United States-Mexico-Canada Agreement (USMCA)

What are the high-wage components of the LVC requirements?

The LVC requirements, which are further described in 29 CFR 810.100 – .300, state that for a covered vehicle to be eligible for preferential tariff treatment, a minimum percentage of the cost of the vehicle must involve certain high-wage expenditures. The minimum LVC percentages are determined by the class of vehicle, as detailed in the chart below. Possible high-wage expenditures include the following:

Material and Manufacturing Expenditures

A minimum percentage of the covered vehicle’s annual purchase value or net cost must come from parts and materials produced in a North American production facility with an average hourly base wage rate of at least US$16 per hour, or an equivalent amount in the applicable foreign currency, or from any labor costs in a North American vehicle assembly plant or facility with an average hourly base wage rate of at least US$16 per hour, or an equivalent amount in the applicable foreign currency.

A producer may also use transportation or related costs for shipping a high-wage part or material within North America to meet this requirement, if the transportation, logistics, or material handling provider(s) paid an average hourly base wage rate of at least US$16 per hour to its direct production workers, such as drivers or loaders, and such costs are not already included in the producer’s annual purchase value calculations.

High-Wage Technology Expenditures

Producers may claim a credit of up to 10% towards the required LVC threshold for research and development and information technology expenditures by demonstrating that the sum of its annual expenditures on wages for research and development and information technology is equal to or greater than 10% of its annual expenditures on production wages. To calculate this credit, the producer divides its total annual corporate expenditures on wages in North America for research and development and information technology by its total annual expenditures on production wages in North America. If the result is less than 10%, then the producer is eligible for a credit equal to the actual percentage.

High-Wage Assembly Expenditures

Producers may claim a single credit of 5% towards the required LVC threshold if the producer has an engine, transmission, or advanced battery assembly or manufacturing plant meeting certain production capacity standards, or has a long-term contract (at least three years) with such a plant, in North America with an average hourly base wage rate of at least US$16 per hour.

What is the alternative staging regime?

Alternative staging regime means the alternative to the standard staging regime (as detailed in the table below), and in part provides for a different phase-in of the LVC requirements for the covered vehicles, and additional time to meet those requirements. The Office of the United States Trade Representative reviews and approves producer requests for an alternative staging regime, including alternative staging regime modification requests.

Producers operating under an alternative staging regime generally must meet an LVC requirement of 25% for passenger vehicles and light trucks, of which at least 10% must be comprised of high-wage material and manufacturing expenditures. Once the alternative staging regime period elapses, the standard staging LVC requirements outlined in the table below will apply.

When do the high-wage components of the LVC requirements become effective, and what LVC percentages are required?

WHD determines whether the producer meets the US$16 per hour requirement, while CBP determines if the producer meets the applicable LVC percentage requirement.

Covered Vehicles subject to the standard staging regime

Effective Date	Vehicle Class	Vehicle Class Material & Manufacturing (min.) +	Technology Expenditures (max.) +	Assembly Expenditures (max.) +	Total LVC Threshold =
7/1/2020	light & heavy truck	30%	10%	5%	45%
7/1/2020	passenger vehicle	15%	10%	5%	30%
7/01/2021	passenger vehicle	18%	10%	5%	33%
7/01/2022	passenger vehicle	21%	10%	5%	36%
7/01/2023	passenger vehicle	25%	10%	5%	40%

What is the formula for calculating the average hourly base wage rate?

29 CFR 810.105 provides the following formula:

This calculation is performed for all hours worked in direct production at a single plant or facility and is not averaged across multiple plants. The terms “total base wages” and “direct production” are explained below.

What WAGES does a producer include in its average hourly base wage rate calculation?

Hourly base wage rate – Rate of compensation the producer pays a worker for each hour worked in direct production.

