Automotive Trade Policy Council Motor Vehicle Manufacturing Assembly - PowerPoint PPT Presentation


Title: Automotive Trade Policy Council Motor Vehicle Manufacturing Assembly


1
Automotive Trade Policy Council Motor
Vehicle Manufacturing / Assembly WTO
Non-Preferential Auto Rules of Origin Charles
Uthus, ATPC Paul Vandevert, Ford Motor
Co.Bernadette Shortt, General Motors
Corp.World Trade OrganizationGeneva,
Switzerland February 14, 2006
2
-- Introduction --Presentation Summary
  • Automotive Trade Policy Council
  • Support for Free Trade
  • Auto Manufacturing and Assembly
  • Global
  • Complex
  • Capital Intensive
  • Summary
  • Rule of Origin
  • ROO Predicates
  • Tariff Shift Preferred (8701-8705)
  • Modification/flexibility for 8708
  • Value Approach Not Effective
  • Conclusion

3
-- Introduction --Automotive Trade Policy
Council
  • The Automotive Trade Policy Council is a U.S.
    based association that represents the common
    international trade, investment and economic
    interest of its member companies DaimlerChrysler
    Corporation, Ford Motor Company and General
    Motors Corporation

4
-- Introduction --Support for Free Trade
  • The U.S. Automotive Industry is a global industry
    that depends on expansion of free trade and
    investment around the world for continued growth
    in sales, production, and investment
    opportunities
  • We strongly support the WTO an believe that a
    well crafted WTO Doha Round agreement will
    promote economic growth, improved standards of
    living and lead to a stronger, more competitive
    global automotive sector
  • We also support the establishment of
    comprehensive regional and bilateral trade
    agreements to augment the WTOs success in
    promoting trade

5
-- Manufacturing Assembly Auto Sector- Global
  • The Auto Sector is a key driver of the world
    economy
  • Is the worlds single largest manufacturing
    sector
  • In 2004, approximately 64 million motor vehicles
    were manufactured/ assembled worldwide by over 50
    major automakers that have their global
    headquarters in 11 countries (USA, Japan,
    Germany, France, China, Korea, Russia, India,
    Malaysia, Sweden and the United Kingdom), and
    have major manufacturing/assembly plants in over
    53 countries.
  • These vehicles were sold in every single country
    in the world. With the United States, Europe
    (the largest in Germany, France, Spain, Italy,
    the U.K. and Belgium), Japan, China, Korea,
    Brazil, Canada, Russia, and Mexico the largest
    markets.
  • With all this activity it is not a surprise that
    the auto sector directly represents 10 of global
    merchandise trade (not including the indirect
    global trade in raw materials and intermediary
    inputs that takes place in support of the auto
    sector)

6
-- Manufacturing Assembly Auto Sector- Global
  • Global auto production is increasingly
    integrated on a global basis
  • Worldwide sourcing of parts and components is
    resulting in a longer supply chain and more
    international suppliers
  • Shared RD for products produced in different
    geographic areas
  • Each vehicle may include materials and parts
    built in-house, obtained from a domestic
    supplier, sourced from a FTA partner, and sourced
    from a foreign supplier. These suppliers in turn
    source from second and third tier suppliers that
    may be located anywhere in the world.
  • The competitive nature of the global auto
    industry adds to this global scope. Automakers
    who do not take advantage of the most competitive
    parts and processes available worldwide cannot
    compete

