heading 94.02 except goods classified under HS headings 84.18, 85.09, 85.10, and 85.16, 87.03 or subheadings 8414.51, 8450.11, 8450.12, 8508.11, and 8517.11, that is entirely or partially composed of recovered materials.
The remanufacturing process per USMCA includes the following steps:
- Disassembly of a used part or component to recover a “core part” or recovered material;
- Cleaning, verifications, inspection, tests, repairing, reconditioning of the recovered material;
- Incorporation of the recovered material in the production of a remanufactured good (it can include new parts).
A recovered material obtained in North America will be considered originated as long as it is used in the production and incorporated in a remanufactured good or part. More information can be obtained through the Automotive Parts Remanufacturers Association website.
Section 10: Reasonable Care/Record-Keeping Requirements for ImportersImporters are required to exercise reasonable care when making a claim under USMCA, including ensuring that they are in possession of a complete and valid certification of origin at the time of making a claim and meeting all recordkeeping obligations. For guidance on reasonable care, please visit [‘Informed Compliance Publication: What Every Member of the Trade Community Should Know About: Reasonable Care’ (October 25, 2017)].
Section 11: Certification of Origin RequirementsThe importer may make a claim for preferential tariff treatment based on a certification of origin process, completed by the importer, the exporter, or the producer, for purposes of certifying that the good qualifies as an originating good.
A certification of origin may be completed by the importer, exporter, or producer of the good on the basis of:
- The certifier of the certification of origin having information, including documents that demonstrate that the good is originating; or
- In the case of an exporter who is not the producer of the good, reasonable reliance on the producer’s written representation, such as in a certification of origin, that the good is originating.
In addition, the following requirements apply to the certification of origin:
- The certification of origin needs not be in a prescribed format; it may be provided on an invoice or any other document, except an invoice or commercial document issued in a non-USMCA Party country.
- It may be completed and submitted electronically.
- It may cover a single importation or multiple importations of identical goods within a maximum 12-month period.
- It must contain the nine data elements set out in Annex 5-A of the Agreement (Appendix II, Annex A of these instructions).
- It meets all other applicable requirements.
An importer is required to have a valid certification of origin in its possession at the time the USMCA preference claim is made.
If U.S. Customs and Border Protection requests the certification of origin and it is illegible, is defective on its face, or is incomplete, the importer will be granted a period of not less than five working days to provide a copy of the corrected certification of origin.
The certification of origin may be submitted in English, Spanish, or French. If submitted in Spanish or French, the English translation should also be provided to CBP.
A certification of origin process is not required for: (1) a non-commercial importation of a good or (2) a commercial importation for which the value of the originating goods does not exceed USD 2,500 provided the importation does not form part of a series of importations that may be considered to have been undertaken or arranged for purposes of evading U.S. laws, regulations, or procedures governing claims for preferential treatment.
If CBP determines that an importation described in this section is part of a series of importations carried out or planned for purposes of evading compliance with preference requirements, the importer may be required to submit the certification of origin.
The importer is responsible for exercising reasonable care concerning the accuracy of the certification of origin and all documentation submitted to CBP.
Section 12: Pre-Entry Automotive Certification Requirements for Passenger Vehicles, Light Trucks, and Heavy Trucks
In addition to the certification of origin process, producers of passenger vehicles, light trucks, and heavy trucks are required to submit three new certifications to receive preferential tariff treatment under the USMCA for these goods: Labor Value Content (LVC) certification (Annex B), Steel certification (Annex C), and Aluminum certification (Annex D). See Annexes B-D of this document for the certifications’ minimum data element requirements.
In accordance with CBP’s Phase 1 Implementation Policy, automotive producers, exporters, and importers were allowed until December 31, 2020, to obtain and submit necessary certifications and documentation, including any documentation necessary to establish compliance with the RVC requirement for 2020.
The procedures described below apply to vehicle producers’ filing of LVC certification, steel certification, and aluminum certification for passenger vehicles, light trucks, and heavy trucks.
