High-Wage Components of the Labor Value Content Requirements Under the United States-Mexico-Canada Agreement Implementation Act

Published date01 July 2020
Citation85 FR 39782
Record Number2020-14014
SectionRules and Regulations
CourtLabor Department,Wage And Hour Division
Federal Register, Volume 85 Issue 127 (Wednesday, July 1, 2020)
[Federal Register Volume 85, Number 127 (Wednesday, July 1, 2020)]
                [Rules and Regulations]
                [Pages 39782-39817]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-14014]
                [[Page 39781]]
                Vol. 85
                Wednesday,
                No. 127
                July 1, 2020
                Part IV Department of Labor----------------------------------------------------------------------- Wage and Hour Division-----------------------------------------------------------------------29 CFR Part 810High-Wage Components of the Labor Value Content Requirements Under the
                United States-Mexico-Canada Agreement Implementation Act; Interim Final
                Rule
                Federal Register / Vol. 85, No. 127 / Wednesday, July 1, 2020 / Rules
                and Regulations
                [[Page 39782]]
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                DEPARTMENT OF LABOR
                Wage and Hour Division
                29 CFR Part 810
                RIN 1235-AA36
                High-Wage Components of the Labor Value Content Requirements
                Under the United States-Mexico-Canada Agreement Implementation Act
                AGENCY: Wage and Hour Division, Department of Labor.
                ACTION: Interim final rule with request for comments.
                -----------------------------------------------------------------------
                SUMMARY: In accordance with section 210(b) of the United States-Mexico-
                Canada Agreement Implementation Act, the U.S. Department of Labor is
                issuing regulations necessary to administer the high-wage components of
                the labor value content requirements as set forth in section 202A of
                that Act.
                DATES: This interim final rule is effective on July 1, 2020. Interested
                persons are invited to submit written comments on this interim final
                rule (``IFR'') on or before August 31, 2020.
                ADDRESSES: To facilitate the receipt and processing of written comments
                on this IFR, the Department encourages interested persons to submit
                their comments electronically. You may submit comments, identified by
                Regulatory Information Number (RIN) 1235-AA36, by either of the
                following methods:
                 Electronic Comments: Follow the instructions for submitting
                comments on the Federal eRulemaking Portal http://www.regulations.gov.
                 Mail: Address written submissions to Amy DeBisschop, Director of
                the Division of Regulations, Legislation, and Interpretation, Wage and
                Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution
                Avenue NW, Washington, DC 20210.
                 Instructions: This IFR is available through the Federal Register
                and the http://www.regulations.gov website. You may also access this
                document via the Wage and Hour Division's (WHD) website at https://www.dol.gov/agencies/whd. All comment submissions must include the
                agency name and Regulatory Information Number (RIN 1235-AA36) for this
                IFR. Response to this IFR is voluntary. The Department requests that no
                business proprietary information, copyrighted information, or
                personally identifiable information be submitted in response to this
                IFR. Submit only one copy of your comment by only one method (e.g.,
                persons submitting comments electronically are encouraged not to submit
                paper copies). Anyone who submits a comment (including duplicate
                comments) should understand and expect that the comment will become a
                matter of public record and will be posted without change to http://www.regulations.gov, including any personal information provided. All
                comments must be received by 11:59 p.m. on the date indicated for
                consideration in this IFR; comments received after the comment period
                closes will not be considered. Commenters should transmit comments
                early to ensure timely receipt prior to the close of the comment
                period. Electronic submission via http://www.regulations.gov enables
                prompt receipt of comments submitted as the Department continues to
                experience delays in the receipt of mail in our area. For access to the
                docket to read background documents or comments, go to the Federal
                eRulemaking Portal at http://www.regulations.gov.
                FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Division of
                Regulations, Legislation, and Interpretation, Wage and Hour Division,
                U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
                Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-
                free number). Copies of this IFR may be obtained in alternative formats
                (Large Print, Braille, Audio Tape or Disc), upon request, by calling
                (202) 693-0675 (this is not a toll-free number). TTY/TDD callers may
                dial toll-free 1-877-889-5627 to obtain information or request
                materials in alternative formats.
                 Questions of interpretation and/or enforcement of the agency's
                regulations may be emailed to [email protected]. Alternatively,
                if unable to send by email, inquiries can also be made by calling (866)
                4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
                zone.
                I. Executive Summary
                 On January 29, 2020, the United States-Mexico-Canada Implementation
                Act (``USMCA Implementation Act'' or ``Act'') was signed into law,
                which ratified the Agreement between the United States of America, the
                United Mexican States, and Canada (``USMCA'') and implemented its
                provisions. In general, and as relevant to the Department of Labor
                (``Department'') for this IFR, the Act requires that to receive
                preferential tariff treatment, a producer of a covered vehicle must
                file a certification that the production of the covered vehicle meets
                the high-wage components of the labor value content (``LVC'')
                requirements. The Act authorizes the Secretary of Labor
                (``Secretary''), in consultation with the Commissioner of U.S. Customs
                and Border Protection (``CBP''), to check the certification for
                omissions or errors and to verify whether a covered vehicle is in
                compliance with the high-wage components of the LVC requirements. This
                IFR implements the Act's requirements and establishes procedures for
                producers to follow concerning the high-wage components of the LVC
                requirements. Any entity seeking preferential tariff treatment when
                importing covered vehicles into the United States must comply with the
                Department's regulations set forth in this IFR, including for plants
                located in Mexico and Canada that it uses to satisfy the high-wage
                components of the LVC requirements.
                 The Act tasks the Department with enforcing the high-wage
                components of the three LVC requirements: The high-wage material and
                manufacturing expenditures, the high-wage technology expenditures
                credit, and the high-wage assembly expenditures credit. The high-wage
                material and manufacturing expenditures component requires a producer
                to have records demonstrating that a minimum percentage of the cost of
                the covered vehicle is composed of vehicle assembly labor and/or parts
                and materials from a North American (United States, Mexico, or Canada)
                plant or facility with a production wage rate, or average hourly base
                wage rate,\1\ of at least US$16 per hour (or its equivalent in Mexican
                or Canadian currency). The high-wage assembly expenditures credit
                component allows a producer to receive a credit of five percent towards
                the total LVC requirement if it demonstrates that it operates, or has a
                long term contract with, a qualified assembly plant that has an average
                hourly base wage rate of at least US$16 per hour for hours worked in
                direct production. This IFR explains how producers must calculate the
                average hourly base wage rate, including what kind of work must be
                included in the calculation and how to treat certain workers for
                purposes of the calculation. The high-wage technology expenditures
                credit component allows a producer to receive an up to 10 percent
                credit towards its total LVC requirement based on its annual
                expenditures in North America on wages for research and development and
                information technology. This IFR explains how
                [[Page 39783]]
                producers must calculate the high-wage technology expenditures credit.
                Other agencies administer the other components of the LVC requirements,
                and these regulations explain how the Department will coordinate with
                CBP and other federal agencies to fulfill its statutory mandate.
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                 \1\ The USMCA refers to the ``average hourly base wage rate''
                while the Uniform Regulations use the term ``average base hourly
                wage rate.'' See Uniform Regulations, Part IV, Sec. 12, ] 1. This
                rule uses the treaty language.
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                 The Act requires that for a covered vehicle to receive preferential
                tariff treatment, a producer must certify that its production of
                covered vehicles meets the LVC requirements, including the high-wage
                components, and requires the Secretary, in consultation with CBP, to
                review the certification for omissions or errors before it is
                considered properly filed. This IFR details what information the
                producer submits to CBP in its certification that the Department will
                review for omissions or errors. The Act further gives the Secretary, in
                conjunction with the Secretary of the Treasury, authority to verify
                whether a covered vehicle complied with the LVC requirements. This IFR
                defines the scope of the Secretary's role in conducting these
                verifications and the process by which the Secretary will conduct these
                verifications.
                 To aid the Secretary in verifying producer compliance, the Act
                gives the Secretary authority to require a producer to make, keep, and
                render for examination and inspection, records and supporting
                documentation related to a producer's certification of compliance with
                the high-wage components of the LVC requirements. Pursuant to this
                authority and consistent with the USMCA's recordkeeping provisions,
                this IFR explains producers' recordkeeping responsibilities and the
                scope of the Secretary's authority to inspect such records.
                 This IFR also provides for an administrative review process of the
                Department's analysis and findings concerning a producer's compliance
                with the high-wage components of the LVC requirements. The
                administrative review will be conducted by either the WHD Administrator
                (``Administrator'') or by an official the Administrator designates as
                the presiding official; the presiding official may refer disputed
                questions of fact to the Chief Administrative Law Judge for a
                recommended decision.
                 The Act provides whistleblower protections to individuals who
                provide information relating to, or otherwise cooperate or seek to
                cooperate in, a verification of the LVC requirements. To implement
                these protections, this IFR describes the Department's whistleblower
                enforcement processes, including the filing of complaints,
                investigations, issuance of determinations, and the administrative
                review process.
                 The Department's estimates of the economic impact of this IFR are
                discussed in sections V. and VI. Pursuant to Executive Order 12866, the
                Office of Management and Budget's (``OMB'') Office of Information and
                Regulatory Affairs (``OIRA'') has determined that this IFR is
                economically significant. The Department has conducted a Regulatory
                Impact Analysis (``RIA'') to demonstrate the IFR's potential effects
                through a qualitative and quantitative analysis, consistent with
                Executive Order 13563. The Department quantified two direct costs to
                businesses: (1) Regulatory familiarization costs and (2) recordkeeping
                costs. Annualizing over 10 years, these costs are estimated to be $6.1
                million per year at both a 3 percent and 7 percent discount rate.
                Producer adjustment costs, consumer costs, economic costs, and
                Departmental costs are discussed qualitatively. This IFR is exempt from
                Executive Order 13771, because this Executive Order expressly exempts
                regulations issued with respect to foreign affairs functions (5 U.S.C.
                553).
                 Pursuant to the Congressional Review Act (5 U.S.C. 801, et seq.),
                OIRA designated this rule as a ``major rule,'' as defined by 5 U.S.C.
                804(2).
                II. Background
                A. The Agreement Between the United States of America, the United
                Mexican States, and Canada
                 On May 23, 2017, the United States Trade Representative (``USTR'')
                published in the Federal Register a notice of the United States'
                intention to begin negotiations with Canada and Mexico regarding
                modernization of the North American Free Trade Agreement (``NAFTA'').
