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U.S. Senator Grassley says June 1 USMCA start date problematic for automakers

FILE PHOTO: Senator Charles Grassley (R-IA) speaks during the reauthorization of Freedom Act on Capitol Hill in Washington, U.S., November 6, 2019. REUTERS/Joshua Roberts

WASHINGTON (Reuters) - U.S. Senate Finance Committee Chairman Charles Grassley said he was concerned about the Trump administration’s proposed June 1 implementation date for the new U.S.-Mexico-Canada trade agreement, saying that this would put undue compliance pressures on U.S. automakers amid the coronavirus crisis.

In remarks on the Senate floor, Grassley said the quick launch date for the trade agreement is problematic for the industry when it is “facing significant supply chain disruptions to COVID-19.”

Grassley said he was urging the administration to take very seriously the auto industry’s concerns about certifying compliance for their vehicles in such a short period and “to ensure a reasonable timely for entry into force of the U.S.-Mexico-Canada Agreement auto regulations.”

“It would be prudent right now to let these companies focus instead on the health of their workforce and supply chains,” Grassley added.

Canada on Friday became the last of the three North American trading partners to ratify the agreement, with Parliament rushing through a vote before taking a three-week break to help stop the spread of the coronavirus.

Groups representing U.S. and foreign automakers - including General Motors Co, Toyota Motor Corp and Volkswagen AG VOWG_p.DE, as well as auto dealers and suppliers - said in a letter that day to the U.S. Congress that they were "gravely concerned" by the June 1 date, including the new automotive rules of origin.

The new trade deal, which replaces the 26-year-old North American Free Trade Agreement, will require 75% North American content compared to 62.5% under NAFTA, and 40%-45% content from “high wage” areas. This is phased in over three to four years, but automakers have to certify compliance with the initial requirements when the agreement takes effect.

Honda Motor Co said on Wednesday it is temporarily halting production in North America for six days because of the anticipated decline in auto sales due to the coronavirus outbreak, and will reduce production by about 40,000 vehicles.

Reporting by Richard Cowan and David Lawder; Editing by Chizu Nomiyama and Nick Zieminski