The USMCA’s Rapid Response Mechanism for Work-Related Complaints: What to Expect From July 1, 2020 | Pillsbury – Global Trade Law and Sanctions

On July 1, 2020, the United States-Mexico-Canada Agreement (USMCA) entered into force, replacing the 26-year-old North American Free Trade Agreement (NAFTA). The US government has taken several steps towards implementation through executive order and regulatory proposals, but the legal framework remains a work in progress.

One of the most closely watched arrangements is the Facility-Specific Rapid Response Mechanism (“Rapid Response Mechanism”) which will allow the United States, Mexico and Canada to take action against facilities with certain breaches of government standards. job. Unlike NAFTA, the USMCA includes labor standards in the basic text of the agreement (Chapter 23, Labor), with new features adding to the enforceability. The Rapid Response Mechanism will apply between the United States and Mexico (Annex 31-A) and between Canada and Mexico (Annex 31-B), but will not apply between the United States and Canada .

The potential impact on covered facilities in Mexico will be relevant to both Mexican businesses; American, European and Asian companies with subsidiaries in Mexico; and US and Canadian companies that rely on Mexico as part of their supply chain.

Scope of the rapid response mechanism

The rapid response mechanism applies when the governments of the United States or Mexico have a good faith belief that workers in a “covered establishment” are denied the right to free association and collective bargaining (“denial of rights” ). A “covered facility” is defined in the USMCA for the purposes of the United States and Mexico as a facility that:

  • (1) produces a good or provides a service traded between countries; Where
  • (2) produces a good or provides a service which competes in the territory of one Party with a good or a service of the other Party.

In addition, the covered establishment must be in a “priority sector”. Priority sectors are sectors that manufacture goods, provide services, or involve mining (agriculture is not included). Manufactured products include, but are not limited to, “aerospace products and components, automobiles and automotive parts, cosmetics, industrial bakery products, steel and aluminum, glass, pottery, plastics, forgings and cement ”.

The Rapid Response Mechanism has limitations for use in the United States that do not apply to Mexico. Specifically, a claim can only be made against a US facility if it is covered by an order of the US National Labor Relations Board (NLRB).

Triggering of the Rapid Response Mechanism in the United States

The Rapid Response Mechanism is distinguished by its accessibility to stakeholders in the US and Mexican economies, as well as its rapid process.

First of all: Any member of the public in the United States can submit a petition alleging a denial of rights at a covered facility in Mexico. The petition is submitted to an “interagency labor committee for oversight and enforcement” (“interagency labor committee”), which will be co-chaired by the United States Trade Representative (USTR) and the Secretary of Labor.

Second: Within 30 days of receiving a petition, the Interagency Labor Committee will review the petition and determine whether there is “sufficient and credible evidence of a denial of rights.”

Third: If the Interagency Labor Committee finds that there has been a “denial of rights,” it should ask Mexico to conduct its own review and determine whether there has been a denial of rights. If Mexico agrees to conduct a review of the complaint, it has 45 days to make a determination.

If Mexico does not agree to conduct a review of the complaint, the United States may request a panel to conduct a separate verification and determination under the USMCA. If Mexico does conduct a review and determines that there has been no denial of duties, the United States may disagree and immediately request a panel verification and determination. However, if Mexico determines that there is a denial of rights, the two countries will enter into a 10-day consultation period to agree on a redress plan. If the consultations fail, then the United States may request a panel verification and determination.

USMCA implementing legislation allows the U.S. government to withhold liquidation of imports from a covered facility that is the subject of the complaint until:

  • A panel of work under the rapid response mechanism determines that there is no denial of rights;
  • A denial of rights remediation course has been agreed and completed within the agreed timeframe; Where
  • The denial of rights has been otherwise remedied.

If a panel determines, in accordance with the Rapid Response Mechanism, that there has been a denial of duties at a Mexican covered facility, the United States may impose remedies, including (a) suspension of preferential treatment for them. products manufactured in the covered facility; (b) the imposition of “penalties” on covered facilities; and (c) denial of entry for such goods, which may be invoked if a covered establishment has received at least two prior denial of duty decisions.

Interim procedural guidelines for the presentation of petitions alleging a denial of rights

On June 30, 2020, the Inter-Agency Labor Committee issued interim procedural guidelines for submitting petitions under the Rapid Response Mechanism and invited the public to comment on the procedures outlined in the notice.

According to the notice, petitions must provide information that addresses, among other things:

  • If the claimant has suffered prejudice;
  • For complaints alleging failure to effectively enforce labor law, “whether there has been a sustained or recurring plan of action or inaction to not enforce labor law”; and
  • If “the matter referred to in the petition occurred in a manner affecting trade or investment”.

It will be worth monitoring what kind of information the Committee considers meets the criteria for a case to occur in a “way that affects trade or investment”. Under the USMCA, the burden of proof to meet this standard has been transferred from the applicant to the institution referred to by the respondent.

Comments on these guidelines and procedures can be submitted to the Committee no later than August 15, 2020.

Takeaway 1 – Potential for early interest and invocation

US stakeholders would be interested in early use of the rapid response mechanism. This includes trade unions, competing companies and other parties. Thus, the early use of the Rapid Response Mechanism will be closely monitored by Mexican manufacturers, subsidiaries of international companies in Mexico, and any companies that may be affected by a disruption in their Mexican supply chain. It will be important for these parties to understand the triggering and application of the rapid response mechanism and how best to respond to it.

Take away 2 – Installations in the automotive, aerospace, steel and aluminum, and mining sectors are among the first that can be tested under the Quick response Mechanism.

While there are some differences in the “priority areas” described in the United States implementing legislation and the USMCA, there is significant overlap between the two. More specifically, these sectors include automotive, aerospace, steel and aluminum, mining and industrial bakeries. These sectors could be among the first to be tested under the rapid response mechanism.

Takeaway meals 3 – Different criteria for denial of rights claims in the United States and Mexico will likely mean more claims against Mexican covered facilities than against US facilities.

As noted above, in the United States, a claim can only be filed if the facility is covered by an enforceable order from the NLRB. Since 2016, approximately 164 facilities in the United States have been subject to an enforcement order from the NLRB. Of these 164 facilities, approximately five would fall under the competence / scope of “priority sectors”. Given the small number of cases involving companies in a “priority sector” covered by an enforceable order of the NLRB, the possibilities for denial of rights in the United States under the rapid response mechanism are less numerous.

There is no precondition for bringing a denial of rights action in Mexico. Without threshold limits on existing work orders and with the broad ability of the American public to request the use of the rapid response mechanism, claims against Mexican Covered Facilities are expected to be more extensive in nature and number.

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