                See 82 FR 23699. Through these negotiations, the United States sought
                to create more balanced, reciprocal trade that supports high-paying
                jobs for Americans and grows the North American economy. On November
                30, 2018, the Governments of the United States of America, the United
                Mexican States, and Canada signed the Protocol Replacing the North
                American Free Trade Agreement with the Agreement between the United
                States of America, the United Mexican States, and Canada (``USMCA''),
                and on December 10, 2019 the three countries agreed to a Protocol of
                Amendments to the USMCA. All three countries ratified the USMCA; Mexico
                on December 12, 2019, the United States on January 29, 2020, and Canada
                on March 13, 2020.
                 The USMCA recognizes that international trade, investment, and
                economic growth can be facilitated through the implementation of
                government-wide practices that promote regulatory quality through
                greater transparency, objective analysis, accountability, and
                predictability. The USMCA also seeks to promote the protection and
                enforcement of labor rights, the improvement of working conditions, and
                the strengthening of cooperation on labor issues.
                 In support of these goals, the USMCA includes new rules of origin
                criteria for claiming preferential tariff treatment for automotive
                goods, including LVC requirements as set forth in Article 7 of the
                Appendix to Annex 4-B of the USMCA (``Automotive Appendix''). The LVC
                requirements promote more high-wage jobs for the U.S. auto industry by
                requiring that a significant portion of motor vehicles be made with
                high-wage labor.\2\ The LVC requirements state that for a passenger
                vehicle, light truck, or heavy truck (``covered vehicle'') to be
                eligible for preferential tariff treatment, a minimum percentage of the
                cost of the vehicle must involve certain high-wage expenditures. After
                a transition period of 3 years with gradually increasing percentages
                (or longer if a producer successfully petitions to be covered under the
                USMCA's alternative staging regime),\3\ as discussed in Articles 7 and
                8 of the Automotive Appendix, at least 40 percent of the value of
                passenger vehicles and 45 percent of the value of light and heavy
                trucks must meet these high-wage expenditure requirements. The three
                categories of high-wage expenditures are as follows:
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                 \2\ United States-Mexico-Canada Trade Fact Sheet: Rebalancing
                Trade to Support Manufacturing, Office of the United States Trade
                Representative, https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/fact-sheets/rebalancing.
                 \3\ The alternative staging regime provides for a phase-in
                period of the LVC requirements and additional time to meet those
                requirements. See 85 FR 22238, 22239 (Apr. 21, 2020).
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                 i. High-wage material and manufacturing expenditures.\4\ The high-
                wage material and manufacturing expenditures provision requires that,
                after a phase-in period, beginning on July 1, 2023 at least 25 percent
                of the annual purchase value or net cost of a passenger vehicle, or 30
                percent of the annual purchase value or net cost of a light truck or
                heavy truck, come from parts and materials used in the production of
                those vehicles, and
                [[Page 39784]]
                produced in a North American production plant or facility, or from any
                labor costs in a North American vehicle assembly plant or facility,
                with a production wage rate of at least US$16 per hour.
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                 \4\ The USMCA refers to ``high-wage material and manufacturing
                expenditures'' while the Uniform Regulations use the term ``high-
                wage material and labor expenditures.'' See, e.g., Uniform
                Regulations, Part IV, Sec. 18, ] 1. This rule uses the treaty
                language.
                ---------------------------------------------------------------------------
                 ii. High-wage technology expenditures. The high-wage technology
                expenditures provision allows producers to claim a credit towards the
                LVC requirements of up to 10 percent. The credit is equal to the
                vehicle producer's total annual expenditures on wages in North America
                for research and development or information technology as a percentage
                of the producer's total annual expenditures on production wages.
                 iii. High-wage assembly expenditures. The high-wage assembly
                expenditures provision permits producers to claim a single credit of
                five percent towards the LVC requirements if the producer has an
                engine, transmission, or advanced battery assembly plant meeting
                certain production capacity standards, or has a long term contract with
                such a plant, in North America with an average production wage rate of
                at least US$16 per hour.
                 The USMCA also states that a claim for preferential tariff
                treatment, including preferential tariffs for automotive goods, must be
                based on a certification of origin completed by the importer, exporter,
                or producer. An importer claiming preferential tariff treatment for a
                good imported into a USMCA Country (the United States, Mexico, or
                Canada) must maintain all documentation, records, and information
                necessary to demonstrate the basis for the claim. Exporters and
                producers must maintain all records necessary to support a claim for
                preferential tariff treatment for a good for which the exporter or
                producer provided a certification of origin.
                 The USMCA further provides that the USMCA Countries may conduct a
                verification of a certification or claim for preferential tariff
                treatment. Pursuant to the USMCA, such verifications may include
                written requests for information and documentation, onsite visits to
                production plants and facilities, as well as other procedures to be
                decided by the USMCA Countries.
                B. United States-Mexico-Canada Agreement Implementation Act
                 On January 29, 2020, the United States-Mexico-Canada Implementation
                Act (``USMCA Implementation Act'' or ``Act'') was signed into law,
                ratifying the USMCA and implementing its provisions. Section 202A of
                the Act, codified at 19 U.S.C. 4532, provides that a covered vehicle is
                eligible for preferential tariff treatment when imported into the
                United States only if the producer has provided a certification that
                the production of the covered vehicle meets the LVC requirements,
                including the high-wage components. See 19 U.S.C. 4532(c)(1)(A). The
                producer must have information on record to support the calculations on
                which its certification is based, and maintain records supporting such
                calculations. See 19 U.S.C. 4532(c)(1)(A). The Secretary, in
                consultation with the Commissioner of CBP, must review these
                certifications for errors or omissions before the certification can be
                considered properly filed. See 19 U.S.C. 4532(c)(1)(B).
                 The Act also describes the procedures for verification of
                preferential tariff claims, including preferential tariff claims for
                covered vehicles. Section 4532(e)(1) authorizes the Secretary of the
                Treasury, in conjunction with the Secretary, to verify whether a
                covered vehicle is in compliance with the LVC requirements. See 19
                U.S.C. 4532(e)(1). The Secretary is charged, in cooperation with the
                Secretary of the Treasury, with verifying whether the production of
                covered vehicles meets the high-wage components of the LVC
                requirements, including the high-wage material and manufacturing
                expenditures, high-wage technology expenditures, and high-wage assembly
                expenditures discussed above. See 19 U.S.C. 4532(e)(2). As part of
                these verifications, the Act authorizes the Secretary to examine any
                record, and request information from any officer, employee, or agent of
                a producer of automotive goods that may be relevant with respect to
                whether the production of the covered vehicle complied with the high-
                wage components of the LVC requirements. See 19 U.S.C. 4532(e)(4)(A).
                Relevant records and information include records and information
                relating to wages, hours, job responsibilities, and other information
                in any plant or facility relied on by the producer to demonstrate
                compliance with the high-wage components of the LVC requirements. See
                19 U.S.C. 4532(e)(4)(B). The Act also prohibits retaliation against any
                person who discloses information relating to a verification or
                otherwise cooperates in a verification. See 19 U.S.C. 4532(e)(5).
                C. Interim Guidance From USTR and CBP
                 CBP published its USMCA Interim Implementing Instructions on April
                20, 2020, and on June 16, 2020 published a revised version (``CBP
                Implementing Instructions''). This guidance is intended to provide
                information as to how to make preferential tariff claims under the
                USMCA pending the issuance of applicable regulations.\5\ These
                instructions, which do not have legal or binding effect, provide
                general guidelines as to the rules of origin and regional value content
                requirements for goods imported into the United States from Canada or
                Mexico, how importers may claim preferential tariff treatment for
                imported goods, and the general process for submitting a certification
                of origin.\6\ The instructions also describe CBP's general
                recordkeeping requirements for importers who have made a preferential
                treatment claim and for any person who has completed a USMCA
                certification of origin or provided a written representation for a good
                exported from the United States to another USMCA Country. They also
                provide information as to how CBP will conduct a verification of a
                claim to preferential tariff treatment and issue a determination
                conveying the verification results.
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                 \5\ U.S. Customs and Border Protection, United States-Mexico-
                Canada Agreement (USMCA) Interim Implementing Instructions, modified
                June 16, 2020, available at https://www.cbp.gov/document/guidance/usmca-interim-implementation-instructions.
                 \6\ The CBP Implementing Instructions state: ``This document is
                for advance informational and advisory purposes only. It is not
                final and is subject to further revision. It is not intended to have
                legal or binding effect. Any decisions a reader makes based on this
                draft document are made with the understanding that the information
                in this document is advisory only and may change. The reader is
                responsible for monitoring the CBP website to ensure awareness of
                the status of any revisions to this document.''
                ---------------------------------------------------------------------------
                 In addition to this general guidance on preferential tariff claims
                under the USMCA, the CBP Implementing Instructions provide more
                specific information about the additional requirements applicable to
                automotive goods. For example, the CBP Implementing Instructions
                provide, in part, information relating to the rules of origin for
                automotive goods and LVC certification procedures and requirements.
                Annex B of the CBP Implementing Instructions, developed in coordination
                with the Department, provides guidance on what certification
                information the Department will review for omissions or errors. This
                topic is discussed in more detail in this IFR. Certain aspects of the
                Department's regulations may differ from the information provided in
                the CBP Implementing Instructions. If there are such differences, the
                Department's regulations are controlling.
                 On April 21, 2020, USTR published the Procedures for the Submission
                of Petitions by North American Producers of Passenger Vehicles or Light
                Trucks
                [[Page 39785]]
                To Use the Alternative Staging Regime for the USMCA Rules of Origin for
                Automotive Goods, a notice in the Federal Register providing guidance
                to vehicle producers for requesting an alternative to the standard
                staging regime for the USMCA rules of origin for automotive goods,
                including the LVC requirements. See 85 FR 22238. The notice specifies
                the vehicle producers that are eligible to petition for an alternative
                staging regime and the requirements that must be met during and after
                the alternative staging regime. It sets forth the timeline for filing
                petitions for alternative staging and details the information that must
                be included in the petitions. The notice also describes the process
                that USTR will use to review and approve such petitions. The notice
                also explains the process for requesting a modification of an approved
                alternative staging plan, which the vehicle producer must make whenever
                there are material changes to information contained in a petition that
                will affect the producer's ability to meet any of the requirements set
                forth in Articles 2 through 7 of the Automotive Appendix after the
                alternative staging period has expired. The notice also specifies that
                vehicle producers that do not meet the requirements of the alternative
                staging regime are not eligible for preferential tariff treatment
                pursuant to the alternative staging regime.