The following are not included in the hourly base wage rate:

Benefits, bonuses, premium payments, incentive pay, overtime premiums, and all other similar payments such as profit-sharing bonuses, tooling allowances, collective bargaining agreement ratification bonuses, and performance bonuses.

Amounts deducted from a worker’s pay may be included in the hourly base wage rate if they are for the benefit of the worker and are reasonable.

For example, reasonable amounts deducted for board and lodging, certain taxes, or amounts deducted for payments to third persons pursuant to a court order may be included in a worker’s hourly base wage rate. Amounts deducted for items that are generally considered to be for the benefit of the employer, such as tools, equipment, or uniforms, may not be included in a worker’s hourly base wage rate (see 29 CFR 531.32(c)).

Total base wages are calculated by multiplying each worker’s hourly base wage rate and number of hours worked in direct production, and then adding together the resulting totals for all workers engaged in direct production work at the plant or facility.

What HOURS WORKED does a producer include in its average hourly base wage rate calculation?

Hours worked in direct production – All time a worker spends personally involved in direct production work at a plant or facility in North America.

• Includes time spent directly involved in: the set-up, operation, or maintenance of equipment or tools used in the production of those vehicles or parts; material handling or inspections of vehicles or parts; on-the-job training regarding the performance of a specific production task; and maintaining and ensuring the operation of the production line or area, including the cleaning of the line or area and the places around it.
• Excludes hours worked by executive or management staff who generally have the authority to hire, fire, promote, transfer, and discipline employees, workers engaged in research and development, certain engineers, and other workers described in 29 CFR 810.130.

85% threshold

If at least 85% of a worker’s total work hours are worked in direct production during the time period the producer uses to calculate the average hourly base wage rate, 100% of the worker’s total work hours are considered hours worked in direct production. If less than 85% of a worker’s total work hours are worked in direct production, only the worker's hours worked in direct production are included in the average hourly base wage rate calculation.

For purposes of determining if a worker meets the 85% threshold, the plant may count paid meal and break times as direct production work. However, if less than 85% of a worker’s total hours are in direct production, then the plant must exclude paid meal time and paid break time from the average hourly base wage rate calculation.

Part-time, temporary, seasonal, and staffing agency workers

Hours of part-time, temporary, and seasonal workers are treated the same as hours of full-time workers; hours of contract workers, such as employees of a staffing agency who are involved in direct production, are also included for purposes of calculating the average hourly base wage rate. Hours of workers paid on a non-hourly basis such as salary, piece-rate, or day-rate will be converted to an hourly equivalent using standard WHD practices (see 29 CFR 810.120 and 810.125).

Is a producer required to use all three high-wage expenditures in its LVC calculation?

No. The high-wage material and manufacturing expenditures component of the LVC requires producers to demonstrate that a minimum percentage of the cost of the vehicle is composed of vehicle assembly labor costs, and/or parts and materials expenditures, from a North American plant or facility with an average hourly base wage rate of at least US$16 per hour. The high-wage material and manufacturing expenditures component is a required part of the LVC calculation, whereas a producer can choose whether to claim the high-wage technology and high-wage assembly expenditures credits in its LVC calculations.

How does a producer calculate the high-wage technology expenditures credit?

29 CFR 810.200 details how a producer may calculate and claim up to a 10% credit towards its total LVC requirement.

The formula is:

Wages for Research & Development (R&D)

Total annual corporate spending in North America on wages for research and development, including prototype development, design, engineering, testing, or certifying operations.

Wages for Information Technology (IT)

Total annual corporate spending in North America on wages for information technology, including software development, technology integration, vehicle communications, and information technology support operations.

Wages – Included in the numerator in this calculation ONLY are all wages paid to relevant workers including bonuses, premium payments, incentive pay, and overtime premiums. This is not the same as the US$16 per hour “average hourly base wage rate” used to calculate high-wage material and manufacturing expenditures and the assembly expenditures credit, which excludes such payments.

