August 2020 Volume 2

WASHINGTON UPDATE

value content rule. The uniform labor value rules regulations were just put out within weeks. Right now, we’re in the USMCA world and there is a period of time where the customs officials in all three countries are working with companies that are trying in good faith to meet the rules. 15. Enforcement: Does the Department of Commerce department and/or Congress have some other mechanism or authority to enforce the content requirements? In the first instance, it really comes down to enforcement by the Customs Authority to make sure that the good is in fact originating beyond that.There are other enforcement measures that exist within the USMCA; there’s a rapid labor-enforcement mechanism, which allows for a correction of any issues. 16. Standardized forms for completing. We’ve only received a few requests for USMCA forms, but they are all in a different format. Is there a reason for each company making their own? One unique thing about the USMCA is that there is no prescribed form; there’s just a set of minimum-data elements. Those data elements are less extensive for certifications under USMCA than they were under NAFTA, but since no official form has been developed, the U.S. Customs and Border Protection will accept that certification in any form, as long as it satisfies the minimum requirements, including listing out those requirements on an invoice. As a practical matter, we're seeing a lot of forms created in a lot of different contexts. The important thing is to make sure that you understand what the minimum-data elements, which are set forth in the agreement and are readily available to assure that those data elements are reported. We have seen instances where companies have been requesting more than the minimum-data elements, and that's sort of a new twist on things—we're trying to determine whether or not there's a good standard way of dealing with that. USMCA agreement, chapter five, sets out the various elements. Its nine elements include very basic information like who you are and what you've done. Some companies are going a little bit extra. 17. Does the source of the tooling matter at all for domestic content or is it just parts/assembly? The source of the tooling doesn't matter for the calculation of the RVC. The labor content rules would apply when you employ someone to maintain that tooling. 18. How do USMCA tariffs correlate with steel 232 tariffs? Example, a forger buys U.S. steel under tariff.They compete with global forgers who buy steel unconstrained. Global competitors export to U.S. and beat out the U.S. forger.The same goes for components supply. Does USMCA offer any help to forgers and component suppliers? On some level, the USMCA has effectively eliminated the 232 steel tariffs on Mexico and Canadian steel that it melted and poured, and, as we talked about, for certain regional value content calculations, and specifically with regard to automotive, 70% of the

13. How are U.S. forgers going to be able to verify Canada or Mexico manufacturers are fully disclosing non-NA forging content? Chapter five of the USMCA establishes uniform rules between the United States, Canada, andMexico that apply to all three countries. This is not specific to the U.S. Basically, this sets up a form provided for in narrative format in annex 5A, which lists the minimum data elements that must be completed for a certificate of origin in the U.S. This is all implemented and enforced by the Customs and Border Protection agents (CBP). They’ve issued USMCA implementing instructions on June 30, 2020. Those instructions provide for how the certifications are to be filed with CBP, and they also provide a one-year ability to support your declaration. So, you can declare, starting today, that the good meets the regional value content as an originating good and you then, as the importer, have to spend time going back to your suppliers to acquire various certificates. Those could be simple declarations, which we've advised clients to provide to anybody that they're supplying who intends to claim preferential treatment under the USMCA, and those declarations just need to state that the part that you're providing is an originating product. TheUSMCAcertification requirements for the importedproduct are on the producer or the importer, whereas there aremerely declaration requirements on the producer’s ability to supply information in relation to its suppliers. The declaration requirements, as set out in one of the annexes for items that must be established in connection with suppliers to the producer and as a practical matter if we're going down the supply chain, is always that, regardless of whether or not a party is directly supplying a manufacturer, maintaining that required information obtaining declarations fromyour own supplier if you're getting components or materials for your own product, you must do the work ahead of time and get verifications. We also have to deal with timeframes verification. It's critical that information be understood and prepared ahead of time, so that if, in the event of a verification by customs, it’s ready to go. 14. Will companies also get credit for high labor value content for parts made in N.A. or does labor content just apply to assembly? Labor content requirements differ depending on the product that's being imported into the U.S. Within each of those labor value content requirements, the labor content can be calculated using a certain percentage of labor for the material and manufacturing expenditures, a certain percentage of labor for the technology expenditures, and a certain amount of labor for assembly expenditures. These rules are found in article seven of chapter four and also have a phase in over several years of the USMCA. The USMCA is written in a very clear narrative and is very easy to follow along and establish whether you've met regional value content rules. An important point here: the labor value rules are for vehicle assemblers only. Some vehicle assemblers may be able to meet the labor value content rule within the four walls of their company. Some of them will not, and they will come to suppliers to aggregate up some of the parts content labor value in order to get to the labor

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