                D. Uniform Regulations
                 The USMCA provides that the parties to the agreement shall, by
                entry into force of the agreement, adopt Uniform Regulations regarding
                the interpretation, application, and administration of, in part,
                Chapter 4 (Rules of Origin) and other matters as may be decided by the
                parties to the agreement. See USMCA, Article 5.16. The Uniform
                Regulations regarding, in part, Chapter 4 (Rules of Origin) and Chapter
                5 (Origin Procedures) adopted on June 3, 2020 represent a trilateral
                agreement between the United States of America, the United Mexican
                States, and Canada regarding the interpretation, application, and
                administration of Chapter 4 and Chapter 5 of the USMCA. The Department
                intends the regulations set forth in this IFR to be consistent with the
                Uniform Regulations.
                E. Inapplicability of Notice and Delayed Effective Date Requirements
                Procedures
                 Pursuant to 5 U.S.C. 553(a)(1), public notice and comment
                procedures are inapplicable to these interim regulations because they
                involve a ``foreign affairs function of the United States.'' The delay
                caused by public notice and comment procedures would prevent these
                regulations from being in place on the date that the USMCA enters into
                force. A failure to have the regulations in place setting forth the
                procedures implementing important rules for preferential tariff
                treatment of automobiles would provoke undesirable international
                consequences by inhibiting the execution of the United States'
                obligations under the USMCA and creating international uncertainty
                about the United States' enforcement of tariff preferences.
                 In addition, the Department for good cause finds, pursuant to 5
                U.S.C. 553(b)(B), that the public notice and comment requirements are
                impracticable and contrary to the public interest, and thus should not
                apply to these regulations. The USMCA's LVC requirements, which the
                Department is tasked in part with enforcing, apply once the USMCA
                enters into force. See 19 U.S.C. 4532(h). Accordingly, these
                regulations establish procedures that the public must know by the
                entry-into-force date in order to claim the benefit of a tariff
                preference under the USMCA. The Uniform Regulations, which required the
                agreement of the United States of America, the United Mexican States,
                and Canada, were only adopted on June 3, 2020. This IFR's regulations,
                however, must be consistent with the Uniform Regulations and could not
                be completed and prepared for public notice and comment until the
                Uniform Regulations were adopted. Given the recent adoption of the
                Uniform Regulations and the approaching date on which the USMCA enters
                into force, following public notice and comment procedures could
                prevent the implementation of these regulations by the entry-into-force
                date, leading to harmful consequences for stakeholders throughout the
                automotive industry. Furthermore, because these are interim
                regulations, the public will have an opportunity to comment and provide
                input for the final rule, reducing any impact from the lack of notice.
                 Finally, for the above-listed reasons, the Department has
                determined that good cause exists under 5 U.S.C. 553(d)(3) for
                dispensing with a delayed effective date.
                III. Additions for 29 CFR Part 810
                 The provisions relating to the Department's role in enforcing the
                high-wage components of the LVC requirements of the USMCA are described
                and interpreted by the Secretary in regulations to appear in new part
                810 of Title 29 of the Code of Federal Regulations, and addressed
                below.
                Subpart A--General
                Section 810.2 Purpose and Scope
                 This section briefly describes the purpose of the USMCA and the
                Act, and the Department's role in enforcing the wage-related components
                of the USMCA's LVC requirements. WHD is issuing the regulations in part
                810 in accordance with 19 U.S.C. 4535(b), which requires the Secretary
                to prescribe regulations necessary to carry out the LVC determination
                under 19 U.S.C. 4532, and 19 U.S.C. 1508(b)(4), which grants the
                Secretary authority to prescribe regulations relating to the
                recordkeeping requirements detailed in 19 U.S.C. 1508(b)(4). The
                Secretary has delegated this authority to the Administrator. The
                Department administers the high-wage components of the LVC
                determination. Other agencies administer the other components of the
                LVC requirements, and the regulations in this part explain how the
                Department will coordinate with CBP and other federal agencies to
                fulfill its statutory mandate.
                 The Department's principal responsibility under the USMCA is to
                evaluate and verify worker wage rates. For assessing high-wage material
                and manufacturing expenditures and high-wage assembly expenditures, the
                Department must determine whether workers earned an average hourly base
                wage rate of at least US$16 per hour for the time worked in direct
                production. For assessing the high-wage technology expenditures credit,
                the Department must evaluate wages paid to research and development and
                information technology workers.
                Section 810.3 Definitions and Use of Terms
                 This section defines terms that are used throughout this IFR. Many
                of the terms in this IFR are already defined in the USMCA. Where noted
                in this section, these terms invoke the USMCA's definitions; however,
                because of variations in how certain terms are used in the USMCA, the
                meanings of certain terms vary slightly across the IFR. For example,
                the terms ``importer'' and ``exporter'' are defined in Appendix 5 of
                the USMCA. Except where indicated otherwise, the term ``producer'' as
                used in this rule encompasses the terms ``importer'' and ``exporter,''
                as these three terms are often referenced together in the treaty, and
                the regulations generally apply uniformly to all three types of
                entities. However, when used in Sec. 810.405, for example, the term
                ``producer'' means only ``producer of the covered vehicle.'' This
                exception is necessary because
                [[Page 39786]]
                only the producer of the covered vehicle may provide a certification
                that the covered vehicle meets the applicable LVC requirements. See 19
                U.S.C. 4532(c)(1)(A).
                 Many of the terms used in this rule are most relevant to the
                portions of the LVC requirements within CBP's purview. Unless otherwise
                stated, the definitions used in these regulations are intended to be
                consistent with CBP's use of the terms. Where these regulations use
                terms relating to the LVC requirements without providing a
                corresponding definition, the Department intends such terms to have the
                meaning as understood by CBP and (where applicable) explained in its
                guidance and regulations.
                 Other definitions are provided in this rule to ensure that there is
                a uniform use and understanding of the terms, which will aid in this
                rule's administration. These terms, such as ``Administrative Law
                Judge'' and ``Administrator,'' adopt standard Department definitions
                used in other rules.
                Subpart B--Calculating the High-Wage Component of Material and
                Manufacturing Expenditures
                Section 810.100 Scope and Purpose of This Subpart
                 The USMCA Implementation Act authorizes the Secretary, in
                conjunction with the Secretary of the Treasury, to verify whether
                covered vehicle production complies with the high-wage components of
                the LVC requirements set forth in the USMCA. See 19 U.S.C. 4532(e). The
                high-wage material and manufacturing expenditures component of the LVC
                requires producers to demonstrate that a minimum percentage of the cost
                of the vehicle is composed of vehicle assembly labor costs, and/or
                parts and materials expenditures, from a North American plant or
                facility with an average hourly base wage rate of at least US$16 per
                hour. The Department works in conjunction with CBP to verify producer
                compliance. Specifically, the Department is responsible for verifying
                whether workers engaged in direct production work at a plant or
                facility included in a producer's material and manufacturing
                expenditures calculation earn an average hourly base wage rate of at
                least US$16 per hour. This subpart addresses calculation of this high-
                wage aspect. All other aspects of material and manufacturing
                expenditures, including determining the percentage of the cost of a
                covered vehicle that assembly labor or specific parts and components
                constitutes, are within the purview of CBP and/or other federal
                agencies and addressed by their regulations and other guidance.
                Section 810.105 Calculating the Average Hourly Base Wage Rate
                 Subsection 810.105(a) sets forth the overarching rule that the
                average hourly base wage rate for a plant or facility is calculated by
                dividing the total base wages paid for all hours worked in direct
                production by the total number of hours worked in direct production.
                The USMCA does not define ``average hourly base wage rate,'' but
                instead defines ``production wage rate'' for a plant or facility as
                ``the average hourly base wage rate, not including benefits, of
                employees directly involved in the production of the part or component
                used to calculate the LVC[.]'' See Automotive Appendix, Article 7.3
                n.77. Thus, the terms ``production wage rate'' and ``average hourly
                base wage rate'' are interchangeable for purposes of calculating a
                producer's high-wage material and manufacturing expenditures for a
                plant or facility. The Department considers the term ``average hourly
                base wage rate'' more descriptive and useful for calculation purposes,
                and generally uses that term.
                 Subsection 810.105(b) describes the three components of the average
                hourly base wage rate calculation: The hourly base wage rate, hours
                worked in direct production, and total base wages.
                 The hourly base wage rate is the rate of compensation a worker is
                paid for each hour worked in direct production work. The hourly base
                wage rate refers to the base rate of pay for an individual worker,
                whereas the average hourly base wage rate refers to the average rate of
                pay for a group of workers in a plant or facility. In determining the
                hourly base wage rate for each worker, the producer must exclude all
                benefits, bonuses, premium payments, incentive pay, overtime premiums,
                and all other similar payments. ``Similar payments'' include, for
                example, profit-sharing bonuses, tooling allowances, collective
                bargaining agreement ratification bonuses, and performance bonuses.
                Excluding such payments from the average hourly base wage rate
                calculation adopts a bright-line rule that is consistent with both the
                plain meaning of the term ``base'' and with the USMCA's language that
                the ``production wage rate is the average hourly base wage rate, not
                including benefits[.]'' See Automotive Appendix, Article 7, n.77. In
                contrast, including other types of payments in the base wage rate would
                undermine the treaty's plain meaning and increase administrative
                complexity. The Department's approach also strengthens the US$16 per
                hour standard, which increases the likelihood that producers will use
                American plants to meet the LVC requirements, and in turn promotes more
                high-wage jobs for U.S. auto industry workers.