Annual expenditures in North America on production wages

Total annual corporate spending on wages for production of covered vehicles in North America.

How does a producer calculate the high-wage assembly expenditures credit?

29 CFR 810.300 details how a producer may calculate and claim a 5% credit towards its total LVC requirement. A producer must demonstrate that it operates (or has a long-term contract of at least three years with) a high-wage North American assembly plant for engines, transmissions, or advanced batteries that meets certain annual production levels listed in Part VI, Section 12 of the USMCA Uniform Regulations. The procedures for how to properly calculate the average hourly base wage rate for this credit are identical to those found in the high-wage material and manufacturing section. The credit cannot be more or less than 5%, and a producer who claims the credit can still use costs associated with the assembly plant for its material and manufacturing expenditures calculations.

High-wage plant is defined as an assembly or manufacturing plant where workers engaged in direct production are paid an average hourly base wage rate of at least US$16 per hour for the entire plant.

The USMCA requires a vehicle producer who seeks preferential tariff treatment to submit a LVC certification to CBP via its Automotive Certification Portal: USMCA Resource Center and Automotive Certification Portal

What is the purpose of the LVC certification?

To receive preferential tariff treatment under the USMCA, each producer of a covered vehicle must file an LVC certification with CBP certifying that the production of the covered vehicle meets the LVC requirements.

What is WHD’s role in the LVC certification process?

WHD, in consultation with CBP, reviews the LVC certifications for omissions or errors, as described in 29 CFR 810.400. The LVC certification is not considered properly filed until it is free of omissions and errors.

What information must a producer include in its LVC certification submission to CBP?

While there is no specific format or template required of producers when filing their LVC certifications, LVC certifications must meet the requirements in 29 CFR 810.405 and Annex B of CBP’s Implementing Instructions dated 6/30/2020.

The requirements described in 29 CFR 810.405 include:

1. Producer information

   The certifying vehicle producer’s name, corporate address, point of contact, and Federal Employer Identification Number or alternative unique identification number of the producer’s choosing, such as a Business Number (BN) issued by the Canada Revenue Agency, Registro Federal de Contribuyentes (RFC) number issued by Mexico’s Tax Administration Service (SAT), Legal Entity Identifier (LEI) number issued by the Global Legal Entity Identifier Foundation (GLEIF), or an identification number issued to the person or enterprise by CBP.

2. Vehicle information

   The vehicle class, model line, and/or other category indicating the motor vehicles covered by the certification.

3. Time period

   The time period the producer of the covered vehicle is using for its LVC calculation. The permissible time periods a producer may use to calculate LVC are detailed in 29 CFR 810.105(d)(1)-(5) and CBP’s Implementing Instructions (dated 6/30/2020).

4. Plant or facility information

   The name, address, and Federal Employer Identification Number or alternative unique identification number of the producer’s choosing, such as a Business Number (BN) issued by the Canada Revenue Agency, Registro Federal de Contribuyentes (RFC) number issued by Mexico’s Tax Administration Service (SAT), Legal Entity Identifier (LEI) number issued by the Global Legal Entity Identifier Foundation (GLEIF), or an identification number issued to the person or enterprise by CBP, for each plant or facility the producer of the covered vehicle is relying on to meet the high-wage material and manufacturing expenditures component of the LVC requirements.

5. Affirmative statements

   A producer must include affirmative statements with the below information (to the extent applicable):

   • The average hourly base wage rate meets or exceeds US$16 per hour for each plant or facility relied upon in its LVC certification.
   • If using high-wage transportation or related costs to meet the high-wage material and manufacturing expenditures component—a statement that indicates such use, and the company name(s) and identifying information for each company used to meet the requirements of this component.
   • If using the high-wage technology expenditures credit—a statement that indicates such use and the percentage claimed as a credit toward the total LVC requirement.
   • If using the high-wage assembly expenditures credit—a statement that indicates such use, identifying information of the assembly plant relied upon to claim the credit, and an affirmative statement that the average hourly base wage rate for such plant meets or exceeds US$16 per hour.

