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Newly assembled vehicles are parked at the Toyota Motor Manufacturing plant in Baja California, Tijuana, Mexico May 31, 2019. (Reuters/Jorge Duenes) - 

Mexico sought formal consultation with the United States on Friday (Aug 20) over the interpretation and application of tougher content rules for automobiles set out in the USMCA trade pact.

In May, Mexico voiced disagreement over the issue in a three-way online virtual meeting when it cited differences with the United States methods. Canada and Mexico use more flexible interpretations.

"Mexico has identified a divergent position between our governments on the interpretation of ... provisions on rules of origin for the automotive sector," Economy Minister Tatiana Clouthier said in a letter.

In her letter on Friday to US Trade Representative Katherine Tai, Clouthier said Mexico wanted to avoid or resolve a possible dispute.

The United States-Mexico-Canada Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA), requires 75 per cent North American content for a vehicle to be considered as being from North America.

The same percentage will apply for so-called essential parts from Jul 1, 2023, up from 69 per cent now, and compared to 62.5 per cent under the previous trade pact.

But once the level of essential parts hits 75 per cent, it is considered 100 per cent and should be counted as such towards the overall value of the automobile, Mexico says.

Its request for consultation is the first non-contentious stage of a dispute resolution mechanism provided for in Chapter 31 of the pact, with an industry expert saying such talks must be held within 30 days, in this case by Sep 20.

The United States is reviewing the request, said US Trade Representative spokesman Adam Hodge.

"We are reviewing Mexico's request for consultations and remain committed to fully implementing the USMCA, including the strong auto regional content requirements to which we all agreed," he said//CNA