7
-- Manufacturing Assembly Auto Sector --
Complexity
Each vehicle involves a continuum of inputs and
commercial functions from research, design,
manufacture to the distribution, financing and
servicing of the vehicle throughout its useful
life
Research Development
Raw Materials Suppliers
ATPC Member- Produced Parts
Engineering Design
U.S. Automotive Parts Suppliers
Testing Safety Compliance
Global Automotive Parts Suppliers
Logistics / Transport
Foreign Automotive Parts Suppliers
Dealerships Auto Financing
Replacement/ Aftermarket Parts
Maintenance Servicing
8
-- Manufacturing Assembly Product Complexity
Each vehicle incorporates thousands of parts and
components, supplied by hundreds of suppliers
from numerous sources
Supplier Capital Affiliation USA (26), Canada
(4), German(3), Japan (2), Sweden, Denmark,
France, Mexico, Korea
9
-- Manufacturing Assembly Assembly
Complexity (A Case Study)
  • The best way to demonstrate this is to look at
    the actual number of parts used in the assembly
    of one North American built motor vehicle
  • Recent analysis of one vehicle indicated 700
    unique part numbers at final assembly-- for a
    total of 800 parts
  • These 700 unique Tier 1 part numbers were
    comprised of approximately 2500 Tier 2 parts,
    which in turn represent approximately 8,250 Tier
    3 parts
  • ONE AVERAGE VEHICLE MODEL
  • of Unique Parts of Suppliers
  • Tier 1 700 150
  • Tier 2 2500 450
  • Tier 3 8250 1,250
  • does not include fasteners, standard parts
    and bulk materials
  • Collectively, ATPC members produce over 90 car
    models on 50 vehicle platforms. Despite the
    sharing of parts across platforms and models it
    still represents hundreds of thousands of auto
    parts and thousands auto part suppliers from
    around the world

10
-- Manufacturing Assembly Capital Intensive
  • The Automotive Sector is highly capital
    intensive
  • In the automotive sector, even the simplest
    vehicle assembly operations require substantial
    capital investment, facilities (including
    buildings,machinery equipment ), and labor
  • A single vehicle auto assembly plant can cost
    between 100 million 1 billion, with millions
    necessary for annual support, retooling and
    capital improvement
  • The auto sector is one of the most highly
    regulated industries in the world adding
    significant capital costs to meet safety and
    emissions standards
  • Because of this there is no such thing as a
    "screwdriver" assembly in the automotive sector

11
-- Manufacturing Assembly Capital Intensive
  • The capital intensive nature of the sector
    limits the number of automakers and discourages
    small volume assembly
  • Today 10 global automakers represent over 75 of
    total global auto production. The top 15
    automakers represent about 90.

12
-- Manufacturing Assembly Auto Sector
Assembly
  • Globally there is a wide range of assembly
    costs
  • Assembly costs are similar from one location to
    another. Low labor costs in one location is
    often offset by the higher capital costs
  • Labor, Capital assembly and Parts/Component costs
    ranges
  • Labor Assembly 5 14
  • Capital Assembly 12 32
  • Parts/Components 55 65
  • Ex Hypothetical Assembly plant
  • (in low labor/high capital cost location)
  • - Labor Assembly 7
  • - Capital Assembly 30
  • - Parts/Components 63
  • TOTAL 100

Hypothetical Assembly Plant
13
-- Manufacturing Assembly Summary
  • Auto production is increasingly integrated on a
    global basis, and trade plays an very important
    and growing role in auto manufacturing and
    assembly
  • The automotive sector, its product (motor
    vehicle), and its manufacturing and assembly
    process is complex
  • The Automotive Sector is highly capital intensive
  • Assembly cost (labor capital ranges from
    25-45)
  • For these reasons, an automotive
    non-preferential rule of origin needs to be easy
    to use/enforce (given its global integration),
    simple (given its complexity), and not concerned
    with screwdriver operations (given its capital
    intensive nature)

14
Rule of Origin
  • WTO Introduction of Non-preferential Auto ROO
  • Currently there is no formally accepted auto ROO
    standard for non preferential trade. The origin
    of vehicles are generally based on tariff shift
    and last country of assembly
  • Requiring a non-preferential auto ROO will
    require changes that will add additional costs
    and burdens to automakers and customs authorities
  • We strongly recommend that in developing this
    requirement, it is important that it is done in
    the least disruptive intrusive manner and
    consistent with the objectives of promoting and
    facilitating international trade and investment