In accordance with 29 CFR 810.405(b), producers must ensure that records of information to support the calculations used in their LVC certification are kept, but should not submit these records with the LVC certification. WHD may request this supporting information when conducting a verification.

What is the timeline for LVC certification review?

Consistent with CBP’s Implementing Instructions (dated 6/30/2020), the timeline for WHD’s review of LVC certifications is as follows:

• Producers submit their LVC certifications to CBP.
• Within five business days of acknowledging receipt of the producer certification, CBP will send the LVC certification to WHD for review for omissions and errors.
• Within 60 days, WHD will review the LVC certification and respond to CBP with the outcome of the WHD review – either “no omissions or errors” or “omissions or errors found.”
• If WHD determines the LVC certification contains no omissions or errors, and CBP agrees, CBP will accept the certification as properly filed and notify the producer.
• If WHD determines the certification contains one or more omissions or errors, WHD will include a description of the omission(s) and/or error(s) and, if it agrees, CBP will notify the producer that the LVC certification has been rejected, describe the omission(s) and/or error(s), and give the producer the opportunity to submit a revised LVC certification or further information within five business days.
• If the producer submits a revised LVC certification or further documentation to CBP, CBP will coordinate a review of the revised submission with WHD.
• Within 30 days, WHD will review the new materials for omissions or errors and reply to CBP with its determination.
• If WHD concludes the LVC certification contains no omissions or errors, and CBP agrees, CBP will accept the LVC certification as properly filed and notify the producer.
• If WHD determines the LVC certification contains one or more omission(s) or error(s), and CBP agrees, CBP will reject the LVC certification and notify the producer that the certification has not been properly filed.
• The producer will then need to submit a new certification package to CBP.

What LVC certification-related records are producers required to make and maintain?

Producers are required to make and maintain records and documentation that support the producer’s certification of compliance with the high-wage components of the LVC requirements for a period of five years. Records may be made and maintained by a supplier or contractor, and WHD will accept records directly from a supplier or contractor where, for example, the producer and supplier or contractor have a contract for such an approach. Required records are described briefly below, and explained in more detail in the regulations at 29 CFR 810.600.

Records Relating to High-Wage Material and Manufacturing Expenditures, and the High-Wage Assembly Expenditures Credit (if applicable)

The full name, job title, home address, and other available contact information for workers employed at each plant relied on by the producer in its LVC calculation; time records with the total number of daily and weekly hours worked; payroll records; any collective bargaining or written agreements applicable to workers who work in direct production; and direct production records (see 29 CFR 810.600(e)(1)-(5)).

• To demonstrate any claimed high-wage transportation or related costs for shipping, a producer must maintain records that establish the wages their transportation, logistics, or material handling service providers paid to their direct production workers, such as contracts showing the wages that transportation or shipping contractors paid to their direct production workers (see 29 CFR 810.600(e)(6)).

What is WHD’s role in the verification process?

WHD coordinates with CBP to verify whether the production of a covered vehicle complies with the high-wage components of the LVC requirements. WHD’s role includes:

1. Determining whether the US$16 per hour threshold (average hourly base wage rate) is met in the plants and facilities the producer relied upon for its LVC calculations; and
2. If claimed, determining whether the percentage identified in the producer’s LVC certification for high-wage technology expenditures is correct.

As part of these verifications, WHD may examine any record and request information from producers that may be relevant to whether the production of the covered vehicle complied with the high-wage components of the LVC requirements.

How will WHD conduct verifications?

CBP has the primary role of conducting verifications of the LVC requirements. CBP initiates the verification process by notifying a producer that a verification has been initiated, including whether the verification concerns the high-wage components of the producer’s LVC certification. WHD assists CBP in verifying that the high-wage components of the producer’s LVC calculations are correct.

