Disruptions caused by Covid-19 in supply chains around the world made producers aware of the importance of having regional suppliers. But in Mexico, this relevance is being stressed even more now that the United StateS, Mexico and Canada Agreement (USMCA) has come into force.

“We have encountered several customers who are now moving their facilities from China to Mexico”, said Fisacero’s CEO, Carlos Alanis, at MM Steelclub’s 3^rd Virtual Conference on Steel, Metals and Mining in Mexico, held on 2 July. “At least three new customers who made contact with us are moving 100% of their manufacturing facilities from China to Mexico”.

Fisacero is a cold rolling mill that specializes in custom made steel strip for the car and electronic industries. According to its CEO, lockdowns imposed by several countries to fight the pandemic created a regional trend. “We saw some problems occurring with companies in Mexico not receiving the components needed for the final assembly. They were coming, especially, from Asia. So they had to stop production”, he explained.

“This became a big problem. That’s why some of these companies are moving to Mexico: they want to have a complete control of their operations and not to depend so much on having several components fabricated somewhere else”.

On the other hand, the USMCA came into effect on 1 July, establishing new requirements for the automotive industry. North American vehicle producers will now have to make at least 70% of their steel and aluminium purchases within the region. This is 10pp more than what the previous agreement, the Nafta, mandated; although companies will have some years to reach this target.

“Previously, with the Nafta, it used to be 60%. But you’d see companies complying only to 20% or 30%. It was really easy to bring materials from all over the world… I think right now, what’s going to happen is that that current 60% established by the Nafta is going to be enforced very aggressively, much more than previously”, Alanis said.

“Now we are starting to see that when you import they ask about the origin of the steel, where it was melted… Before, it wasn’t that complicated”. Alanis thinks this will make the market develop new local suppliers in the near future.

With the USMCA, authorities will have five years from now on to check if goods imported with the Nafta actually met its requirements, as Baker McKenzie’s Mexican office’s partner, Jose Hoyos, explained during MM Steelclub’s event.

“This means that, for the next five years, companies must maintain all the records that demonstrate that good steps were covered by certificates of origin”, he said.