Imagine being asked to bake a cake but not being told what kind of cake you’ll be baking while knowing you’ll be judged on the results.
You might know you need milk, eggs and flour, but whether the cake needs to be chocolate or carrot is pretty important, too, and will change what you pick up during your shopping trip.
That’s how Kristin Dziczek, vice president of the Industry, Labor & Economics Group at the Center for Automotive Research in Ann Arbor, Mich., described the rollout of the new trade deal replacing the North American Free Trade Agreement (NAFTA).
The new agreement — the United States-Mexico-Canada Agreement (USMCA) — went into effect July 1. Although many auto industry analysts said NAFTA was overdue for an update, the uncertainty over the new rules, some of which weren’t issued until a week before they took effect, has resulted in new forms of stress.
The details spelled out in the rules are key when determining how specific parts in an automobile that is produced through a global supply chain are going to be classified under the trade deal. That, in turn, will determine if they avoid tariffs.
Automakers and suppliers, who are still dealing with fallout from the COVID-19 pandemic and the resumption of manufacturing, are scrambling to make sure they are in compliance, with limited time to digest the full impact on their operations.
Realizing the problem, the federal government has promised to provide leeway “as long as importers are making satisfactory progress toward compliance and are making a good-faith effort to comply with the rules to the extent of their ability.”
While extra time will help, Dziczek noted that the rules are the rules, and they’ve now gone into effect.
“You’ve got to be in compliance now. [The authorities are] expecting good faith compliance while the certification systems get up and running. ... You have to be meeting the letter of the law starting today,” she said.
It’s no easier for foreign carmakers looking to import vehicles into the country, said Jennifer Safavian, president and CEO of Here for America, an initiative of Global Automakers, which speaks for foreign automakers in the United States.
The “USMCA is a complex agreement, and our member companies are trying to get it right, but that’s different for every company,” she said.
Matt Blunt, president of the American Automotive Policy Council, praised the agreement, but also discussed the challenges. The council represents Ford, General Motors and Fiat Chrysler Automobiles.
“The rapid timeline for entry into force of the USMCA will require tremendous efforts from American automakers with close coordination between industry and government to help ensure successful implementation of the agreement,” he said in a statement. “We look forward to an ongoing dialogue with the administration and other auto industry stakeholders to ensure the USMCA can achieve its full potential.”