                 Amounts deducted from a worker's pay generally may be included in
                the hourly base wage rate to the extent they are for the benefit of the
                worker and are reasonable. WHD will look to the principles outlined in
                29 CFR part 531 to determine whether a deduction is for the benefit of
                the employee and is reasonable, and therefore may be included in the
                hourly base wage rate. For example, reasonable amounts deducted for
                board and lodging may be included in a worker's hourly base wage rate,
                see 29 CFR 531.3, as may amounts deducted for taxes assessed against
                the employee, see 29 CFR 531.38, and amounts deducted for payments to
                third persons pursuant to a court order, see 29 CFR 531.39. Conversely,
                amounts deducted for tools, equipment, or uniforms may not be included
                in a worker's hourly base wage rate, see 29 CFR 531.32(c).
                 The second component of the average hourly base wage rate
                calculation is to determine the number of hours worked in direct
                production by each worker. This means all time a worker spends
                personally involved in the production of passenger vehicles, light
                trucks, heavy trucks, or parts used in the production of these vehicles
                at a plant or facility located in North America, or directly involved
                in the set-up, operation, or maintenance of equipment or tools used in
                the production of those vehicles or parts at that plant or facility.
                The total number of hours worked in direct production at a plant or
                facility, as referenced in subsection (a), is calculated by adding
                together hours in direct production (as calculated under subsections
                (b)(2)(i) and (b)(2)(ii)) for all workers who perform direct production
                work at that plant or facility.
                 Subsection (b)(2)(i) provides that, except for executive and
                management staff, certain engineers, and other workers described in
                Sec. 810.130, if at least 85 percent of a worker's total work hours
                are worked in direct production during the time period the producer
                uses to calculate the average hourly base wage rate, see Sec.
                810.105(d), the worker's total work hours are considered hours worked
                in direct production, and are included in the average hourly base wage
                rate calculation. This is consistent with the Uniform Regulations,
                which provide that ``[f]or direct production workers, the average base
                hourly wage rate of pay is calculated based on all their working
                hours[,]'' and define
                [[Page 39787]]
                ``direct production worker'' as ``any worker whose primary
                responsibilities are direct production work, meaning at least 85
                percent of the worker's time is spent performing direct production
                work.'' Uniform Regulations, Part VI, Sec. 12, ] 1. Subsection (i) is
                also consistent with the USMCA's production wage rate definition, which
                emphasizes the wage rate of workers ``directly involved in the
                production of the part or component used to calculate the LVC.'' See
                Automotive Appendix, Article 7, n.77.
                 Subsection (b)(2)(ii) provides that, except for workers described
                in Sec. 810.130 (for whom all hours worked are excluded), if less than
                85 percent of a worker's total work hours are worked in direct
                production, only the worker's hours worked in direct production are
                included in the average hourly base wage rate calculation. This is
                similarly consistent with the Uniform Regulations provision that
                ``[f]or other workers performing direct production work [who are not
                direct production workers], the average hourly rate is calculated based
                on the amount of hours performing direct production work.'' Uniform
                Regulations, Part VI, Sec. 12, ] 1.
                 The 85 percent threshold described in Sec. 810.105(b) should
                simplify compliance with the high-wage components of the LVC
                requirements by permitting producers to count all hours (and pay) for
                workers who spend most of their time performing direct production work.
                This bright-line approach minimizes compliance burdens and promotes
                administrative efficiency. Also, including in the average hourly base
                wage rate all direct production hours for any worker who performs
                direct production work (except for workers described in Sec. 810.130),
                helps ensure that the average hourly base wage rate appropriately
                reflects wages paid for direct production work.
                 The third component of the average hourly base rate calculation is
                calculating ``total base wages''--i.e., the cumulative base wages for
                all time that workers spend performing direct production work. This
                calculation involves two steps. First, multiply each worker's hourly
                base wage rate by that worker's number of hours worked in direct
                production at that rate. The hourly base wage rate is set forth in
                subsection (b)(1) and hours worked in direct production is set forth in
                subsection (b)(2). Second, total the values calculated in step one to
                obtain total base wages paid for all hours worked in direct production
                at the plant or facility. As previously discussed, all of a worker's
                hours worked are considered hours worked in direct production (and are
                included in the average hourly base wage rate calculation) for workers
                who satisfy the 85 percent threshold in Sec. 810.105(b)(2)(i), while
                for workers under Sec. 810.105(b)(2)(ii), only hours worked in direct
                production are included. This calculation does not include any hours
                (whether in direct production or otherwise) for workers described in
                Sec. 810.130 (e.g., executives, management, research and development
                workers, certain engineers, and other personnel).
                 Once the above calculations are performed (for the appropriate time
                period as set forth below), the average hourly base wage rate is
                calculated by dividing the total base wages by the total number of
                hours worked in direct production.
                 Neither the USMCA, its implementing legislation, nor the Uniform
                Regulations address how to calculate the hourly base wage rate
                ``average.'' The Department has chosen to calculate this average by
                dividing workers' total base wages for direct production work by their
                total number of hours worked in direct production, rather than by
                calculating the hourly base wage rate for each worker, and then
                averaging those individual rates.\7\ The Department believes that its
                chosen approach is more consistent with the Department counting hours
                worked in direct production toward the average hourly base wage rate.
                In contrast, the alternative approach is less consistent because it
                uses a single wage rate for each worker, including for workers who
                receive that rate in part for performing work that is not direct
                production work. The chosen approach may also strengthen the US$16 per
                hour standard because computing the average using the total number of
                hours worked in direct production may prevent an upward skewing of the
                average that could occur under the alternative method, under which
                highly paid workers working relatively few hours in direct production
                would have equal computational weight to lower-paid workers who work
                all or virtually all hours in direct production. Finally, as addressed
                in more detail in the discussion of Sec. 810.120, by dividing by the
                total number of hours workers spend performing direct production work,
                the Department's chosen approach allows employers to appropriately
                weight the wages of full- and part-time workers, without having to
                apply any special rules or computations for part-time workers. This
                uniform approach decreases administrative complexity and promotes
                efficiency.
                ---------------------------------------------------------------------------
                 \7\ These approaches can yield different results. For example,
                assume Worker A earned $800 in base wages for 40 hours of direct
                production work and Worker B earned $200 in base wages for 20 hours
                of direct production work. Under the chosen approach, a producer
                would compute the average by dividing the total base wages ($1,000)
                by the total hour worked in direct production (60), producing an
                average hourly base wage rate of $16.67 (which satisfies the US$16
                per hour LVC threshold). Under the alternative approach, the
                producer would average the hourly rate for each worker ($20 for
                Worker A and $10 for Worker B), resulting in an average hourly base
                wage rate of $15 per hour, which is less than the LVC threshold. The
                outcome could change (with the chosen approach resulting in a lower
                rate than the alternative approach) depending on the facts in a
                particular case. How to compute the average is distinct from
                determining what pay to include in the hourly base wage rate (under
                Sec. 810.105(b)(1)) and what work hours to include when calculating
                the average hourly base wage rate (as discussed in Sec.
                810.105(b)(2)).
                ---------------------------------------------------------------------------
                 Subsection 810.105(c) provides that a producer must include all
                hours worked in direct production at a plant or facility (other than by
                workers described in Sec. 810.130), and the pay for such hours, when
                calculating the average hourly base wage rate for that plant or
                facility. This is consistent with the Article 7.3 of the Automotive
                Appendix, which provides that the average hourly base wage rate at a
                ``vehicle assembly plant or facility'' must be at least US$16 per hour
                for the parts or materials produced in that facility and, if the
                producer elects, labor costs in vehicle assembly at that facility count
                towards the high-wage material and manufacturing expenditures.
                Automotive Appendix, Article 7.3(a). Additionally, where a worker is
                paid by a third party (such as a temporary employment agency), only the
                wages received by the worker (and deductions that are for the worker's
                benefit and are reasonable, as described in Sec. 810.105(b)(1)(ii))
                are included in the average hourly base wage rate calculation.
                 Subsection 810.105(d) provides the time period over which a
                producer can calculate the average hourly base wage rate. The time
                period options are taken from Article 7.5 of the Automotive Appendix,
                which permits calculating the LVC over any one of the following
                periods: (1) The previous fiscal year of the producer; (2) the previous
                calendar year; (3) the quarter or month to date in which the vehicle is
                produced or exported; (4) the producer's fiscal year to date in which
                the vehicle is produced or exported; or (5) the calendar year to date
                in which the vehicle is produced or exported. In computing the average
                hourly base wage rate, the producer may use only base wages earned and
                hours worked in direct production (as set forth in subsection
                810.105(b)(2)) during the selected time period. Thus, for example, if
                in 2022 a producer elects to calculate
                [[Page 39788]]
                the average hourly base wage rate using the previous calendar year
                (under Sec. 810.105(d)(2)), its calculations would encompass hourly
                base wage rates for hours worked in direct production from January 1,
                2021 through December 31, 2021.
                Section 810.110 Examples of Direct Production Work
                 Section 810.110 provides a non-exhaustive list of examples of types
                of work that constitute direct production work for purposes of
                calculating the average hourly base wage rate. The Department includes
                these examples to help producers understand which types of work to
                include when properly calculating the average hourly base wage rate.
                These examples are consistent with the USMCA, as they describe types of
                work performed by ``employees directly involved in . . .
                production[.]'' Automotive Appendix, Article 7.3 n.77.
                 Consistent with the Uniform Regulations, subsection (a) explains
                that direct production work includes production of vehicles and parts,
                including both manufacture and assembly, as well as the operation or
                maintenance of equipment used in the production of vehicles and parts.
                Direct production work is not specific to a single location in the
                plant or facility; it may take place on a production line, at a
                workstation, on the shop floor, or in another production area. As to
                specific tasks, direct production work includes material handling of
                vehicles or parts; inspections of vehicles or parts, including
                inspections that are normally categorized as quality control, and for
                heavy trucks, pre-sale inspections carried out at the place where the
                vehicle is produced; on-the-job training regarding the execution of a
                specific production task; and maintaining and ensuring the operation of
                the production line or production area and the operation of tools and
                equipment used in the production of vehicles or parts, including the
                cleaning of the line or production area and the places around it.
                Direct production work may be performed by skilled tradespeople, such
                as process or production engineers, mechanics, technicians, and other
                employees, responsible for maintaining and ensuring the operation of
                the production line or tools and equipment used in the direct
                production of vehicles or parts. Consistent with Article 7.3 of the
                Automotive Appendix and the Uniform Regulations, direct production work
                does not include research and development work or engineering work
                unrelated to maintaining and ensuring the operation of the production
                line or tools and equipment used in the production of vehicles or
                parts.
