The White House announced that the U.S. and Mexico reached a preliminary agreement to modernize the North American Free Trade Agreement (NAFTA). The preliminary agreement, called the United States-Mexico trade agreement, currently excludes Canada, the Auto Care Association says. But sources say the three countries are working toward a three-way agreement possibly by the end of this week.

According to multiple news sources, the updated auto rules of origin require that 75% of a vehicle’s content comes from North America – up from the current 62.5% – to receive duty-free treatment.  The updated rules also state that 70% of steel, aluminum and glass used in autos be sourced from North America. Additionally, the U.S. and Mexico agreed on a labor wage provision requiring 40% of a passenger vehicle’s final assembly be completed by workers making at least $16 per hour, news outlets report. The threshold is 45% for light trucks.

The U.S. has also agreed to keep the current 2.5% tariff currently applied under World Trade Organization rules for non-conforming autos that do not meet the rules of origin requirement if made at an existing manufacturing facility. Non-conforming autos made at new plants may be subject to additional tariffs pending results of the Section 232 autos/auto parts investigation.

Canada has not been a part of the NAFTA talks over the past few weeks but is expected to endorse the updated provisions that the U.S. and Mexico have agreed to, the Auto Care Association says.

For more information about the Auto Care Association’s government affairs and trade initiatives, please contact Angela Chiang at [email protected].