A passenger vehicle, light truck, or heavy truck is eligible for preferential tariff treatment only if the producer provides to CBP the required LVC certification, steel certification, aluminum certification, and has information on record to support those calculations relied on for the certifications. However, as described previously, CBP permitted automotive producers, exporters, and importers to obtain and submit the necessary certifications and documentation, including any documentation necessary to establish compliance with the RVC requirement, by December 31, 2020, for claims of preferential tariff treatment of qualifying passenger vehicles, light trucks, or heavy trucks entered for consumption or withdrawn from warehouse for consumption, on or after July 1, 2020, and through the end of calendar year 2020. For subsequent LVC certification, steel certification, and aluminum certification, CBP will provide additional guidance on the timing and submission of such certifications.
Section 13: How to File USMCA’s Pre-Entry Auto Certifications with CBP for LVC, Steel, and AluminumLVC, Steel, and Aluminum certification can be filed through the USMCA Center’s portal at CBP’s website.
Producers can upload files and submit their automotive certifications using the following steps;
Step 1: From the webpage:
- Click on “Automotive Certification Request”
Step 2: Contact Information:
- Select “Producer” from the drop-down menu
- Click “Next” to advance
Step 3: Upload File:
- Select the checkbox for the type of automotive certification documents you wish to include in the submission
- Select the files you wish to upload and click next to submit. Please do not mix Steel, Aluminum, and LVC in one file. You can, however, upload three separate files in one submission.
Upon completion of the submission, you will receive a confirmation message and a tracking number.
A USMCA Portal User Guide can be found on the CBP webpage, which includes the steps summarized above with screenshots and troubleshooting tips. If the above portal is not working, an alternative method for submitting these certifications is to email them to USMCAautoRoO@CBP.DHS.gov. CBP’s USMCA Center will reply to the sender within two business days acknowledging receipt of the email and a tracking number.
Section 14: LVC Certification Review for Errors and OmissionsCBP’s USMCA Center will forward the LVC certification information to the U.S. Department of Labor (DOL) Wage and Hour Division (WHD) for review for omissions and errors within five business days from acknowledging receipt of the producer certification.
DOL will review the LVC certification within 60 days and respond to CBP with the status of their review with either “no errors” or “errors found”.
- If CBP’s USMCA Center receives a “no errors” status from DOL, then CPB’s USMCA Center will accept the certification and reply to the producer “certification accepted.”
- If CBP’s USMCA Center receives an “errors found” status, accompanied by a description of the errors or omissions from DOL, then CBP will reply to the producer “certification rejected,” describe the errors and omissions and give the producer an opportunity to supply further information. CBP will inform the producer that further information or documentation is due to CBP within five business days.
- Producer should resubmit a revised certification to CBP via the USMCA Center. CBP’s USMCA Center will coordinate a review with DOL.
- DOL will review the new documentation for omissions and errors within 30 days and reply to CBP’s USMCA Center with its determination.
- If CBP’s USMCA Center receives a “no errors” status from DOL, CBP will accept the certification and reply to the producer “certification accepted”.
- If CBP’s USMCA Center receives an “errors found” status from DOL, then CBP will reject the LVC certification, and the USMCA Center will reply to the producer with “certification not properly filed.”
If a producer received a “certification not properly filed” status, a new certification package must be submitted to CBP via the USMCA Center Portal. Users will need to resubmit their documents through the portal using the initial procedure. Please note each individual submission will receive an individual tracking number.
Section 15: Steel and Aluminum Certification Review for Errors and OmissionsCBP’s USMCA Center will review the steel certification and aluminum certification for errors and omissions and determine “no-error” status or “errors found” status and the description of the errors or omission.
- If “no errors” found, CBP’s USMCA Center will accept the certification and reply to the producer “certification accepted”. If “errors found,” CBP’s USMCA Center will reply to the producer with a notification that “certification rejected” and a description of the errors or omissions for action. The USMCA Center will inform the producer that further information or documentation is required and additional information is due to CBP in five business days.
- The producer should submit a revised certification to CBP via the USMCA Center. CBP’s USMCA Center will review the revised certification for omissions and errors within 30 days.