                 Subsection (b) explains that except for workers described in Sec.
                810.130, time spent, for example, by line supervisors and team leads,
                engaged in providing on-the-job training regarding the execution of a
                specific production task or relieving a worker in the performance of
                direct production duties is direct production work. On-the-job training
                generally involves direct production work and often occurs on the
                production line, at a workstation, on the shop floor, or in another
                production area. Such activities would include, for example, a line
                supervisor staying at a workstation with a worker to guide the worker
                through how to perform a task the worker has been assigned. Relief work
                also constitutes hours worked in direct production because in such
                instances the supervisor is performing the same direct production work
                performed by the relieved worker, and which would normally be included
                in that worker's hours worked in direct production. However, time spent
                managing workers, including supervising workers performing direct
                production work, is not itself direct production work, and therefore is
                not included in the average hourly base wage rate calculation.
                 The Department invites comments from stakeholders concerning what,
                if any, additional examples of direct production work should be
                included in the final rule.
                Section 810.115 Paid Meal Time and Paid Break Time
                 Section 810.115 explains how to treat paid meal and break times
                when calculating the average hourly base wage rate. Such time counts as
                direct production work for purposes of determining (under Sec.
                810.105(b)(2)(i)) whether at least 85 percent of a worker's total work
                hours--a figure that includes paid meal time and paid break time for
                purposes of the USMCA--are hours worked in direct production. However,
                if less than 85 percent of a worker's total work hours are worked in
                direct production, paid meal time and paid break time are not
                considered hours worked in direct production when applying Sec.
                810.105(b)(2)(ii). Unpaid meal time and unpaid break time are never
                included in the average hourly base wage rate calculation.
                 Counting paid meal and break time toward the 85 percent threshold
                is a fair approach that will simplify the average hourly base wage rate
                calculation and ease burdens on producers. In contrast, a simple
                example illustrates how excluding such time from the 85 percent
                threshold could undermine the threshold and thus the USMCA's
                objectives. A full-time worker who works 8 hours per day, 5 days per
                week, during the producer's certification period must spend at least 34
                hours per week (i.e., 85 percent of 40 hours) performing direct
                production work to meet the 85 percent threshold. If such a worker
                received a 30-minute paid meal break and two 15-minute paid rest breaks
                each work day (totaling 5 hours per week), and such hours did not count
                toward the 85 percent threshold (but were considered part of total
                hours worked), the worker would not meet the 85 percent threshold if
                the worker spent more than 1 additional hour per week performing work
                that is not direct production work. This outcome could result in more
                workers who spend virtually all of their time performing direct
                production work nonetheless not meeting the 85 percent threshold. Such
                a result could undermine the interests in administrative efficiency
                underlying the 85 percent threshold, and create disincentives to
                providing workers paid meal and break times--time which may help to
                promote worker efficiency. Given such consequences, the Department
                believes its treatment of paid meal time and paid break time is
                consistent with the Uniform Regulations.
                Section 810.120 Part-Time, Temporary, Seasonal, and Contract Workers
                 Subsection 810.120(a) provides that hours of part-time workers,
                temporary workers, and seasonal workers are treated the same as hours
                of full-time workers for purposes of calculating the average hourly
                base wage rate. The Department understands that such workers are common
                in the automobile industry, and sees no basis in the USMCA or the Act
                for treating such workers differently than permanent full-time workers
                when calculating the average hourly base wage rate. What matters for
                USMCA purposes is the worker's base rate of pay and the type of work
                the worker performs, not the timing of the worker's work or whether it
                technically is provided on a part-time or full-time basis. The
                Department's equal treatment of all workers is reflected in the average
                hourly base wage rate calculation, which appropriately weights the pay
                and hours worked for all workers by simply dividing the total base
                wages paid for all hours worked in direct production by the total
                number of hours worked in direct production. A different approach (such
                as granting producers discretion to exclude these workers from its
                [[Page 39789]]
                calculations under certain circumstances) could skew the calculations
                so that they do not accurately represent the actual average hourly base
                wage rates for time workers spent performing direct production work.
                Without accurate average hourly base wage rates, the Department could
                not effectively verify whether producers have complied with the high-
                wage components of the LVC requirements, thereby undermining the
                purpose of the USMCA and the Act.
                 Subsection 810.120(b) provides that workers' hours are included in
                the average hourly base wage rate calculation even if the workers do
                not have an employment relationship with the producer. This could
                include, for example, contract workers and workers employed by staffing
                agencies who perform direct production work. This approach is
                consistent with the treaty text, which emphasizes whether employees are
                directly involved in production work, see Automotive Appendix, Article
                7.3 n.77, not whether they are directly employed by the producer or
                another entity. In addition, Sec. 810.120(b) promotes transparency by
                helping ensure that all direct production work is included in the
                average hourly base wage rate calculation, regardless of how a working
                relationship is structured. As with the workers addressed in Sec.
                810.120(a), the inclusion of these workers' hours will result in more
                representative calculations that more precisely reflect the actual
                average hourly base wage rates, which will allow the Department to
                accurately verify whether producers have complied with the high-wage
                components of the LVC requirements.
                Section 810.125 Workers Paid on a Non-Hourly Basis
                 Section 810.125 explains how to factor the wages of workers paid on
                a non-hourly basis into the average hourly base wage rate calculation.
                While the USMCA refers to the average hourly base wage rate, the
                Department recognizes that not all workers who perform direct
                production work are paid on an hourly basis. Given this reality, and to
                help ensure that the average hourly base wage rate calculation does not
                exclude workers who perform direct production work based solely on
                whether they are paid hourly, the Department interprets the USMCA as
                permitting workers paid on a basis other than hourly to be included in
                the average hourly base wage rate calculation. To do otherwise would in
                effect force a producer to convert to hourly status any worker it wants
                to include in its average hourly wage rate calculations. This promotes
                neither the USMCA's purpose nor efficient business practices.
                 Accordingly, if any worker performing direct production work is
                compensated by a method other than hourly, such as a salary, piece-
                rate, or day-rate basis, the worker's hourly base wage rate shall be
                calculated by converting the salary, piece-rate, or day-rate to an
                hourly equivalent. The Department will follow standard WHD practices in
                converting non-hourly wages to an hourly equivalent. WHD regularly does
                such conversions in the Fair Labor Standards Act (``FLSA'') context and
                for several other statutes it enforces. After performing the
                conversion, the hourly equivalent rate is then multiplied by the
                worker's number of hours worked in direct production for purposes of
                calculating the average hourly base wage rate.
                 Subsection 810.125(b) provides examples of specific types of
                conversions using standard WHD practices where a salary, piece-rate, or
                day-rate wage is paid to a worker on a (1) weekly or bi-weekly, (2)
                semi-monthly, or (3) a monthly basis.
                Section 810.130 Executive, Management, Research and Development,
                Engineering, and Other Personnel
                 Section 810.130 provides a list of the types of workers whose hours
                worked are never included in the average hourly base wage rate
                calculation. Subsection (a) excludes from the average hourly base wage
                rate any hours worked by executive or management staff who generally
                have the authority to make final decisions to hire, fire, promote,
                transfer, and discipline employees. This regulation, which largely
                tracks the Uniform Regulations and is consistent with its intent, is
                meant to provide helpful guidance to the regulated community on the
                duties indicative of executive or management staff. It is not intended
                to condone including in the average hourly base wage rate direct
                production work hours of executive or management staff who, for
                example, perform all but one of the enumerated duties, or make
                decisions on all of the listed duties, but not ``final decisions'' on
                one of the listed duties. The Department will closely scrutinize the
                designation of employees as not falling within this category when
                conducting verifications in order to ensure compliance with the USMCA's
                position that the average hourly base wage rate exclude the ``salaries
                of management[.]'' See Automotive Appendix, Article 7, n.77.
                 Subsection 810.130(b) excludes from the average hourly base wage
                rate any hours worked by workers engaged in research and development.
                Subsection 810.130(c) excludes engineers, mechanics, or technicians, if
                such personnel are not responsible for maintaining and ensuring the
                operation of the production line or tools and equipment used in the
                production of vehicles or parts. These provisions are consistent with
                the Uniform Regulations, which provide that direct production work does
                not include ``any work by workers engaged in research and development,
                or work by engineering or other personnel that are not responsible for
                maintaining and ensuring the operation of the production line or tools
                and equipment used in the production of vehicles or parts.'' Uniform
                Regulations, Part VI, Sec. 12, ] 1. The Department interprets ``or
                other personnel'' in the Uniform Regulations to encompass mechanics or
                technicians--skilled workers who, under the Uniform Regulations,
                perform direct production work when they are ``responsible for
                maintaining and ensuring the operation of the production line or tools
                and equipment used in the production of vehicles or parts,'' but who do
                not perform direct production work, and thus cannot be included in the
                average hourly base wage rate calculation, when they do not meet that
                requirement. Uniform Regulations, Part VI, Sec. 12, ] 1. A contrary
                interpretation of ``other personnel'' that, for example, encompassed
                all other types of workers, could unduly exclude direct production work
                from the average hourly base wage rate calculation in a manner that the
                Department believes is contrary to the USMCA and the intent underlying
                the Uniform Regulations.
                Section 810.135 Interns, Students, and Trainees
                 Section 810.135 provides that hours worked by an intern, student,
                or trainee who does not have an express or implied compensation
                agreement with the employer are not considered hours worked in direct
                production. Accordingly, the hours worked by such workers are not
                included in the average hourly base wage rate calculation. Conversely,
                if an intern, student, or trainee has an express or implied
                compensation agreement with the employer, the intern, student, or
                trainee's hours and pay are treated like any other worker in the
                average hourly base wage rate calculation, as described in Sec.
                810.105. This approach is consistent with the Uniform Regulations,
                which address interns, students, and trainees in the average
                [[Page 39790]]
                base hourly wage rate and direct production work definitions. See
                Uniform Regulations, Part VI, Sec. 12, ] 1.
