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USITC Launches Probe into USMCA Auto Rules

  //automotive-transportation.news-articles.net/co .. /usitc-launches-probe-into-usmca-auto-rules.html
  Published in Automotive and Transportation on Friday, February 20th 2026 at 4:12 GMT by Toronto Star
      Locales: UNITED STATES, CANADA, MEXICO

Washington D.C. - February 20th, 2026 - The U.S. International Trade Commission (USITC) has formally launched a comprehensive investigation into the rules of origin for automobiles under the United States-Mexico-Canada Agreement (USMCA), a move that could reshape the North American automotive landscape. The probe, initiated at the request of the U.S. Trade Representative (USTR), aims to determine the extent to which automakers are complying with the USMCA's stringent regional content and labor value requirements and whether those requirements are achieving their intended goal: to incentivize automotive production within North America.

The USITC has been tasked with a 180-day period to thoroughly examine vehicle import data and manufacturing processes, culminating in a public report delivered to both Congress and the USTR. This investigation arrives at a crucial juncture, two years after the full implementation of the USMCA and amid growing anxieties about global supply chain vulnerabilities exposed by recent geopolitical events.

Delving into the USMCA's Automotive Rules of Origin

The USMCA's auto rules of origin are significantly more complex than those under the previous North American Free Trade Agreement (NAFTA). The agreement mandates that at least 60% of a vehicle's content must originate within the USMCA region - the United States, Mexico, and Canada - to qualify for tariff-free access to the U.S. market. This percentage is calculated based on the vehicle's total value, encompassing everything from raw materials to assembled components. However, the complexities don't stop at the percentage.

Crucially, the USMCA introduces a "Labor Value Content" (LVC) requirement. This stipulates that a specific percentage of the vehicle's value must be attributable to labor performed by workers earning at least $16 per hour - a clear attempt to shift production towards higher-wage countries like the U.S. and Canada, and away from lower-cost regions. This LVC threshold is currently set at 40% for 2023, rising to 45% in 2026. Reaching this LVC has proven challenging for some manufacturers, necessitating careful sourcing and potentially increasing production costs.

Concerns Spark Investigation

The USTR's request for this investigation signals increasing concerns that some automakers are navigating, or potentially circumventing, these rules. Reports suggest that certain manufacturers may be utilizing loopholes or engaging in practices that technically meet the 60% regional content requirement, but rely heavily on components from non-USMCA countries to offset labor costs and maintain competitive pricing. There's also suspicion that some companies are misclassifying parts or manipulating data to inflate the North American content percentage.

The United Auto Workers (UAW) union has been a vocal proponent of stricter enforcement of the USMCA rules, arguing that full compliance is essential to protect American jobs and ensure fair competition. They've repeatedly claimed that insufficient oversight has allowed companies to exploit the agreement, leading to continued plant closures and job losses in the U.S.

Potential Outcomes and Implications

The USITC's report is anticipated to provide a detailed analysis of compliance rates, identifying potential areas of non-compliance and assessing the effectiveness of the current rules. The findings could trigger a range of outcomes.

• Increased Enforcement: The USTR could issue guidance clarifying existing rules and stepping up enforcement efforts, including audits of automakers and penalties for violations.
• Rule Modifications: The USITC might recommend amendments to the USMCA's auto rules of origin, potentially increasing the regional content or labor value thresholds, or tightening the definition of "originating" materials.
• Dispute Resolution: If evidence of widespread non-compliance is found, the U.S. could initiate dispute resolution proceedings against Mexico or Canada under the USMCA framework.
• Supply Chain Reshuffling: Regardless of the specific outcome, the investigation is likely to accelerate the ongoing trend of supply chain diversification and regionalization, as automakers seek to ensure compliance and mitigate future risks.

The investigation is already drawing intense scrutiny from all stakeholders. Automakers are bracing for potential new regulations and increased compliance costs. Canadian and Mexican officials are closely monitoring the situation, concerned that stricter rules could disadvantage their domestic industries. The UAW is hoping for a decisive report that strengthens protections for American workers. The findings, expected in August 2026, will undoubtedly have significant ramifications for the future of automotive trade and manufacturing in North America.