15
-- Rule of Origin- Rule of Origin Principles
  • Non-preferential ROO
  • Should be simple to understand and relatively
    easy to apply and enforce
  • Must be conclusive in determining country of
    origin
  • Should not be vulnerable to multiple
    interpretation or manipulation
  • Should not be susceptible to be used for any
    other purpose than determining country of origin
  • Must be able to maintain flexibility in order to
    keep pace with rapidly changing economy,
    industry, and technology
  • Supports not hinders international trade of
    automotive goods

16
-- Rule of Origin Tariff Shift Works Best for
Motor Vehicles
  • The HTS codes for finished vehicles (8701-8705)
    stand entirely separate and apart from all other
    HTS codes for parts, components and assemblies
    necessary to constitute a complete vehicle. In
    other words, assembly of a complete, finished
    vehicle always requires a tariff shift at the
    Heading (4 digit) level
  • Shipment of a complete motor vehicle in
    unfinished or disassembled form, classified under
    one of the 5 vehicle headings, is unheard of in
    the automotive industry
  • Therefore, any vehicle assembly into a complete,
    finished motor vehicle classified under one of
    the 5 vehicle headings will necessarily represent
    substantial economic and commercial activity that
    justifies designation of that country as the
    country of origin for the finished vehicle

17
-- Rule of Origin-- Tariff Shift Preferable
Approach
  • Virtually all countries throughout the world,
    whether or not WTO members, use the Harmonized
    Tariff System for tariff classification
  • Tariff shift rules are straightforward, objective
    and simple to apply in the automotive sector
  • In the automotive sector, the HTS classification
    of virtually all parts, material and vehicles is
    well-established throughout the WTO member
    community so that tariff classification in this
    sector is uniform and consistent worldwide
  • Because tariff classification in the automotive
    sector is well established and consistent, a
    tariff shift Non-Preferential ROO will be easily
    applied by exporters and importers, as well as
    being easy and clear for Customs authorities to
    administer and enforce.

18
-- Rule of Origin Value-based ROO not as
Effective
  • Value based ROO is subject to manipulation in
    that values are easily adjusted and therefore are
    less reliable indicators of substantial economic
    or commercial contribution for purposes of
    designating country of origin.
  • Value based ROO is subject to multiple
    interpretations as definition(s) of value are
    continually being debated and interpreted by both
    Customs authorities and the trade community
  • Under Value based ROO, if required content not
    met in country of final assembly, result will be
    no country of origin, which defeats whole purpose
    of Non-Preferential Rule of Origin. A tariff
    shift ROO will always result in a country of
    origin determination
  • Value based ROO will require resources and
    capacity that majority of traders and national
    Customs authorities do not have. There would be
    no appreciable other benefit or reason to invest
    in or develop the necessary resources and
    capacity, except compliance with the
    Non-Preferential ROO
  • Thus, value based ROO could have effect of
    stifling or restricting trade, which would
    contradict the WTO mission.

19
-- Rule of Origin Tariff Shift Exceptions
  • There may be issues with Tariff Shift
    conferring origin in a few instances of 8707
    8708
  • In most cases it can be addressed by a simple
    adjustment of the Tariff Shift Rule.
  • Auto Transmissions (HTS 8708.40) Parts and
    Accessories of Motor Vehicles - Gear Boxes
  • Components of Auto Transmissions (HTS 8708.99)
    Parts and Accessories of Motor Vehicles Other
  • While a Tariff Shift rule at the Heading level
    would not be sufficient, expanding the rule to a
    Sub-heading level would provide a workable rule
    as long as there is no limitation on shifting
    from 8708.99
  • However, there are still cases where even
    adjusting the Tariff Shift rule will not be
    sufficient, such as
  • Brakes (HTS 8708.31) Parts and Accessories of
    Motor Vehicles- Brakes, servo-brakes and parts
    thereof
  • Components of Brakes (HTS 8708.31) Parts and
    Accessories of Motor Vehicles - Brakes,
    servo-brakes and parts thereof
  • In these few cases an alternative rule needs to
    be considered. We recommend that in these
    instances the last country of manufacture be
    defined as the country of origin.

