OTTAWA – Canada and Mexico have gained their problem to the U.S. interpretation of content material guidelines for autos beneath the brand new North American commerce pact, a dispute panel dominated on Wednesday, a choice that favors elements makers north and south of the U.S. border.

A yr in the past Canada and Mexico filed a grievance in opposition to the USA over the way to apply automotive-sector content material necessities beneath the United States-Mexico-Canada (USMCA) free commerce settlement, which got here into impact in 2020.

The U.S. interpretation of the foundations is “inconsistent” with the USMCA, the panel stated in its ruling.

“The choice is sweet for Canada and Mexico,” stated Flavio Volpe, president of Canada’s Automotive Elements Producers’ Affiliation.

Canada “is glad to see that the dispute settlement mechanisms in place are supporting our rights and obligations negotiated in USMCA,” Canadian Commerce Minister Mary Ng stated in an announcement.

“This is good news,” stated Tatiana Clouthier, Mexico’s former economic system minister in a video on Twitter. “That helps all the automotive business within the North American area enormously.”

The choice is “disappointing,” stated Adam Hodge, a spokesperson for the USA Commerce Consultant’s workplace, including that the choice might lead to “fewer American jobs.”

Below the USMCA, the USA should now agree with Canada and Mexico on the way to apply the panel resolution, or face doable retaliatory tariffs.

“We’re reviewing the report and contemplating subsequent steps,” Hodge stated. The USTR will now “have interaction Mexico and Canada on a doable decision to the dispute,” Hodge stated.

“Within the coming days, Mexico will start a strategy of dialogue and cooperation with its buying and selling companions,” Mexico’s economic system ministry stated in an announcement after the ruling.

The choice was introduced amid a separate USMCA dispute centred on vitality that has pitted the USA and Canada in opposition to Mexico. Ottawa and Washington argue Mexico’s vitality insurance policies are placing U.S. and Canadian corporations at a drawback, whereas Mexico has defended its insurance policies and stated it has damaged no legal guidelines.

Below USMCA, 75 per cent of a automobile’s elements should originate in North America to qualify for tax-free standing, however the USA disagreed with the way to calculate that quantity.

Mexico and Canada stated if a “core half,” such because the engine or transmission, has 75 per cent regional content material, the USMCA permits that quantity to be rounded as much as 100 per cent when calculating the broader requirement for a whole automobile’s regional content material.

The USA stated “core half” content material shouldn’t be rounded up when figuring out the content material of all the automobile.

Volpe stated the choice is also vital as a result of it demonstrates that disagreements might be settled beneath the foundations of the brand new commerce pact.

“It exhibits that the dispute-resolution automobile throughout the USMCA works,” Volpe stated.