- If “no errors” found, CBP’s USMCA Center will reject the steel or aluminum certification.
- If “errors found”, CBP’s USMCA Center will reject the steel or aluminum certification and will reply to the producer with “certification not properly filed”. Users will need to resubmit their documents through the portal using the initial procedure. Please note each individual submission will receive an individual tracking number.
CBP’s USMCA Center will notify producers of the status of each certification upon completion of the Center’s review. Upon receipt of final documentation and within 120 days of initial submission, CBP will inform the producer if the certifications are “properly filed” and have been “accepted”.
If CBP determines that the producer’s certifications are “not properly filed,” the producer must resubmit a new package for review via the USMCA Center Portal using the initial how-to file process. Until such a point that CBP has determined that the producer’s certifications are “not properly filed,” the producer may continue to submit claims for preferential tariff treatment of qualifying passenger vehicles, light trucks, and heavy trucks.
Section 16: Automotive RVC and LVC Averaging Election Requirements for Passenger Vehicles, Light Trucks, and Heavy Trucks
For the purpose of calculating the RVC or LVC of a passenger vehicle, light truck, or heavy truck, the producer may elect to average its RVC or LVC using any of the following categories, on the basis of either all motor vehicles in the category or only those motor vehicles in the category that are exported to the territory of one or more of the other USMCA countries:
- The same model line of motor vehicles in the same class of vehicles produced in the same plant in the territory of a USMCA country;
- The same class of motor vehicles produced in the same plant in the territory of a USMCA country;
- The same model line or same class of motor vehicles produced in the territory of a USMCA country; or
- Any other category as the USMCA countries may decide.
For purposes of calculating the RVC of passenger vehicles, light trucks, or heavy trucks, the calculation may be averaged over the producer’s fiscal year.
For purposes of calculating the LVC of passenger vehicles, light trucks, or heavy trucks, the producer may base the LVC calculation on the following periods:
- The previous fiscal year of the producer;
- The previous calendar year;
- The quarter or month to date in which the vehicle is produced or exported;
- The producer’s fiscal year to date in which the vehicle is produced or exported; or
- The calendar year to date in which the vehicle is produced or exported.
Producers were allowed until July 31, 2020, to submit RVC and LVC averaging elections for 2020.
The CBP’s USMCA Center e-mail: USMCAautoRoO@CBP.DHS.gov.Section 17: Alternate RVC and LVC Averaging Periods for Passenger Vehicles, Light Trucks, and Heavy Trucks
If the fiscal year of a producer begins after July 1, 2020, but before July 1, 2021, the producer may calculate their RVC or LVC of passenger vehicles, light trucks, or heavy trucks for the period beginning on July 1, 2020, and ending at the end of the following fiscal year.
For the period July 1, 2020, to June 30, 2023, the producer may calculate their RVC or LVC of passenger vehicles, light trucks, or heavy trucks for the following periods:
- July 1, 2020, to June 30, 2021;
- July 1, 2021, to June 30, 2022;
- July 1, 2022, to June 30, 2023; and
- July 1, 2023, to the end of the producer’s fiscal year.
Additionally, a producer may calculate their RVC or LVC of heavy trucks for the following periods:
- July 1, 2023, to June 30, 2024;
- July 1, 2024, to June 30, 2025;
- July 1, 2025, to June 30, 2026;
- July 1, 2026, to June 30, 2027; and
- July 1, 2027, to the end of the producer’s fiscal year.
Correction of False/Unsupported USMCA Claims
An importer will not be subject to penalties under U.S. law (19 U.S. Code 1592) for making an incorrect claim that a good qualifies as a USMCA originating good if the importer, in accordance with the prescribed regulations, makes a corrected claim within 30 days of discovery and pays any duties and/or fees (such as the Merchandise Processing Fee) owed with respect to that good.