WHD may request records from the producer after providing the producer with 30 days’ notice of such request. These include records relating to workers’ wages, hours, job responsibilities, or any other information relevant to whether the producer meets the high-wage components of the LVC requirements. This often includes worker time records, payroll records, and information the producer is required to maintain to support its LVC certification calculations.

WHD may examine these records in person as part of a verification visit, or request them electronically or by mail. WHD may request and inspect documents, interview workers, enter and inspect any facility, and gather any other information deemed necessary to the verification.

Upon completion of a verification, WHD provides CBP with WHD’s verification findings and analysis. WHD’s analysis of the high-wage components of the LVC requirements will contribute to CBP’s final determination to grant or deny the producer’s preferential tariff treatment claim.

What records are producers required to make and maintain?

See 29 CFR 810.405 for information producers must include in their LVC certifications.

Producers are required to make and maintain records and documentation to support a producer’s certification of compliance with the high-wage components of the LVC requirements. Producers must maintain those records for a period of five years from the date on which the certification of origin was completed, and such records must be made available to WHD in an accessible format within 30 days of WHD’s request. Specific requirements for the types of records producers must maintain are found in 29 CFR 810.600.

To demonstrate compliance with the high-wage material and manufacturing expenditures component and eligibility for the high-wage assembly expenditures credit, the records must contain each worker’s information including the full name (and identifying symbol or number if used in place of the worker’s name on any time, work, or payroll records), job title, home address, and other available contact information; the total number of daily and weekly hours worked; payroll records; any collective bargaining or written agreements; and direct production records.

To demonstrate high-wage transportation or related costs for shipping (which a producer may include in its material and manufacturing expenditures calculation), a producer must maintain records that show the wages their transportation, logistics, or material handling service providers paid to their direct production workers performing those services.

To demonstrate eligibility for the high-wage technology expenditures credit, the producer must maintain a record of the total wages paid to workers in North America who perform (a) research and development or information technology work, and (b) direct production work. These records must include the workers’ names and the type of work performed.

What is the administrative review process for WHD’s findings concerning a producer’s compliance with the high-wage components of the LVC requirements?

A producer may protest the final determination issued by CBP on its claim for preferential tariff treatment. If such a protest involves WHD’s analysis of the high-wage components of the LVC requirements, WHD will conduct an administrative review of its analysis and provide the results to CBP. The administrative review will be conducted by either the WHD Administrator or an official the Administrator designates.

Disputed questions of fact may be referred by the presiding official to the U.S. Department of Labor (“DOL”) Chief Administrative Law Judge (“ALJ”) for a recommended decision. The Chief Judge will designate an ALJ to hear the disputed question(s) and issue a recommended decision within 120 days of when the question was referred by the presiding official, or longer if the parties agree. The presiding official has the discretion to accept or reject the decision, consider any evidence deemed relevant, and request additional information. The WHD Administrator will strive to issue a decision within one year from the date it receives notice of the protest from CBP, not including any time during which additional verification or collection of information is taking place.

Are individuals who provide information relating to a verification of the LVC requirements protected from retaliation?

Yes. See 29 CFR 810.800 for whistleblower protections for individuals who provide information related to a verification of a producer’s compliance with the LVC requirements or who cooperate or seek to cooperate in such a verification. WHD accepts complaints alleging discrimination for participating in these protected activities. WHD will review each complaint, determine if it is actionable, and investigate as appropriate.

The regulations at 29 CFR 810.800 outline the anti-retaliation protections for whistleblowers.

Who do the regulations protect?

The regulations provide whistleblower protections for any person who discloses information to a federal agency or to any person relating to a verification of a producer’s compliance with the LVC requirements, or who cooperates or seeks to cooperate in a verification concerning the producer’s compliance with the LVC requirements. Examples of workers protected include workers of the producer or of third-party suppliers, part-time, temporary, seasonal or contract workers, and other personnel who work at plants or facilities relied upon by the producer to meet the high wage components of the LVC requirements. WHD accepts complaints alleging retaliation or discrimination for participating in these protected activities. WHD will review each complaint, determine if it is actionable, and investigate as appropriate.