20
-- Rule of Origin-- ROO Conclusion
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Automotive Trade Policy Council Motor Vehicle Manufacturing Assembly

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Title: Automotive Trade Policy Council Motor Vehicle Manufacturing Assembly


1
Automotive Trade Policy Council Motor
Vehicle Manufacturing / Assembly WTO
Non-Preferential Auto Rules of Origin Charles
Uthus, ATPC Paul Vandevert, Ford Motor
Co.Bernadette Shortt, General Motors
Corp.World Trade OrganizationGeneva,
Switzerland February 14, 2006
2
-- Introduction --Presentation Summary
  • Automotive Trade Policy Council
  • Support for Free Trade
  • Auto Manufacturing and Assembly
  • Global
  • Complex
  • Capital Intensive
  • Summary
  • Rule of Origin
  • ROO Predicates
  • Tariff Shift Preferred (8701-8705)
  • Modification/flexibility for 8708
  • Value Approach Not Effective
  • Conclusion

3
-- Introduction --Automotive Trade Policy
Council
  • The Automotive Trade Policy Council is a U.S.
    based association that represents the common
    international trade, investment and economic
    interest of its member companies DaimlerChrysler
    Corporation, Ford Motor Company and General
    Motors Corporation

4
-- Introduction --Support for Free Trade
  • The U.S. Automotive Industry is a global industry
    that depends on expansion of free trade and
    investment around the world for continued growth
    in sales, production, and investment
    opportunities
  • We strongly support the WTO an believe that a
    well crafted WTO Doha Round agreement will
    promote economic growth, improved standards of
    living and lead to a stronger, more competitive
    global automotive sector
  • We also support the establishment of
    comprehensive regional and bilateral trade
    agreements to augment the WTOs success in
    promoting trade

5
-- Manufacturing Assembly Auto Sector- Global
  • The Auto Sector is a key driver of the world
    economy
  • Is the worlds single largest manufacturing
    sector
  • In 2004, approximately 64 million motor vehicles
    were manufactured/ assembled worldwide by over 50
    major automakers that have their global
    headquarters in 11 countries (USA, Japan,
    Germany, France, China, Korea, Russia, India,
    Malaysia, Sweden and the United Kingdom), and
    have major manufacturing/assembly plants in over
    53 countries.
  • These vehicles were sold in every single country
    in the world. With the United States, Europe
    (the largest in Germany, France, Spain, Italy,
    the U.K. and Belgium), Japan, China, Korea,
    Brazil, Canada, Russia, and Mexico the largest
    markets.
  • With all this activity it is not a surprise that
    the auto sector directly represents 10 of global
    merchandise trade (not including the indirect
    global trade in raw materials and intermediary
    inputs that takes place in support of the auto
    sector)

6
-- Manufacturing Assembly Auto Sector- Global
  • Global auto production is increasingly
    integrated on a global basis
  • Worldwide sourcing of parts and components is
    resulting in a longer supply chain and more
    international suppliers
  • Shared RD for products produced in different
    geographic areas
  • Each vehicle may include materials and parts
    built in-house, obtained from a domestic
    supplier, sourced from a FTA partner, and sourced
    from a foreign supplier. These suppliers in turn
    source from second and third tier suppliers that
    may be located anywhere in the world.
  • The competitive nature of the global auto
    industry adds to this global scope. Automakers
    who do not take advantage of the most competitive
    parts and processes available worldwide cannot
    compete

