Analysis
June 3, 2026
USMCA Review: Agreement needs stronger rules of origin
Written by Kevin Dempsey
In less than a month, the governments of the United States, Mexico and Canada must meet to review the operation of the United States-Mexico-Canada Agreement (USMCA) and decide whether to extend it beyond the remaining 10 years of its initial term or continue talking about how to improve the agreement.
The American Iron and Steel Institute (AISI) believes the USMCA was a necessary update to the NAFTA agreement, but we have urged the three governments to take this opportunity to further improve the rules governing North American trade to strengthen manufacturing in the United States and throughout the region.
One critical area for continued work is to close any loopholes that might allow countries not party to the agreement to benefit from it. This means strengthening rules of origin in the USMCA.
The rules of origin in a trade agreement govern where a product is considered to originate. As a general matter, under the USMCA, only goods made in one of the North American countries party to the agreement are supposed to benefit from the preferential tariff treatment and other provisions of the trade agreement. For USMCA to live up to its promise, the rules of origin must ensure that the bulk of the value in manufactured goods comes from North America if those goods are to be treated as made here.
This is why rules of origin are among the most important mechanisms in any trade agreement. They determine whether trade preferences genuinely support regional manufacturing and investment — or whether products made largely outside the region can still qualify for preferential treatment.
If steel-intensive products made with steel made outside the region can qualify as “North American,” then the agreement would undermine the very industrial base it was designed to support. That is because steel is not simply another commodity. It is the backbone of modern manufacturing and infrastructure. Steel is essential to automobiles and trucks, construction, energy infrastructure, shipbuilding, heavy equipment, defense systems, appliances and the growing technologies driving economic expansion.
This means that steel products should only qualify as “North American” if the steel itself is melted and poured within North America — not merely processed or finished here. Absent strong “melt and pour” requirements, the USMCA would be a mere piece of paper that fails to live up to its goal of enhanced American industrial production.
Strengthening the USMCA’s rules of origin will encourage investment in North America, support regional jobs, strengthen supply chains and reduce dependence on foreign competitors.
One of the key changes made from the NAFTA to the USMCA was to strengthen the rules of origin for automobiles and auto parts to require that a significant share of a car’s value and its key parts were made in North America. The USMCA increased regional value content requirements for automobiles to 75%, in addition to establishing stronger labor provisions and including a requirement that 70% of the steel purchased by automakers originate in North America. These provisions helped encourage regional sourcing and reinforced incentives for investment within the region.
As industrial production evolves, rules of origin should evolve to ensure they continue supporting regional investment and supply chain development. The importance of rules of origin extends well beyond automobiles and light trucks. The same principle applies to steel products, electric vehicles, advanced batteries, energy infrastructure technologies, AI-driven manufacturing systems, and other advanced materials that are reshaping industrial production. It is critical that the three governments establish stronger rules of origin in these categories of goods as well. This will strengthen our manufacturing base and ensure that key steel-intensive products continue to be made in North America with steel produced in this region.
This is especially important as North American companies compete against increasingly aggressive trade policies and unfair trade practices from countries outside the region. This is clearly evident in steel, where global overcapacity remains at historically high levels. For example, last year, China exported as much steel as all of North America consumed, and Chinese firms received 15 times more government subsidies than firms in the rest of the world.
That is why stronger customs enforcement, improved monitoring, coordinated trade enforcement, and aligned regional approaches also remain essential components of a successful USMCA framework.
Modernized and enforceable rules of origin, stronger regional supply chains, coordinated approaches to combatting unfair trade and development of policies that support real North American production can help ensure that the United States, as well as Canada and Mexico, remain globally competitive manufacturing leaders. The upcoming review of the USMCA should be viewed not simply as a trade discussion, but as a broader industrial strategy discussion. Future North American competitiveness depends not only on what we trade, but also on what we make.