                Section 810.140 High-Wage Transportation or Related Costs for Shipping
                a High-Wage Part or Material
                 Section 810.140 provides that a producer may include in its high-
                wage material and manufacturing costs high-wage transportation or
                related costs for shipping a high-wage part or material within the
                USMCA Countries, if these high-wage transportation or related costs
                have not otherwise already been included in the annual purchase value
                calculations. This section tracks the Automotive Appendix, Article 7.3
                n.75, and properly credits a producer who uses high-wage labor to
                perform transportation and shipping work. As defined and described in
                more detail in the Uniform Regulations, ``high-wage transportation or
                related costs for shipping'' refers to the costs that a producer incurs
                on transportation, logistics, or material handling services where the
                relevant service provider paid an average hourly base wage rate of at
                least US$16 per hour to the provider's direct production workers
                performing these services. For purposes of this section, such workers
                include, for example, drivers and loaders performing the
                transportation, logistics, or material handling of a part or component.
                The Department may verify the hourly base wage rate for such workers by
                examining the transportation or shipping providers' contracts,
                including collective bargaining agreements entered into by the
                transportation or shipping company, and other indications of the wages
                paid to these workers.
                Section 810.145 Currency Exchange
                 Section 810.145 explains that the high-wage component of material
                and manufacturing expenditures (and assembly expenditures under Sec.
                810.300) is expressed in U.S. dollars--US$16 per hour. Pursuant to the
                USMCA and its implementing statute, the Department may review
                certifications and conduct verifications of plants or facilities in
                Mexico and Canada that pay wages in the Mexican peso or Canadian
                dollar. Accordingly, the Department may need to review average hourly
                base wage rate calculations of producers based on wages paid in the
                respective domestic currencies. In reviewing those calculations, the
                Department will follow the rules governing currency exchange set forth
                in the Uniform Regulations, e.g., Uniform Regulations, Part I, Sec. 2,
                ] 1; Part IV, Sec. 12, ] 1, and regulations and/or guidance issued by
                the Department of the Treasury and/or CBP.
                Section 810.150 Adjustment of the Average Hourly Base Wage Rate
                 This section provides that in the event the USMCA Countries agree
                to adjust the average hourly base wage rate from US$16 per hour, the
                Department's regulations will continue to apply and the Department will
                use the new average hourly base wage rate. A change in this dollar
                amount does not affect the principles set forth in the Department's
                regulations, and so continuing to apply these regulations is
                appropriate. This section will ensure continuity and avoid the
                misimpression that a change to the average hourly base wage rate would
                require the Department to promulgate new regulations. In addition, to
                ensure that the regulated community is aware of the change, WHD will
                publish a notice in the Federal Register alerting the public of the new
                dollar amount of the average hourly base wage rate requirement.
                Subpart C--Calculating the High-Wage Technology Expenditures Credit
                Section 810.200 High-Wage Technology Expenditures Credit
                 This section explains how to calculate the second high-wage
                component of the LVC requirements, the high-wage technology
                expenditures credit. Article 7.3 of the Automotive Appendix provides
                that a producer is entitled to a high-wage technology expenditures
                credit equal to ``the annual vehicle producer expenditures in North
                America on wages for research and development (``R&D'') or information
                technology (``IT'') as a percentage of total annual vehicle producer
                expenditures on production wages in North America.'' As explained in
                this section, a producer may receive a 10 percent credit towards its
                total LVC requirement by demonstrating that the sum of its annual
                expenditures in North America on wages for R&D and IT is equal to or
                greater than 10 percent of its annual expenditures on production wages
                in North America. If a producer's annual expenditures in North America
                on wages for R&D and IT are less than 10 percent of the producer's
                annual expenditures in North America on production wages, then the
                producer is eligible for a credit equal to the actual percentage of the
                producer's annual expenditures in North America on wages for R&D and IT
                as a percentage of its total annual expenditures in North America on
                production wages. In other words, the high-wage technology expenditures
                credit is calculated as follows, with a maximum allowable credit of 10
                percent:
                [GRAPHIC] [TIFF OMITTED] TR01JY20.010
                 Consistent with the USMCA, and as described in more detail in the
                Uniform Regulations, for purposes of the calculation, ``annual
                expenditures in North America on wages for R&D'' means total annual
                corporate spending in North America on wages for research and
                development, including prototype development, design, engineering,
                testing, or certifying operations. See Automotive Appendix, Article
                7.3, n. 79; see also Uniform Regulations, Part VI, Sec. 12, ] 1.
                Likewise, ``annual expenditures in North America on wages for IT''
                means total annual corporate spending in North America on wages for
                information technology, including software development, technology
                integration, vehicle communications, and information technology support
                operations. See Automotive Appendix, Article 7.3, n. 80. The Department
                invites comment on the types of R&D and IT work performed for
                automotive producers, including how often such workers perform other
                types of work in addition to their R&D and IT duties. Similarly,
                consistent with the USMCA, ``annual expenditures in North America on
                production wages'' means total annual corporate spending on wages for
                production of passenger vehicles, light trucks, and heavy trucks in
                North America. See Automotive Appendix, Article 7.
                 The Department interprets the term ``wages'' for purposes of the
                high-wage technology expenditures credit as meaning all wages paid to
                relevant
                [[Page 39791]]
                workers, including bonuses, premium payments, incentive pay, and
                overtime premiums. ``Wage'' in this context is distinct from the
                ``hourly base wage rate'' defined in Sec. 810.105(b)(1), as the treaty
                language addressing the high-wage technology expenditures credit refers
                to ``wages'' broadly as opposed to the narrower ``base wages'' used for
                calculating the high-wage material and manufacturing expenditures
                component and the high-wage assembly expenditures credit. Thus, for
                purposes of calculating the numerator in the above formula, producers
                must total expenditures for all wages paid to workers in North America
                for the research and development and information technology work
                described above. Similarly, for purposes of calculating the denominator
                in the above formula, producers must total expenditures for all wages
                paid to workers in North America who perform direct production work.
                Producers often keep this data regarding total expenditures on wages in
                the normal course of business, and thus this interpretation of
                ``wages'' should provide administrative efficiency for producers.
                Subpart D--Calculating the High-Wage Assembly Expenditures Credit
                Section 810.300 High-Wage Assembly Expenditures Credit
                 This section describes the requirements for calculating the high-
                wage assembly expenditures credit, the third high-wage component of the
                LVC requirements. Consistent with Article 7 of the Automotive Appendix,
                Sec. 810.300(a) explains that a producer may receive a credit of five
                percent towards the total LVC requirement if it demonstrates that it
                operates, or has a long term contract with, a qualified assembly plant.
                An assembly plant qualifies a producer for the high-wage assembly
                expenditures credit if it is a North American high-wage engine assembly
                plant, transmission assembly plant, or advanced battery assembly plant
                that meets certain minimum annual production capacity requirements.
                Five percent is the only possible assembly expenditures credit that
                producers may receive; producers may not receive a credit of less than
                five percent if they qualify for the high-wage assembly expenditures
                credit and may not receive a credit of greater than five percent if
                they identify more than one qualified assembly plant.
                 Subsections 810.300(a)(1)-(3) explain the three types of assembly
                plants that may qualify a producer for the high-wage assembly
                expenditures credit. Qualified assembly plants may be engine,
                transmission, or advanced battery assembly plants, must be ``high-
                wage,'' and must meet certain levels of minimum annual production
                capacities of originating parts. As detailed in Sec. 810.300(c), these
                minimum annual production capacity levels are set forth in Article 7 of
                the Automotive Appendix and in the Uniform Regulations. The required
                minimum annual production capacity levels are not included in this
                section because they are outside of the Department's authority and are
                instead within CBP's purview. Thus, producers should consult the
                Uniform Regulations and CBP guidance to ensure that relevant assembly
                plants meet the required minimum annual production capacity levels
                required for the producer to qualify for the high-wage assembly
                expenditures credit.
                 Subsection 810.300(b) further explains that in order to be
                considered ``high-wage'' for purposes of the high-wage assembly
                expenditures credit, an assembly plant must have an average hourly base
                wage rate of at least US$16 per hour for the entire plant. This
                requirement is consistent with Article 7 of the Automotive Appendix,
                which requires an assembly plant to have an average production wage of
                at least US$16 per hour to qualify for the high-wage assembly
                expenditures credit. To ensure consistency across calculations for the
                LVC requirements, the average production wage for the high-wage
                assembly expenditures credit is determined by calculating the average
                hourly base wage rate in the same manner as for the high-wage material
                and manufacturing expenditures credit, as detailed in Sec. 810.105.
                 Subsection 810.300(d) clarifies that the definition of ``long term
                contract'' for purposes of this section is set forth in the Uniform
                Regulations. See Uniform Regulations, Part IV, Sec. 18, ]] 12-14.
                 Subsection 810.300(e) allows a producer to use an assembly plant
                that it relied on to satisfy the high-wage material and manufacturing
                expenditures component of the LVC requirement to also qualify for the
                high-wage assembly expenditures credit if that assembly plant meets the
                requirements of Sec. 810.300(a). The Department recognizes that an
                assembly plant used by a producer to meet the high-wage material and
                manufacturing expenditures component could also be a qualified plant
                for purposes of the high-wage assembly expenditures component.
                Therefore, this section permits producers to use the same plant for
                both high-wage components if all requirements are met.
                Subpart E--Certification Provisions
                Section 810.400 Scope and Purpose of This Subpart
                 In order to receive preferential tariff treatment under the Act, a
                producer must certify that its production of covered vehicles meets the
                LVC requirements, including the high-wage components of the LVC
                requirements that the Department administers. See 19 U.S.C.
                4532(c)(1)(A). The Secretary, in consultation with CBP, must ensure
                that the producer's certification submitted to CBP does not contain
                omissions or errors before the certification is considered properly
                filed. See 19 U.S.C. 4532(c)(1)(B)(i). Consistent with the Act, the
                Department's certification role is limited to reviewing the high-wage
                components of the LVC certification for omissions or errors. All other
                certification matters are outside of the Secretary's purview, and are
                addressed in the Uniform Regulations and regulations and/or guidance
                issued by CBP or other federal agencies.
                Section 810.405 Certification
                 Consistent with the requirements of the Act, and to aid the
                Department in fulfilling its statutory mandate, this section lists the
                information submitted by producers to CBP that WHD will review for
                omissions or errors. The certification information described in this
                section that WHD will review relates to the high-wage components of the
                LVC requirements that the Department administers.
