Wage and Hour to Enforce USMCA Rules of Origin Provision

February 21, 2020

The Department of Labor’s Wage and Hour Division (WHD) will be implementing an automobile industry-focused USMCA measure that alleviates tariffs from a manufactured vehicle if certain percentages of the vehicle are produced in North American plants by workers earning an average of at least $16 per hour.

This “Labor Value Content” (LVC) provision in the USMCA was an important point for the Trump administration in the deliberations leading up to the trade agreement’s ratification.  The Wage and Hour Division’s notice found its way into the division’s budget proposal as a performance goal for 2021.

The LVC provision mandates that 40% of a passenger car and 45% of pickups and cargo vehicles must be manufactured in the U.S. in order to apply.

Outlook:  The WHD is responsible for writing the regulations and developing an enforcement program to implement the LVC.  Given the short timeframe, a rule is likely sooner rather than later.