What Is USMCA Vehicle Compliance?
USMCA replaced NAFTA in July 2020 and introduced new origin requirements for automotive goods to qualify for duty-free trade within North America. Vehicles must meet strict content, material sourcing, and labor standards to be eligible.
Key Compliance Thresholds:
- 75% Regional Value Content (RVC): Required for passenger vehicles and light trucks.
- 70% North American Steel & Aluminum Content: Applies to core material sourcing for the vehicle.
- 40–45% Labor Value Content (LVC): A percentage of labor must be performed by workers earning $16/hour or more.
- Certified origin documentation must support all compliance claims.
These thresholds aim to encourage North American production and ensure fair labor and material standards across borders.
Why It Matters More in 2025
The U.S. has implemented a sweeping 25% tariff on non-compliant automotive imports. Demonstrating USMCA compliance is the only way to avoid this added cost and remain competitive in the North American market.
- USMCA-certified vehicles: 0% duty
- Non-compliant vehicles: 25% duty, plus additional documentation scrutiny
Even vehicles assembled in Mexico or Canada are not automatically exempt, origin documentation must verify that sourcing and labor meet the thresholds.
Real-World Example: BMW’s SUVs assembled in Mexico now face tariffs unless their component mix meets USMCA standards. Small deviations in content or documentation can lead to substantial financial penalties and delivery delays.
Who Is Responsible for Compliance?
While OEMs are ultimately responsible, compliance under USMCA is a collaborative, multi-party process that includes:
- Tier 1, 2, and 3 suppliers providing materials and subcomponents
- Freight forwarders and LSPs managing transportation and documentation
- Customs brokers submitting claims to U.S. Customs and Border Protection (CBP)
- Trade compliance teams overseeing classification, audit readiness, and risk management
Every stakeholder must ensure that data, certifications, and sourcing inputs are accurate and traceable.
Key Compliance Documents and Processes
To secure preferential tariff treatment under USMCA, companies must prepare the following:
1. Certificate of Origin (COO)
- Must be issued by the exporter, producer, or importer
- Includes item descriptions, classification (HS) codes, and origin criteria used
- Can be provided electronically or in writing, but must be retained for at least five years
2. RVC Calculations
- Use either the net cost method or transaction value method to calculate regional content
- Must document the proportion of content sourced from North America for each component
- Requires verified supplier declarations
3. Labor Value Content (LVC) Documentation
- Includes hours worked and wages paid in qualifying facilities
- Should be audited periodically to ensure wage compliance
4. Steel and Aluminum Origin Declarations
- Suppliers must provide written certifications that at least 70% of their inputs are sourced from North America
- These certificates must be validated by procurement or compliance personnel
Proper documentation ensures audit readiness and speeds up customs clearance.
Common Pitfalls to Avoid
- Incomplete or inconsistent COO submissions: Missing fields, mismatched HS codes, or vague product descriptions often lead to shipment holds.
- Overreliance on verbal supplier assurances: Without documented RVC or LVC declarations, the claim will not hold under audit.
- Failure to monitor non-core suppliers: A single non-compliant subcomponent can disqualify the entire vehicle.
- Inadequate data storage: COOs and sourcing records must be securely retained for at least five years.
💡 Tip: Adopt a digital compliance system with supplier onboarding, automated validation, and document management.
Logistics Considerations for LSPs and Forwarders
Logistics providers are often the last link before customs submission, ensuring accuracy and speed is critical.
- Collaborate with OEM clients prior to shipment to confirm compliance status
- Include USMCA COO data with your customs pre-file
- Use automated customs tools to flag errors before submission
- Ensure your team is trained in identifying common COO red flags
Freight forwarders can play a proactive role by alerting shippers when components or declarations may not meet compliance thresholds.
Enforcement and Audits
CBP and its Canadian and Mexican counterparts are actively auditing USMCA claims. Enforcement activity includes:
- Retrospective audits up to 5 years after entry
- Fines or retroactive duties if documentation is missing or fraudulent
- Random shipment reviews at ports of entry
Be audit-ready by:
- Maintaining organized records for all claimed content and sourcing
- Training teams on proper documentation practices
- Verifying supplier credentials and wage data at regular intervals
Failure to pass a USMCA audit can lead to long-term trade disruption and brand risk.
Final Recommendations
In a highly regulated and cost-sensitive industry, USMCA compliance is both a shield and a strategy. To stay compliant, competitive, and audit-ready:
- Build cross-functional compliance teams across sourcing, logistics, and legal
- Invest in digital tools to track and verify supplier declarations
- Conduct mock audits and process reviews bi-annually
- Stay current with changes to USMCA enforcement protocols and regional content thresholds
Remember: In 2025, USMCA is not just a trade agreement, it’s a survival tool in a protectionist trade environment where accurate documentation can save millions.
Want a printable checklist? Reach out to our team for a downloadable USMCA compliance audit template.