                 Under subsection 810.405(a)(1), WHD will review the certifying
                vehicle producer's name, corporate address, Federal Employer
                Identification Number or alternative unique identification number of
                the producer's choosing, such as a Business Number (BN) issued by the
                Canada Revenue Agency, Registro Federal de Contribuyentes (RFC) number
                issued by Mexico's Tax Administration (SAT), Legal Entity Identifier
                (LEI) number issued by the Global Legal Entity Identifier Foundation
                (GLEIF), or an identification number issued to the person or enterprise
                by CBP, and a point of contact. This information will provide context
                for the certification and help streamline the verification process.
                 Under subsection 810.405(a)(2), WHD will review the vehicle class,
                model line, or other relevant category the motor vehicles covered by
                the certification. The producer need not provide a detailed description
                of the vehicles, but need only provide
                [[Page 39792]]
                sufficient information to enable WHD to distinguish other
                certifications filed by the same producer. This information will enable
                WHD to review certifications more efficiently by eliminating
                potentially duplicative submissions.
                 Under subsection 810.405(a)(3), WHD will review the time period the
                producer is using for its LVC calculations. The time period options are
                taken from Article 7 of the Automotive Appendix, which permits
                calculating the LVC over any one of the following periods: (1) The
                previous fiscal year of the producer; (2) the previous calendar year;
                (3) the quarter or month to date in which the vehicle is produced or
                exported; (4) the producer's fiscal year to date in which the vehicle
                is produced or exported; or (5) the calendar year to date in which the
                vehicle is produced or exported. The period a producer selects will be
                the period its LVC certification is valid. See 19 U.S.C.
                4532(c)(1)(B)(ii). WHD must know the date range the producer used to
                perform its calculations in order to ensure that the high-wage
                components of the certification are properly filed for a given import,
                and to review the relevant records in the event of a verification.
                 Under subsection 810.405(a)(4), WHD will review the name, address,
                and Federal Identification Number or alternative unique identification
                number of the producer's choosing, such as a Business Number (BN)
                issued by the Canada Revenue Agency, Registro Federal de Contribuyentes
                (RFC) number issued by Mexico's Tax Administration Service (SAT), Legal
                Entity Identifier (LEI) number issued by the Global Legal Entity
                Identifier Foundation (GLEIF), or an identification number used by CBP,
                for each plant or facility the producer of the covered vehicle is
                relying on to meet the high-wage material and manufacturing
                expenditures component of the LVC requirements. WHD will use this
                information to learn what plants and facilities the producer is relying
                on to meet the LVC requirements. In addition, this information will
                streamline the verification process if WHD needs to contact a plant or
                facility during a verification.
                 Under subsection 810.405(a)(5), WHD will review the producer's
                affirmative statement that the average hourly base wage rate meets or
                exceeds US$16 per hour for each plant or facility identified in Sec.
                810.405(a)(4). Including this information in the certification form
                will assist WHD in identifying potential errors in the producer's
                determination that it may use a particular plant or facility to meet
                the high-wage components of the LVC requirements, and will streamline
                the verification process.
                 If the producer is using high-wage transportation or related costs
                to meet the high-wage material and manufacturing expenditures
                component, under Sec. 810.405(a)(6) WHD will review the producer's
                affirmative statement that indicates such use, and review the company
                name and other identifying information for each company the producer
                used to calculate its high-wage transportation or related costs. This
                information will allow WHD to identify the transportation companies
                that the producer is using so that, in the event of a verification, WHD
                can confirm the companies' average hourly base wage rates.
                 If the producer is using the high-wage technology expenditures
                credit to meet the LVC requirements, under Sec. 810.405(a)(7) WHD will
                review the producer's affirmative statement that indicates such use,
                and the percentage the producer is claiming as a credit towards the
                total LVC requirement. Documenting the percentage the producer is
                claiming as a high-wage technology expenditures credit as part of the
                certification will demonstrate that the producer has performed this
                calculation as required, ensure that producers recognize that a record
                of qualifying expenditures must be maintained in connection with this
                certification, and streamline the verification process.
                 If the producer is using the high-wage assembly expenditures credit
                to meet the LVC requirements, under Sec. 810.405(a)(8) WHD will review
                the producer's affirmative statement that indicates such use, and the
                plant name and other identifying information for the assembly plant the
                producer used to qualify for the high-wage assembly expenditures
                credit. Under this subsection, WHD will also review the producer's
                affirmative statement that the average hourly base wage rate meets or
                exceeds US$16 per hour for the assembly plant identified in the
                certification. This information will assist WHD in identifying
                potential errors or omissions in the producer's certification and will
                streamline the verification process.
                 Subsection 810.405(b) requires a producer of the covered vehicle to
                ensure that records are kept of information to support its compliance
                with the high-wage components of the LVC requirements, including the
                calculations submitted under Sec. Sec. 810.405(a)(5), (a)(7), and
                (a)(8)(ii). This subsection is consistent with the implementing
                statute. See 19 U.S.C. 4532(c)(1)(A)(ii). Such information will
                generally be in records that producers must ensure are kept under the
                recordkeeping requirements set forth at Sec. 810.600, and should not
                be submitted as part of the certification. This subsection further
                explains that producers are responsible for ensuring that records are
                provided to the Department upon request, as described in Sec.
                810.600(c), but that these records may be physically maintained by a
                supplier or contractor and that the Department will accept records
                directly from a supplier or contractor if, for example, the producer
                has contracted for such an arrangement. As discussed in more detail
                later in this preamble, the Department may request this supporting
                information when conducting a verification to determine whether a
                producer met the high-wage components of the LVC requirements.
                 Subsection 810.405(c) explains that requirements in subsection
                810.405(a) apply to all producers of covered vehicles whether or not
                they are subject to the alternative staging regime. While the LVC
                percentage benchmarks change for producers subject to the alternative
                staging regime period, the high-wage components of the LVC requirements
                that the Department verifies do not change. Specifically, the US$16 per
                hour requirement (for high-wage material and manufacturing expenditures
                and assembly expenditures) and the wage calculation for high-wage
                technology expenditures are fixed. Accordingly, producers subject, and
                not subject, to the alternative staging regime will submit, and WHD
                will review, the same information described in Sec. 810.405. This
                uniform approach decreases regulatory complexity and will simplify and
                help expedite the Department's review of producer certifications.
                Section 810.410 Administrator's Review for Omissions or Errors
                 The Act requires the Secretary, in consultation with CBP, to ensure
                that each producer's certification does not contain omissions or errors
                before the certification is considered properly filed. See 19 U.S.C.
                4532(c)(1)(B)(i). The Administrator will review each certification for
                omissions or errors relating to the high-wage components of the LVC
                requirements. An omission would include, for example, the producer
                failing to include with its certification any portion of the
                information listed in Sec. 810.405(a). An error would include, for
                example, a certification based on the wrong type of information (such
                as a time period not
                [[Page 39793]]
                listed in Sec. 810.405(a)(3)). If the Administrator determines that
                the high-wage components of the certification contain no omissions or
                errors, WHD will notify CBP that the high-wage components of the
                certification have been properly filed.
                 USMCA Article 5.7 states that a USMCA Country ``shall not reject a
                certification of origin due to minor errors or discrepancies that do
                not create doubts concerning the correctness of the import
                documentation'' and provides importers ``not less than five working
                days to provide the customs administration [of the importing country] a
                corrected certification of origin.'' Consistent with this requirement
                and as described in Sec. 810.410(b), if the Administrator determines
                that the certification contains an omission or error, WHD will notify
                CBP, and CBP will require the producer to submit a modified
                certification, or otherwise contest the Administrator's determination
                that the certification contains an omission or error. If the producer
                submits a modified certification in response to this notice, the
                Administrator will review the modified certification for omissions or
                errors.
                 If, upon review of the original or modified certification, the
                Administrator determines that it contains no omissions or errors, WHD
                will notify CBP that the high-wage components of the certification have
                been properly filed. If the producer does not successfully contest the
                notice of deficiency or submit a modified certification in response to
                the notice, or if the modified certification contains omissions or
                errors, WHD will notify CBP that the high-wage components of the
                certification have not been properly filed. The producer may appeal
                this decision pursuant to the regulation at Sec. 810.700. Regardless
                of the Administrator's determination of filing status, however, CBP
                retains complete authority over all decisions concerning whether to
                grant or deny preferential tariff treatment based on certification
                information reviewed by WHD.
                Subpart F--Verification of the Labor Value Content's Wage Components
                Section 810.500 Scope and Purpose of This Subpart
                 This provision details the authority of the Secretary to
                participate in verifications of compliance with the USMCA's LVC
                requirements as well as the scope of the Secretary's role in those
                verifications. The Act gives the Secretary of the Treasury, in
                conjunction with the Secretary, authority to verify whether a covered
                vehicle complied with the LVC requirements set forth in the USMCA. See
                19 U.S.C. 4532(e)(1). The purpose of the regulations in this subpart is
                to define the Secretary's role in conducting these verifications and
                the process by which the Secretary will conduct these verifications.
                Specifically, the Secretary, through the Administrator, will verify
                compliance with the high-wage components of the LVC requirements.
                Verifications of other components of the LVC requirements are outside
                of the Secretary's purview and are described in the Uniform Regulations
                and regulations and guidance issued by CBP and/or the Department of the
                Treasury.
                Section 810.505 Scope of Verification
                 Subsection 810.505(a) permits the Administrator, or the
                Administrator's designee, to verify, through investigation, whether a
                producer complied with the high-wage components of any part of the LVC
                requirements. The regulation explains that the producer is responsible
                for all aspects of compliance with the high-wage components of the LVC
                requirements at its plants and facilities as well as the plants and
                facilities of the suppliers and contractors listed in its
                certification. For example, notwithstanding any agreement between the
                producer and a supplier or contractor, as discussed in Sec.
                810.600(d), it is ultimately the responsibility of the producer to
                ensure that records are properly maintained and provided to the
                Department upon request. For the wage component of the high-wage
                material and manufacturing expenditures provision of the LVC
                requirements, the Administrator may verify whether the average hourly
                base wage rate in any plant or facility relied on by the producer in
                its certification meets the US$16 per hour requirement. If the
                producer's certification claims transportation or related costs for
                shipping as part of its high-wage material and manufacturing
                expenditures calculation, as detailed in Sec. 810.405(a)(6), the
                Administrator may verify whether any transportation, logistics, or
                material handling provider relied on by the producer in its
                certification meets the US$16 per hour requirement. Verifications of
                other components of the material and manufacturing expenditures
                provision of the LVC requirements are conducted by CBP. The
                Administrator may also verify that the producer properly claimed a
                credit for high-wage technology expenditures, as explained in Sec.
