In his testimony before the U.S. International Trade Commission (USITC) in Washington, D.C., Auto Care Association President and CEO Bill Hanvey explained to legislators about the economic impact and burden the United States-Mexico-Canada Agreement (USMCA) would place on the automotive aftermarket.

Auto Care President and CEO Bill Hanvey speaks during a press conference in Las Vegas at AAPEX 2018. Hanvey testified on Nov. 15 about the impact of tariffs and the United States-Mexico-Canada Agreement (USMCA) on the automotive aftermarket. Photo by Mark Phillips/Aftermarket Intel

The USITC instituted an investigation last month in response to a request from U.S. Trade Representative Robert Lighthizer following the release of the USMCA text, the association said in a press release.

In 2017, the U.S. exported $61 billion auto parts to Mexico and Canada, accounting for more than 70 percent of all auto parts exports, Hanvey said in his testimony during the Nov. 15 hearing.

“We anticipate that the USMCA will result in increased investment and/or reshoring of production into North American supply chains by auto and auto parts manufacturers to take advantage of the agreement’s duty free treatment. However, we are also concerned with a few provisions in the USMCA that may result in added costs for our members, their customers and U.S. consumers.”

“The USMCA’s increased rules of origin threshold will require some auto parts manufacturers to invest in new production facilities, tooling and supply chain management structures,” Hanvey said in his prepared remarks. “We urge the administration to communicate and cooperate with all automotive industry stakeholders in the development and application of standards for the phasing in of the increased rules of origin criteria.”

“Additionally, the new certification requirements will create challenges, as additional administrative costs will be required to comply with new record‐keeping procedures,” Hanvey said. “These requirements will be especially burdensome for small‐ and medium‐size producers that may not possess the technical software and information protocols needed to track each input at each stage in the supply chain.”

“The twin threat of 232 tariffs combined with the USMCA’s quota on 232 exemptions for Canada and Mexico create an inhospitable long‐term barrier to increasing trade, investment and growth. As we have expressed in the past, we hope that these 232 tariffs do not come into fruition,” Hanvey said.

More than 1,000 Chinese companies export auto parts to the U.S., shipping axles, fog lamps, brake rotors and more to U.S. auto companies and parts stores, the Wall Street Journal reports. Many categories of parts coming from China are either affected by the tariffs or will be.

MEMA’s Ann Wilson testifies

Also testifying Nov. 15 was Ann Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association (MEMA).

“MEMA believes the announcement of the U.S.-Mexico-Canada agreement is a positive step forward for all three countries. We supported an update of the agreement that makes the United States more competitive and that meets the needs of a 21st century economy,” Wilson said in her prepared remarks. “At the same time, we have consistently cautioned against widespread new requirements that provide little value to the supply chain.”

“Suppliers are dependent on cost-effective components in order to provide consumers with new technologies in a competitive manner,” Wilson said. “Suppliers and vehicle manufacturers will have little choice but to move production elsewhere if access to cost-effective inputs is restricted.”

“Smaller, more localized suppliers are likely to feel the pinch of increased parts immediately,” Wilson said. “Cost increases from abrupt changes resulting from tariffs or quotas or increased administrative requirements are felt up and down the supply chain. But smaller suppliers feel these impacts immediately.”

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