What are the protected activities and retaliatory prohibited acts?

It is unlawful to intimidate, threaten, restrain, coerce, blacklist, discharge, or in any other way discriminate against any person who has engaged in the protected activities described above.

How much time does an individual have to file a complaint of discrimination or retaliation?

A complaint must be filed with WHD within 12 months after the alleged discriminatory act occurs. The whistleblower complaint must provide sufficient facts for WHD to determine whether there is reasonable cause to believe a violation has occurred and an investigation is warranted. No particular form of complaint is required, and a complaint may be filed in writing, or by calling WHD. When WHD determines it is warranted, an investigation will be conducted. WHD will issue a written determination of its findings to all known interested parties within 30 calendar days of the date of filing, unless the whistleblower and the employer that allegedly engaged in discrimination agree that additional time is warranted or if WHD needs additional time to determine whether a violation occurred (e.g., due to delays in receiving requested information, difficulty scheduling interviews, or impediments in obtaining other information) (see 29 CFR 810.800(b)-(c)).

What are the consequences if WHD determines a prohibited act occurred?

Remedies may include monetary relief, injunctive relief, civil money penalties for each violation, and/or any other equitable relief remedies such as employment, reinstatement, promotion, compensation for monetary losses, or other make-whole relief (see 29 CFR 810.800(c)(3)(i)).

What is the administrative process to contest WHD’s determination related to the anti-retaliation provisions?

Any party has the right to request a hearing before an administrative law judge (“ALJ”) within 15 calendar days of the date of WHD’s determination; otherwise, the determination becomes the final order of DOL. Once a request for a hearing is timely filed, WHD’s determination is not in effect unless and until the case is dismissed or an ALJ affirms WHD’s decision. The ALJ will issue a decision within 60 calendar days after the date of the hearing (see 29 CFR 810.800(d)).

What is the appeal process of an ALJ’s decision?

As detailed in 29 CFR 810.800(e), a party may appeal an ALJ decision by filing a petition for review with the Administrative Review Board (“ARB”) within 30 days of the date of the ALJ’s decision. The decision of the ALJ is not in effect unless and until the ARB issues an order affirming the ALJ’s decision, or unless and until 30 calendar days have passed after the ARB received the petition for review and the ARB has not notified the parties that it will review the ALJ’s decision. An order of the ARB is subject to discretionary review by the Secretary of Labor under 29 CFR 810.800(f).

The following list is a non-exhaustive list of terms and definitions related to the USMCA. All of these terms involve the LVC requirements, although some implicate issues within the purview of CBP. These definitions are provided for informational purposes only, and do not displace any definitions of the same terms provided in other USMCA-related authorities.

Alternative Staging Regime

The alternative to the standard staging regime, which provides for a different phase-in of the LVC (and other) requirements and additional time to meet those requirements.

Average Hourly Base Wage Rate

Pay rate for hours worked in direct production. This is calculated by dividing the total base wages paid for all hours worked in direct production at a plant by the total number of hours worked in direct production at that plant. This rate must equal at least US$16 per hour for the plant to count toward the LVC requirements.

Average Purchase Value (“APV”)

The sum of the values of high-wage materials purchased annually by a producer for use in the production of passenger vehicles, light trucks, or heavy trucks in a plant located in the territory of a USMCA Country.

Covered Vehicle

Passenger vehicle, light truck, or heavy truck.

Direct production work

Work by any employee directly involved in the production of covered vehicles, or parts for these vehicles, in a USMCA Country. It includes (for example) the set-up, operation or maintenance of tools or equipment used in the production of those vehicles and parts, material handling and inspections of vehicles and parts, and maintaining and ensuring the operation of the production line or production area, including cleaning of the line or production area and the places around it. Direct production work does not include time spent managing or supervising workers, or research and development or engineering work unrelated to maintaining and ensuring the operation of the production line or tools and equipment used in the production of vehicles or parts.

