This week, two events related to the USMCA’s Facility-Specific Rapid Response Mechanism (RRM) were raised against the following companies in the auto industry:
Per reports, on Monday the AFL-CIO filed, in conjunction with the Sindicato Internacional de Empleados de Servicios (SEIU), SNITIS, and Public Citizen, a Rapid Response petition against Tridonex, an auto-part manufacturer located in Matamoros, Tamaulipas (near Brownsville, Texas).
According to the news reports, the petition claims that workers have been denied their right of freedom of association to create a new union because of the State government’s inactions. Also, the media reported that about 600 employees that sought to have a new union were fired last year.
Though the Mexican Labor Law reform on unions and collective bargaining matters is in force, its implementation is phased. Accordingly, the State of Tamaulipas will start to implement the reform by 2022.
The Interagency Labor Committee for Monitoring and Enforcement (the “Committee”) will review the petition, per the interim guidelines, and has to decide within 30 (calendar) days whether or not there is sufficient, credible evidence of a denial of labor rights at said facility. If affirmative, the Committee will inform the USTR to trigger RRMs, requesting Mexico to review such denial of rights.
Per Article 31-A.4 USMCA, Mexico must be informed about this petition and/or review process. As a result, the Ministry of Economy, in conjunction with the Ministry of Labor, will proceed to investigate for internal purposes.
We highlight that the USTR has not yet requested Mexico to review the alleged denial of rights.
On Thursday, the USTR announced that it had requested Mexico to review of Alleged Worker’s Rights Denial at General Motor’s Facility in Silao.
For the first time, the United States is using USMCA’s Rapid Response Labor Mechanism to review if workers at a General Motors facility in Silao, Mexico, are being denied the right of free association and collective bargaining. Read here: https://t.co/Y07uoC9Hix— United States Trade Representative (@USTradeRep) May 12, 2021
The request claims that the workers at this facility are being denied the right of free association and collective bargaining. In particular, the US has concerns about the process regarding the vote on the collective bargaining agreement between GM and the Union; this process is known as (“legitimación” or “legitimization”).
The US is aware that the Mexican Ministry of Labor suspended the vote as a result of concerns about irregularities, including the destruction of ballots.
Given the above, the US requests Mexico to review “all actions and statements, by or on behalf of the Union or the Company, with respect to the legitimization process […]” including any action or statement against any worker’s right to a personal, free, and secret vote on the legitimization of the collective bargaining agreement.
According to the Press Release, the USTR has requested the Secretary of the Treasury to suspend the final settlement of customs accounts related to entries of goods from GM’s Silao facility. If there is an agreement that there has been a denial of benefits, it is possible that goods from GM’s Silao facility will not enjoy preferential tariffs per USMCA.
According to the media, the Mexican Ministry of Labor on Wednesday ordered to reinstate the legitimization process on Wednesday 12th of May (just one day before the USTR’s request!).
Also, we share the following reports:
GM stated that it did not have any involvement in any alleged labor violations and that it will cooperate with the US and Mexican authorities.
Mexico has 10 days to accept the USTR’s request to review the alleged denial of rights per the RRM. The government of Mexico issued a press release stating that it will start reviewing (internally) the case, but we expect Mexico to formally engage in the RRM process and, thus, Mexico will eventually have to share its findings within 45 (calendar) days since USTR’s request.
For more information about the process, see our Rapid Response Mechanism flow chart and our presentations:
Interestingly, Katherine Tai, head of the USTR, congratulated yesterday Mexico for “stepping in when it became aware of voting irregularities earlier this year”. If Mexico’s course of action is implemented successfully, it is possible that the USTR agrees with the remedial actions and, thus, GM’s Silao goods continue to enjoy preferential tariffs.
Proud to be using the Rapid Response Labor Mechanism for the first time to review workers’ free association and bargaining rights in a factory in Silao, Mexico. I commend the Mexican government for stepping in to suspend the vote when it became aware of voting irregularities.— Ambassador Katherine Tai (@AmbassadorTai) May 12, 2021
In VTZ, we believe that these are the first of many labor cases. Katherine Tai is a strong “enforcement” advocate and promoter of the rapid response mechanism. Therefore, it is imperative for Mexican companies covered by the rapid response mechanism, such as in the manufacturing industry, not to interfere with their workers’ rights of freedom of association and collective bargaining, but also to cooperate with the labor authorities as appropriate. Failure to do so, the USTR may initiate the rapid response mechanism, jeopardizing preferential tariff treatment per USMCA.