USMCA in Effect: How Mexico Shelter Services Help U.S. Manufacturers with Compliance07.23.20
The North American Free Trade Agreement (NAFTA) was in place for 26 years before being officially replaced by the United States-Mexico-Canada Agreement (USMCA) and enforced into law on July 1, 2020. This new trade agreement will be in effect until 2036 and subject to review and revisions every six years. During its time, NAFTA was responsible for the growth in the volume of Mexico’s imports and exports and positioned the country as one of the top global trading partners of the U.S.
As the start of the new agreement goes into effect, there have been significant changes to the flow of trade amid the global pandemic of Covid-19. Industries have had to remain agile, in addition to adapting to the new rules and regulations under the USMCA. In the midst of it all, the main concern of manufacturers is to maintain compliance and continue operations without delay.
Following Product Classification and Labor Law Compliance
One of the main areas affected by the USMCA is the automotive industry, as there are stringent content rules for product origin. As outlined in the agreement, 75 percent of automotive content must be made in North America by 2023. Proof of origin requires organization identification as an importer, exporter, or producer, description of originating goods to enable tariff classification, and document origins criteria.
Although the USMCA has not been officially enforced until this month, manufacturers and maquiladoras have already been implementing procedures and policies that will allow them to operate in accordance to the USMCA mandates. In preparation for these updated requirements, U.S. automobile manufacturers have turned to shelter services in Mexico for assistance in tracking and registration processes to ensure proper compliance.
Another area of conversation and concern is changes to labor requirements. According to the Office of the United States Trade Representative, the USMCA outlines that 40-45 percent of automobile manufacturing must be made by workers earning at least $16 USD per hour. This is in addition to Mexico’s new labor law which ensures workers can freely organize and unions are granted full collective bargaining rights.
U.S. manufacturers must uphold new labor law compliance, in addition to maintaining a competitive edge when recruiting top talent from Mexico’s thriving workforce. Working with a Mexico shelter company with a built-in network, such as IVEMSA, provides companies with necessary HR guidance and insight when recruiting and retaining employees.
Minimize Risk While Maintaining Production Control with a Mexico Shelter Company
Product classification and labor law regulations are only two of the many areas of compliance involved when manufacturing in Mexico. Partnering with a Mexico shelter company allows U.S. manufacturers to minimize their risk and liability. The shelter company serves as the legal representative and maintains responsibility for establishing IMMEX program registration, certifications, and other permits and licensing as required for operational setup. In return, manufacturers maintain full production control with regards to processes and intellectual property rights.
As economies push forward in 2020, the success of the USMCA lies within the goals of strengthening the rule of law to promote transparency and strengthen industrial competition, as well as promote public policies that encourage equitable and sustainable regional development. Maintaining compliance remains at the top of the priority list for manufacturers, and IVEMSA is ready to help streamline your operational setup.
To learn more about manufacturing in Mexico, contact us today.