Tesla: "Inconsistent Treatment" in Mexico-U.S.-Canada Agreement T-MEC
Tesla criticizes that Mexico and Canada enjoy better tariff treatment with products that have components from outside the region than electric cars assembled in the US.
Tesla pointed out that a U.S. rule gives Mexico and Canada more advantages than the U.S. when it comes to the trade of electric vehicles within the region. This is called "inconsistent treatment."
The company questioned the Special Rule for Free Trade Zones in a letter addressed to the White House Trade Representative (USTR), as part of the dispute settlement panel on automotive rules of origin under the Mexico-U.S.-Canada Agreement (T-MEC).
Under this rule, Tesla electric vehicles made in a free trade zone (FTZ) in the United States are not eligible for the T-MEC when they are taken out of the FTZ and put into U.S. commerce for sale.
The result of this treatment is that Tesla must pay tariffs on FTZ-passed components used in vehicles that are manufactured in the U.S. and qualify for the T-MEC, but the importer in Canada or Mexico does not have to pay tariffs on those same vehicles when imported into Canada or Mexico by their T-MEC qualifying status.
"The result of this ban is that there is inconsistent treatment of T-MEC-qualifying electric vehicles made in the U.S. versus their treatment in Canada and Mexico," said Miriam Eqab, Tesla's deputy general counsel for Trade.
For example, if a Mexican electric vehicle producer produces an electric vehicle under Mexico's IMMEX program, and through that manufacturing process qualifies the vehicle for T-MEC, that Mexican producer can export that electric vehicle to the United States without paying any import duties on the components imported into Mexico, and the importer in Canada or the United States can claim duty-free treatment by its T-MEC qualifying status.
Eqab explained that this creates an uneven playing field between these special economic areas within T-MEC member countries, where Mexican and Canadian producers can avoid import duties and obtain T-MEC benefits on exports, while U.S. producers cannot.
"We respectfully request that the Administration consider removing this restriction from T-MEC so that goods manufactured in these special economic zones receive equal treatment across Canada, Mexico, and the United States," she added.
Tesla believes that the transition to a fully electrified light and heavy-duty vehicle sector can and will occur more quickly than USTR anticipates.
Lastly, the company pointed out that people are still buying electric cars. The Model 3 is the best-selling premium sedan in the world, and the Model Y is one of the best-selling SUVs in the United States.