KOTRA Publishes Guidebook on 'USMCA Origin Rules' for North and Central America

[Asia Economy Reporter Suyeon Woo] KOTRA, in collaboration with the law firm Bae, Kim & Lee International Trade Institute, has published the 'USMCA Rules of Origin Guide.'

With the US-Mexico-Canada Agreement (USMCA) coming into effect last July, concerns over the complex and stringent rules of origin have grown within the industry. Through this guide, KOTRA provides a legal interpretation of the rules of origin contained in the USMCA and analyzes North American business cases of Korean companies by type.

The US-led USMCA rules of origin significantly strengthen the obligation for member countries to use North American regional content compared to the previous North American Free Trade Agreement (NAFTA). In particular, the three rules introduced in the automotive and parts sectors are expected to have a major impact on the global industry, including South Korea.

To receive tariff-free benefits for finished vehicles in the North American market, the Regional Value Content (RVC) must be raised to 75%. Under the previous NAFTA, it was 62.5%. Additionally, 70% of the steel and aluminum used in automobile production must be produced in the North American region.

A newly introduced Labor Value Content (LVC) requires that 45% of the labor wages per vehicle be paid at a rate of at least $16 per hour. All these conditions favor the U.S. automotive parts and steel industries.

Meanwhile, last year, South Korea's exports of automobiles and parts to North America reached $27.1 billion. With as many as 80 Korean companies operating in the U.S., Mexico, and other regions, a quick understanding of the new USMCA regulations is urgently needed.

KOTRA has made efforts in this guide to explain the newly introduced USMCA automotive and parts rules of origin in an easy-to-understand manner. The original and fully translated texts of the USMCA agreement, uniform regulations, and implementation guidelines are also included. The guide categorizes export and investment cases of Korean automotive parts companies in the North American market by type and analyzes how these new regulations will be applied going forward.

Sudeuk Son, Head of KOTRA's Economic and Trade Cooperation Division, said, "The North American automotive market accounts for 41% of our exports, making it highly important. We will closely monitor trade measures such as the USMCA and continue to discover information that our industry needs."

The 'USMCA Rules of Origin Guide' can be downloaded for free starting from the 9th on the KOTRA Overseas Market News website and the Bae, Kim & Lee International Trade Institute website.

This content was produced with the assistance of AI translation services.