capital report: oct. 2, 2018

New NAFTA Announced: U.S., Canada and Mexico Reach Trilateral Trade Agreement

On Sunday, Sept. 30, the United States, Canada and Mexico reached a new trade agreement to replace the North American Free Trade Agreement (NAFTA) right before the U.S.-imposed deadline. NAFTA is still in effect while the new agreement, called the United States-Mexico-Canada Agreement (USMCA), goes through Congressional review. The timing allows outgoing Mexican President Enrique Peña Nieto to sign the USMCA prior to him leaving office.

“We are encouraged to see the United States reach a trilateral trade agreement with Mexico and Canada, allowing duty-free movement of auto parts to continue between the three countries. As we continue to review the text, we hope the modernized agreement strengthens trade in the region and promotes consistency and predictability for U.S. auto manufacturers, distributors, retailers and service providers,” said Bill Hanvey, president and CEO, Auto Care Association.

In terms of autos and auto parts, the updated auto rules of origin (Chapter 4) requires that 75 percent of a vehicle’s content must come from North America, up from the current 62.5 percent, in order to receive duty-free treatment. The agreement also includes a labor wage provision requiring a percentage of a vehicle to originate from workers earning at least $16/hour to be eligible for duty-free treatment.

Please review the full text of the trade agreement for more details. USTR has released a couple factsheets as well:

Questions? Contact Angela Chiang.

View Auto Care’s NAFTA resource page:


Vehicle Data Legislation Introduced in Massachusetts

Last month, three Massachusetts legislators introduced a bill to amend the commonwealth’s Right to Repair law, with the goal being to ensure that new vehicle data technology does not prevent drivers from using independent auto care facilities for maintenance and repairs.

The need for the new legislation was brought about by the onset of vehicle telematics, which permits vehicles to transmit information wirelessly. Introduced by Reps. Paul McMurtry, D-Dedham, Joan Meschino, D-Hull, and John Lawn, D-Watertown, the legislation would require that any vehicle utilizing telematics technology must “permit the secure communication of all mechanical vehicle data in a standardized format accessible by the owner or lessee of the vehicle through their smart phone and, by an independent motor vehicle repair facility for purposes of maintaining, diagnosing and repairing a motor vehicle.”

Transparency is guaranteed since access to vehicle data would require authorization from the owner or lessee of a vehicle. The bill would further prohibit automakers from requiring their authorization in order to access a vehicle’s on-board diagnostic system for purposes of repairs unless such access is standardized and not controlled by the automakers themselves.

According to IHS Market, 70 percent of new vehicles today come with connected technology. That number is expected to jump to 90 percent of new vehicles by 2020. While this technology could provide benefits to car owners and the independent auto care industry, all of the data currently transmitted by vehicles goes directly to the automakers, granting them full control over where a vehicle can be serviced. Further, some automakers are beginning to require authorization in order for an independent service facility to access the vehicle on-board diagnostic system. The onset of telematics, as well as new authorization schemes, are designed to make the automaker the gatekeeper that decides how, to whom and at what cost vehicle repair data is made available.

The original Massachusetts Right to Repair law was enacted as a result of a ballot measure in 2012 requiring automakers to make available to independent repair shops the same repair information, software and tools they provide to their franchised dealers. The ballot measure was approved by an 86-14 percent margin, demonstrating that motorists overwhelmingly want the right to choose where they have their vehicle serviced.

Questions? Contact Aaron Lowe.

Visit the Massachusetts Right to Repair website:


Senate Committee Holds Hearing on Auto Tariffs

The U.S. Senate Finance Committee held a hearing last Wednesday, Sept. 26 to discuss the impact of tariffs on the U.S. automotive industry. According to Chairman Orrin Hatch, R-Utah, the hearing was an opportunity for the committee members “to engage with experts on what new tariffs on automobiles and automotive parts could mean for families, job creators and U.S. economic growth.”

The Auto Care Association released a statement after the hearing, “urg[ing] Secretary Ross and the president to listen to the widespread opposition to imposing tariffs on imported auto parts and to conclude that importing these goods is not a threat to national security but rather a necessary component of a thriving domestic automotive industry.”

Read the full statement:


USTR Develops Search Engine for Products Subject to Section 301 Tariffs

The Office of the U.S. Trade Representative (USTR) has developed a search engine for companies to find out whether their products are subject to the Section 301 tariffs on imports from China. Parties can simply enter the 8-digit HTS code for a particular product to confirm whether it is subject to a tariff and identify the corresponding tariff list.

USTR has also started to notify parties of product exclusion request determinations submitted for products on the first tariff list. If you received a denial notice, note that you can resubmit a new request if you have additional information that you would like considered.

Helpful links:

The third tariff list was finalized last week but the notice did not mention a product exclusion process, as was the case for the first two rounds. In a letter to USTR, the Auto Care Association urged the administration to adopt a process for our members and stakeholders to request products to be excluded from the third tariff list.

Questions? Contact Angela Chiang.

View Auto Care’s Section 301 resource page:


U.S. Signs Revised Free Trade Agreement with South Korea

On Monday, Sept. 24, President Trump and South Korean President Moon Jae-in signed a revised United States-Korea Free Trade Agreement, known as KORUS. The original KORUS was signed in 2012, but the new agreement removes a few trade barriers in an attempt to improve the trade deficit between the two countries.

Key provision of the new agreement include:

  • U.S. Truck Tariffs – Korea will phase out the 25 percent tariff on trucks.
  • U.S. Auto Exports – Increased quota of U.S. automobile exports from 25,000 to 50,000 per manufacturer per year without meeting Korean safety standards. Those cars only need to meet U.S. safety standards. Note that U.S. automakers have not come close to reaching the cap in past years.
  • Section 232 Steel Tariffs – U.S. agreed to exempt Korea from its Section 232 tariff on steel but instead, be subject to a quota to limit steel exports to the U.S.

Read the KORUS factsheet:


Antidumping Order on Tapered Roller Bearings from China to Remain in Place

Last month, the U.S. International Trade Commission (USITC) voted to continue the antidumping duty order on imports of tapered roller bearings from China. USITC determined that revoking the existing antidumping order would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time. This is the fourth five-year sunset review. A full report of the investigation will be available in mid-October.

View the announcement:


Get the Latest Coverage of the 2018 Elections

Thanks to support from the Auto Care Political Action Committee (ACPAC), we are pleased to bring Capital Report readers the latest Inside Elections with Nathan Gonzalez, a bi-monthly nonpartisan analysis of U.S. elections.

Read the latest issue:

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