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U.S. retailers urgently looking north for used- vehicle inventory amid the microchip crisis face another potential burden: tariffs.
Industry trade groups in the U.S. and Canada are imploring the Biden administration to back away from a Trump-era interpretation of the United States-Mexico-Canada Agreement that they say could make most used vehicles shipped to the U.S. subject to import duties.
"The previous U.S. administration took a more restrictive interpretation of the new USMCA rules [by] saying the new rules of origin on vehicles moving forward should also be applied retroactively on used vehicles from a few years ago — which, quite frankly, is completely nonsensical," said Tim Reuss, CEO of the Canadian Automobile Dealers Association.
At issue are used vehicles produced before USMCA went into effect. As of July 2020, the trade pact raised regional-value content requirements and introduced labor-value content rules that must be met for a vehicle to cross borders without being subject to import duties.
The industry groups say the U.S. government has interpreted the rules to mean that vehicles made before July 2020 are still subject to USMCA requirements, not those under the preceding North American Free Trade Agreement. As a result, U.S. dealers who purchase used vehicles from Canada or Mexico are in some cases being slapped with tariffs or at least warned that they could be subject to them in the future.
The U.S. interpretation applies to vehicles imported from Mexico, but it likely causes the most headaches at the Canadian border.
According...