7
-- Manufacturing Assembly Auto Sector --
Complexity
Each vehicle involves a continuum of inputs and
commercial functions from research, design,
manufacture to the distribution, financing and
servicing of the vehicle throughout its useful
life
Research Development
Raw Materials Suppliers
ATPC Member- Produced Parts
Engineering Design
U.S. Automotive Parts Suppliers
Testing Safety Compliance
Global Automotive Parts Suppliers
Logistics / Transport
Foreign Automotive Parts Suppliers
Dealerships Auto Financing
Replacement/ Aftermarket Parts
Maintenance Servicing
8
-- Manufacturing Assembly Product Complexity
Each vehicle incorporates thousands of parts and
components, supplied by hundreds of suppliers
from numerous sources
Supplier Capital Affiliation USA (26), Canada
(4), German(3), Japan (2), Sweden, Denmark,
France, Mexico, Korea
9
-- Manufacturing Assembly Assembly
Complexity (A Case Study)
  • The best way to demonstrate this is to look at
    the actual number of parts used in the assembly
    of one North American built motor vehicle
  • Recent analysis of one vehicle indicated 700
    unique part numbers at final assembly-- for a
    total of 800 parts
  • These 700 unique Tier 1 part numbers were
    comprised of approximately 2500 Tier 2 parts,
    which in turn represent approximately 8,250 Tier
    3 parts
  • ONE AVERAGE VEHICLE MODEL
  • of Unique Parts of Suppliers
  • Tier 1 700 150
  • Tier 2 2500 450
  • Tier 3 8250 1,250
  • does not include fasteners, standard parts
    and bulk materials
  • Collectively, ATPC members produce over 90 car
    models on 50 vehicle platforms. Despite the
    sharing of parts across platforms and models it
    still represents hundreds of thousands of auto
    parts and thousands auto part suppliers from
    around the world

10
-- Manufacturing Assembly Capital Intensive
  • The Automotive Sector is highly capital
    intensive
  • In the automotive sector, even the simplest
    vehicle assembly operations require substantial
    capital investment, facilities (including
    buildings,machinery equipment ), and labor
  • A single vehicle auto assembly plant can cost
    between 100 million 1 billion, with millions
    necessary for annual support, retooling and
    capital improvement
  • The auto sector is one of the most highly
    regulated industries in the world adding
    significant capital costs to meet safety and
    emissions standards
  • Because of this there is no such thing as a
    "screwdriver" assembly in the automotive sector

11
-- Manufacturing Assembly Capital Intensive
  • The capital intensive nature of the sector
    limits the number of automakers and discourages
    small volume assembly
  • Today 10 global automakers represent over 75 of
    total global auto production. The top 15
    automakers represent about 90.

12
-- Manufacturing Assembly Auto Sector
Assembly
  • Globally there is a wide range of assembly
    costs
  • Assembly costs are similar from one location to
    another. Low labor costs in one location is
    often offset by the higher capital costs
  • Labor, Capital assembly and Parts/Component costs
    ranges
  • Labor Assembly 5 14
  • Capital Assembly 12 32
  • Parts/Components 55 65
  • Ex Hypothetical Assembly plant
  • (in low labor/high capital cost location)
  • - Labor Assembly 7
  • - Capital Assembly 30
  • - Parts/Components 63
  • TOTAL 100

Hypothetical Assembly Plant
13
-- Manufacturing Assembly Summary
  • Auto production is increasingly integrated on a
    global basis, and trade plays an very important
    and growing role in auto manufacturing and
    assembly
  • The automotive sector, its product (motor
    vehicle), and its manufacturing and assembly
    process is complex
  • The Automotive Sector is highly capital intensive
  • Assembly cost (labor capital ranges from
    25-45)
  • For these reasons, an automotive
    non-preferential rule of origin needs to be easy
    to use/enforce (given its global integration),
    simple (given its complexity), and not concerned
    with screwdriver operations (given its capital
    intensive nature)

14
Rule of Origin
  • WTO Introduction of Non-preferential Auto ROO
  • Currently there is no formally accepted auto ROO
    standard for non preferential trade. The origin
    of vehicles are generally based on tariff shift
    and last country of assembly
  • Requiring a non-preferential auto ROO will
    require changes that will add additional costs
    and burdens to automakers and customs authorities
  • We strongly recommend that in developing this
    requirement, it is important that it is done in
    the least disruptive intrusive manner and
    consistent with the objectives of promoting and
    facilitating international trade and investment

