Thank you.
On that specific issue, all three countries agreed that in the original text and interpretation of the USMCA that there were specific local content thresholds for different types of parts. Once those parts were deemed to have met those thresholds, which was ostensibly 65% to 75%, then those parts would be deemed to be 100% compliant in the vehicle calculation. The local content requirement in a vehicle is set at 75%, so if I qualified my armrest, my wheels or my transmission, then that number would start for that component at 100%. “Rolled up to 100%” is the term that we use.
The new administration, the Biden administration, said that they would like to see the real local content number to be the one used, whatever that is—66%, 83%, 94%. Canada and Mexico successfully appealed that and said that this was not what we agreed on and that this is not the way the industry works.
Even though I represent component suppliers, we always argued during the NAFTA negotiations that if we tighten the restrictions too much, the penalty for automakers for not meeting the compliance number is a 2.5% most favoured nation tariff, so just turn around and pay the tariff and then maybe not be guided at all by the rules of origin. Canada and Mexico won that. We're waiting for the Americans to give a report on how they're going to comply with that, but they've been silent since.