High-wage plant

An assembly or manufacturing plant where workers engaged in direct production are paid an average hourly base wage rate of at least US$16 per hour for the entire plant.

High-wage components of the LVC requirements

Materials and Manufacturing Expenditures, Technology Expenditures Credit, Assembly Expenditures Credit.

High-wage labor costs

The sum of wage expenditures, not including benefits, for workers who perform direct production work at a high-wage vehicle assembly plant.

High-wage material

A material that is produced in a high-wage production plant.

Labor Value Content (LVC)

The requirement that a minimum percentage of the cost of a covered vehicle is composed of certain high-wage expenditures. The three components of this calculation are Material and Manufacturing expenditures, Technology expenditures, and Assembly expenditures.

LVC Certification

A covered vehicle producer’s written declaration to CBP that its production of the covered vehicle meets the high-wage components of the LVC requirements.

Net Cost

Total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and nonallowable interest costs that are included in the total cost.

Producer

An individual or entity who engages in the production and/or assembly of automotive goods in a USMCA Country. In many instances the producer is also the vehicle importer or exporter.

Total Vehicle Plant Assembly Annual Purchase Value (“TAPV”)

The sum of the values of all parts or materials purchased, on an annual basis, for use in the production of passenger vehicles, light trucks or heavy trucks in a plant located in the territory of a USMCA country.

USMCA Country(ies)

The United States of America, the United Mexican States (“Mexico”), or Canada. USMCA Countries means any combination of these three countries. The regulations use these terms interchangeably with the term “North America.”

Uniform Regulations

The regulations agreed upon by the three USMCA Countries, pursuant to Chapter 5, Article 5.16 of the USMCA, regarding, in part, the interpretation, application, and administration of Chapter 4 (Rules of Origin) and Chapter 5 (Origin Procedures) of the USMCA.

Verification (also called an “audit”)

WHD’s investigation, in conjunction with CBP, of a producer’s compliance with the high-wage components of the LVC requirements.

Federal Register: High-Wage Components of the Labor Value Content Requirements Under the United States-Mexico-Canada Agreement Implementation Act

On January 29, 2020, the United States-Mexico-Canada Implementation Act was signed into law, ratifying the USMCA and implementing its provisions. The USMCA replaced the North American Free Trade Agreement (“NAFTA”) and includes new rules of origin requirements for claiming preferential tariff treatment (i.e., a reduced customs duty rate) for automotive goods produced in a USMCA Country. One such requirement is that a portion of the covered vehicle is manufactured with high-wage labor, defined as an average hourly base wage rate of at least US$16 per hour. Producers of a covered vehicle who intend to claim preferential tariff treatment must file a LVC certification with CBP certifying that the production of the covered vehicle meets the high-wage components of the LVC requirements.

The Secretary of Labor delegated LVC-related enforcement authority to WHD, and on July 1, 2020, WHD issued its LVC-related regulations at 29 CFR Part 810. The interim final rule provides guidance to the regulated community to aid compliance with the high-wage components of the LVC requirements of the USMCA. Among other provisions, the rule details what information the Department will review for omissions and errors on LVC certifications submitted by vehicle producers to U.S Customs and Border Protection, defines the scope of the Department’s role in conducting verifications to help ensure producer compliance, sets forth recordkeeping requirements, and describes the Department’s whistleblower enforcement process. The interim final rule entered into force on July 1, 2020.

• Labor Rights and the United States-Mexico-Canada Agreement (USMCA) | U.S. Department of Labor
• U.S Customs and Border Protection (CBP)’s USMCA Website
• United States-Mexico-Canada Agreement | United States Trade Representative