The stakes are very high for automakers. They will have to certify that 75 percent of their components are made in the region, up from NAFTA's 62.5 percent. Additionally, they'll need to meet new labor value content requirements, with 40 percent of the labor needing to be paid at $16 or more per hour. Regional content requirements will also apply for steel and aluminum.
Demonstrating that they meet those requirements is the difference between being able to bring a light truck made in Mexico into the U.S. duty-free and being subject to a 25 percent tariff.
As a result, automakers are likely to start unilaterally putting provisions in their purchase orders requiring suppliers to comply with the new content rules. If those suppliers eventually come under audit and can't certify the content, they could be in legal jeopardy on a scale that could wipe out their business.
The impact is going to be felt hardest by the many smaller suppliers that don't have the technical ability to track and report country of origin and labor-rate information.
Their enterprise resource planning systems often aren't set up to properly track every aspect of their supply chain, leaving gaps at ...