15
-- Rule of Origin- Rule of Origin Principles
  • Non-preferential ROO
  • Should be simple to understand and relatively
    easy to apply and enforce
  • Must be conclusive in determining country of
    origin
  • Should not be vulnerable to multiple
    interpretation or manipulation
  • Should not be susceptible to be used for any
    other purpose than determining country of origin
  • Must be able to maintain flexibility in order to
    keep pace with rapidly changing economy,
    industry, and technology
  • Supports not hinders international trade of
    automotive goods

16
-- Rule of Origin Tariff Shift Works Best for
Motor Vehicles
  • The HTS codes for finished vehicles (8701-8705)
    stand entirely separate and apart from all other
    HTS codes for parts, components and assemblies
    necessary to constitute a complete vehicle. In
    other words, assembly of a complete, finished
    vehicle always requires a tariff shift at the
    Heading (4 digit) level
  • Shipment of a complete motor vehicle in
    unfinished or disassembled form, classified under
    one of the 5 vehicle headings, is unheard of in
    the automotive industry
  • Therefore, any vehicle assembly into a complete,
    finished motor vehicle classified under one of
    the 5 vehicle headings will necessarily represent
    substantial economic and commercial activity that
    justifies designation of that country as the
    country of origin for the finished vehicle

17
-- Rule of Origin-- Tariff Shift Preferable
Approach
  • Virtually all countries throughout the world,
    whether or not WTO members, use the Harmonized
    Tariff System for tariff classification
  • Tariff shift rules are straightforward, objective
    and simple to apply in the automotive sector
  • In the automotive sector, the HTS classification
    of virtually all parts, material and vehicles is
    well-established throughout the WTO member
    community so that tariff classification in this
    sector is uniform and consistent worldwide
  • Because tariff classification in the automotive
    sector is well established and consistent, a
    tariff shift Non-Preferential ROO will be easily
    applied by exporters and importers, as well as
    being easy and clear for Customs authorities to
    administer and enforce.

18
-- Rule of Origin Value-based ROO not as
Effective
  • Value based ROO is subject to manipulation in
    that values are easily adjusted and therefore are
    less reliable indicators of substantial economic
    or commercial contribution for purposes of
    designating country of origin.
  • Value based ROO is subject to multiple
    interpretations as definition(s) of value are
    continually being debated and interpreted by both
    Customs authorities and the trade community
  • Under Value based ROO, if required content not
    met in country of final assembly, result will be
    no country of origin, which defeats whole purpose
    of Non-Preferential Rule of Origin. A tariff
    shift ROO will always result in a country of
    origin determination
  • Value based ROO will require resources and
    capacity that majority of traders and national
    Customs authorities do not have. There would be
    no appreciable other benefit or reason to invest
    in or develop the necessary resources and
    capacity, except compliance with the
    Non-Preferential ROO
  • Thus, value based ROO could have effect of
    stifling or restricting trade, which would
    contradict the WTO mission.

19
-- Rule of Origin Tariff Shift Exceptions
  • There may be issues with Tariff Shift
    conferring origin in a few instances of 8707
    8708
  • In most cases it can be addressed by a simple
    adjustment of the Tariff Shift Rule.
  • Auto Transmissions (HTS 8708.40) Parts and
    Accessories of Motor Vehicles - Gear Boxes
  • Components of Auto Transmissions (HTS 8708.99)
    Parts and Accessories of Motor Vehicles Other
  • While a Tariff Shift rule at the Heading level
    would not be sufficient, expanding the rule to a
    Sub-heading level would provide a workable rule
    as long as there is no limitation on shifting
    from 8708.99
  • However, there are still cases where even
    adjusting the Tariff Shift rule will not be
    sufficient, such as
  • Brakes (HTS 8708.31) Parts and Accessories of
    Motor Vehicles- Brakes, servo-brakes and parts
    thereof
  • Components of Brakes (HTS 8708.31) Parts and
    Accessories of Motor Vehicles - Brakes,
    servo-brakes and parts thereof
  • In these few cases an alternative rule needs to
    be considered. We recommend that in these
    instances the last country of manufacture be
    defined as the country of origin.

20
-- Rule of Origin-- ROO Conclusion
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