U.S. Releases Interim Final Rule on Labor Value Content Requirements

On July 1, 2020, the U.S. Department of Labor (DOL) published in the Federal Register an interim final rule (IFR) issuing regulations necessary to administer the high-wage components of the labor value content (LVC) requirements for the automotive industry as set forth in section 202A of the United States-Mexico-Canada Agreement Implementation Act (USMCA). The IFR takes effect immediately as of July 1, 2020. Interested parties are invited to submit written comments on any changes by August 31, 2020.

To receive preferential tariff treatment under the USMCA, a producer of a covered vehicle must file a certification that the production of the covered vehicle meets the high-wage components of the LVC requirements. It authorizes the Secretary of Labor, in consultation with the Commissioner of U.S. Customs & Border Protection (CBP), to review the certification for omissions or errors and to verify whether a covered vehicle complies with the high-wage components of the LVC requirements. To meet this requirement, 40% to 45% of the content of a vehicle must be made by workers ultimately earning at least U.S. $16 per hour. In addition:

  • The IFR provides a detailed calculation methodology with respect to the high-wage components and manufacturing expenditures of the LVC requirements;

  • The IFR details what information the producer must submit to CBP in its certification that the DOL will review for omissions or errors. It also defines the scope of conducting verifications and the processes by which the DOL will conduct them.

  • The IFR explains producers’ recordkeeping responsibilities and the scope of the DOL’s authority to inspect such records;

  • The IFR provides for an administrative review process of the DOL’s analysis and findings with respect to a producer’s compliance with the high-wage components of the LVC requirement; and

  • The IFR also describes the DOL’s whistleblower enforcement processes.

In addition, vehicle producers are allowed to include high-wage technology expenditure credits and high-wage assembly expenditure credits in the LVC calculation.
Read the published USTR notice.