Section 18: Recordkeeping RequirementsAny importer who claims preferential tariff treatment under USMCA for a good imported into the United States from a USMCA country must keep the following documentation for a period of no less than five years from the date of entry:
- Records and supporting documentation related to the importation;
- All records and supporting documents related to the origin of the good (including any certifications or copies thereof); and
- Records and supporting documentation necessary to demonstrate compliance with the transit and transshipment provisions in Article 4.18 of the Agreement.
The importer must render these records for examination and inspection upon request per 19 U.S. Code 1508-1510 and 19 CFR Part 163.6.
Any exporter or producer who completes a USMCA certification of origin or provides a written representation for a good exported from the United States to a USMCA country must keep all records and supporting documents related to the origin of the good (including the certification or copies thereof), including records related to:
- The purchase, cost, value, and shipping of, and payment of, the good or material;
- The purchase, cost, value, and shipping of, and payment for, all materials, including indirect materials, used in the production of the good or material, and
- The production of the good in the form in which it is exported or the production of the material in the form in which it was sold.
These records must be maintained for a period of no less than five years from the date of entry and must be rendered for examination and inspection upon request.
In addition to the recordkeeping requirements denoted above, any vehicle producer whose good is the subject of a claim for preferential tariff treatment under the USMCA must keep records and supporting documents related to the labor value content and steel and aluminum purchasing requirements.
The vehicle producer must retain these records for a period of five years after the date of filing the certifications and render them for examination and inspection upon request. Through Federal Register 85 FR 39782, the U.S Department of Labor issued updated regulations at 29 CFR Part 810 that provide broader information on recordkeeping requirements related to the high-wage components of the labor value content requirements.
The requirements on the importer, exporter, and producer to maintain records applies even if the importing Party does not require a certification of origin or if a requirement for a certification of origin has been waived.
Section 19: Reconciliation Entry (Entry Type 09)- Starting July 1, 2020, and pending publication in the Federal Register Notice of a Modification to the Reconciliation Prototype to allow flagging for USMCA, importers are able to flag an entry summary at the time it is filed for the possibility of making a post-importation under 1520(d) claim for USMCA preference.
- Filling of a reconciliation entry is not mandatory, but it is the exclusive means to file a USMCA claim once the entry summary is flagged for FTA.
- After flagging the entry summary, it will be considered duplicative and will not be accepted.
For further questions regarding reconciliation, contact: OT-RECONFOLDER@cbp.dhs.gov.
Section 20: Post-Importation ClaimsIf at the time of importation a good qualified as originating but a claim for preference was not made, the USMCA permits importers to make a post-importation preference claim to request a refund of the duties paid at entry. The importer may make a post-importation claim within one year of importation in accordance with 19 U.S. Code 1520(d).
The claim must include:
- A declaration stating that the good qualified as an originating good at the time of importation and the number and date of the entry or entries covering the good;
- A copy of a certification containing the required data elements (Annex 5-A of the Agreement) (Appendix II, Annex A of this document) demonstrating that the good qualified as originating at or before importation;
- A statement indicating whether the entry summary or equivalent documentation was provided to any other person; and
- A statement indicating whether a protest, petition, or request for re-liquidation has been filed relating to the good and identification of such filling(s).
Importers may use the ACE Reconciliation Prototype to submit post-importation preference claims pursuant to 19 USMCA 1520 (d). All reconciliation entries must follow the reconciliation process and be accepted.
Section 21: Sources of Information- FTA Tariff Tool website
- USTR website
- CBP website
- ITA website
- FAS (USDA) website
- Wilson Center website
Additional CBP Resources- Basic Importing and Exporting
- USMCA Implementation Instructions
- Automated Commercial Environment (ACE) Entry Filing Problems/Rejects: Your assigned ACE client representative.
- CBP Automotive Good Entry-Specific Inquiries: CBP Automotive and Aerospace Center [CEE-; +1+(866) 295‐7624, code 03]
- If the resources listed above cannot answer your inquiry, please contact CBP’s USMCA Center.
George Ayache, Commercial Officer – Automotive
George.Ayache@trade.govMonica Martinez, Commercial Specialist - Automotive
Monica.Martinez@trade.gov