                810.200. For verifications of the high-wage assembly expenditures
                provision of the LVC requirements, the Administrator may also verify
                whether an engine, transmission, or advanced battery assembly facility
                that a producer relied on in its certification has an average hourly
                base wage rate of at least US$16 per hour. Verifications of any other
                component of the high-wage assembly expenditures credit are conducted
                by CBP.
                 Subsection 810.505(b) provides the investigation methods the
                Administrator may use in the course of a verification. The Act grants
                the Secretary authority, which has been delegated to the Administrator,
                to examine, or cause to be examined, upon reasonable notice, any record
                (including any statement, declaration, document, or electronically
                generated or machine-readable data) described in the Administrator's
                notice with reasonable specificity. See 19 U.S.C. 4532(e)(4)(A)(i). The
                Act states that the Secretary shall assist the Secretary of the
                Treasury to carry out these actions. 19 U.S.C. 4532(e)(4)(A). The
                Department interprets this provision to mean that the Secretary of the
                Treasury, through CBP, has the primary role of conducting verifications
                of the LVC requirements, and that the Secretary will assist CBP by
                using these methods to verify whether the production of covered
                vehicles meets the high-wage components of the LVC requirements.
                 The Administrator may examine these records in person as part of a
                verification visit, or may request the producer to provide them
                electronically or by mail. Article 5.9, paragraph 7 of the USMCA
                explains that for verifications, each USMCA Country must provide
                producers at least 30 days to respond to written requests for
                information and 30 days to respond to requests to open facilities for a
                verification visit. Accordingly, the Department interprets the term
                ``reasonable notice'' as used in the Act to mean 30 days' notice. The
                Act grants the Secretary authority to request information from any
                officer, employee, or agent of a producer of automotive goods, as
                necessary, that may be relevant with respect to whether the production
                of covered vehicles meets the high-wage components of the LVC
                requirements. See 19 U.S.C. 4532(e)(4)(A)(ii). As the statute gives the
                Secretary broad authority to request information that may be relevant,
                the Department interprets the term ``employee'' in this context to
                include any worker at a plant or facility relied on in the producer's
                certification, regardless of the worker's employment relationship with
                the producer. This encompasses, for example, workers
                [[Page 39794]]
                employed by a staffing agency. To help ensure receipt of accurate
                information, the information may be obtained under oath, at the
                discretion of the Administrator.
                 Subsection 810.505(c) describes the specific content of the records
                the Administrator is authorized to request and examine. As the
                Administrator's role in verifications is to verify the high-wage
                components of the LVC requirements, the Administrator may request and
                examine records relating to wages, hours, job responsibilities, or any
                other information related to the producer's certification that it meets
                the high-wage components of the LVC requirements. The specific types of
                records that the Administrator may request are those that producers are
                required to maintain under this rule's recordkeeping requirements, see
                Sec. 810.600, and will often include worker time records, payroll
                records, and information that the producer is required (under 19 U.S.C.
                1508(b)(4)) to keep on record to support its certification
                calculations. The Administrator will review the provided records to
                verify that the high-wage components of the producer's LVC calculations
                are correct.
                 Subsection 810.505(d) explains that the Administrator will conduct
                its verification consistent with the timelines in Article 5.9 of the
                USMCA. Article 5.9 details the requirements for verification of all the
                rules of origin, of which the LVC requirements make up just one. It
                provides timelines for requesting verification visits or information
                from producers, producers' responses to those requests, completion of
                the verification, and issuance of a written determination. Most of the
                timelines apply to actions within the purview of CBP, e.g., issuance of
                a written determination. However, the Administrator will conduct
                verifications consistent with these timelines to the extent they are
                applicable to the Administrator's verification. For example, paragraph
                10 of Article 5.9 pertains to requests from producers for postponement
                of a verification visit. Consistent with paragraph 10, the
                Administrator (acting through, and subject to approval by, CBP) will
                allow a producer, on a single occasion, within 15 days of receipt of a
                notification requesting a verification visit, to request the
                postponement of the proposed verification visit for a period not
                exceeding 30 days from the proposed date of the visit.
                Section 810.510 Notice to a Producer That a Verification of Compliance
                With Labor Value Content Requirements Has Been Initiated
                 This section provides that CBP will notify a producer that a
                verification of LVC compliance has been initiated, regardless of which
                component(s) of the LVC requirements are the subject of that
                verification. CBP makes determinations regarding grants or denials of
                preferential tariff treatment and thus is responsible for notifying
                producers if a verification of LVC compliance that may implicate such
                preferential tariff treatment has been initiated.
                 CBP is responsible for notifying a producer that a verification of
                LVC compliance has been initiated, both for verifications that CBP
                initiates, and for verifications the Administrator has initiated with
                CBP. The Administrator's role in initiating verifications with CBP is
                limited to verifications concerning all aspects of the high-wage
                components of a producer's LVC certification and supporting records and
                calculations. CBP may initiate and conduct verifications of the
                components of a producer's LVC certification and may ask the
                Administrator to conduct a verification of the high-wage components.
                Regardless of how the verification is initiated, CBP will provide
                notice to the producer.
                Section 810.515 Conduct of Verifications
                 This section explains how the Administrator will conduct
                verification visits, where appropriate. Article 5.9 of the USMCA
                authorizes an importing USMCA Country to use a variety of techniques to
                conduct verifications, including verification visits to the premises of
                the producer of the good in order to request documents and other
                information, and observe the production process and the related
                facilities. As the Administrator is authorized to conduct
                verifications, the Administrator may conduct verification visits.
                During these visits, the Administrator may request and inspect
                documents, interview workers or others on the premises, inspect the
                facility, and gather any other information as the Administrator deems
                necessary to the verification. As the Administrator can verify
                compliance only with a portion of the LVC requirements, the
                Administrator will coordinate with CBP and other federal agencies in
                the course of conducting any verifications, as appropriate. The
                Administrator also retains discretion to involve other federal
                agencies, as well as agencies within the Department such as the Bureau
                of International Labor Affairs, in its verifications, as appropriate.
                Section 810.520 Confidentiality
                 This section provides that the Administrator will protect the
                confidentiality of any person who provides information to the
                Department in confidence in the course of a verification under this
                subpart to the full extent possible under existing law. This includes,
                for example, invoking the government informant's privilege where
                appropriate. The intent of this section is to provide assurances of
                confidentiality, to the extent possible, to any person who provides
                information to the Department, in the hope that such assurances
                encourage those with information relevant to the Department's
                investigations or verifications to provide information to, or speak
                openly with, the Department. Retaliation against any person who
                provides such information is prohibited under the Act's whistleblower
                provisions, as implemented in Sec. 810.800.
                Section 810.525 Notice Provided to CBP Regarding the Administrator's
                Findings
                 This section provides that upon completion of a verification, the
                Administrator will provide CBP with the verification findings and a
                written analysis explaining the basis for those findings. Article 5.9,
                paragraph 14, of the USMCA requires the importing USMCA Country to
                provide the producer subject to a verification with a written
                determination of whether the goods at issue qualify for preferential
                tariff treatment, including the findings of facts and legal basis for
                that determination. As discussed supra, CBP makes all determinations
                regarding grants or denials of preferential tariff treatment.
                Accordingly, CBP will provide this written determination to the
                producer at the conclusion of a verification. If, however, the
                Administrator participated in a verification because it involved the
                verification of one or more of the high-wage components of the LVC
                requirements, the Administrator will provide CBP with the verification
                findings and an analysis explaining the basis of those findings so that
                CBP can include relevant information in the written determination
                ultimately provided to the producer.
                [[Page 39795]]
                Section 810.530 Verification of Labor Value Content Compliance for
                Producers Subject to Alternative Staging Regime
                 Verification procedures outlined in this subpart apply to producers
                as soon as the USMCA enters into force, whether or not the producers
                are subject to the alternative staging regime. The Act provides that
                the Administrator may conduct verifications of compliance with the LVC
                requirements, regardless of whether the producer is subject to the
                alternative stage regime. See 19 U.S.C. 4532(d)-(e). The
                Administrator's role in administering the LVC requirements does not
                change if a producer is subject to the alternative staging regime.
                Accordingly, verifications conducted by the Administrator are conducted
                in the same manner when a producer is subject to the alternative
                staging regime.
                Subpart G--Recordkeeping Requirements
                Section 810.600 Recordkeeping Requirements
                 Article 5.8 of the USMCA requires USMCA Countries to require
                importers, exporters, and producers to maintain records necessary to
                demonstrate the validity of certifications of origin. These records
                include those relating to the production of goods, including covered
                vehicles. Article 5.9 of the USMCA authorizes USMCA Countries to
                request such documentation during the verification process. The Act
                requires importers who claim preferential tariff treatment under the
                USMCA for goods imported into the United States from a USMCA Country,
                and vehicle producers whose goods are the subject of a claim for
                preferential tariff treatment under the USMCA, to make, keep, and,
                pursuant to rules and regulations promulgated by the Secretary, render
                for examination and inspection records and supporting documents related
                to the labor value content requirements. See 19 U.S.C. 1508(b)(4). The
                Act further grants the Secretary authority during the course of a
                verification to request any records relating to wages, hours, job
                responsibilities, or any other information in any plant or facility
                relied on by a producer of covered vehicles to demonstrate that the
                production of those vehicles meets the high-wage components of the LVC
                requirements. See 19 U.S.C. 4532(e)(4)(B). Pursuant to these
                authorities, this section of the rule details the recordkeeping
                obligations of importers, exporters, and producers of covered vehicles
                necessary to demonstrate compliance with the high-wage components of
                the LVC requirements.
                 Subsection 810.600(b) provides that although electronic records are
                generally preferred, as such records are easily generated, maintained,
                and made available for inspection, the records described in this
                section may be made and maintained in any form or format. However,
                pursuant to Article 5.8, paragraph 3 of the USMCA, the records must be
                in a form or format that allows the records to be promptly retrieved
                and printed or copied.
                 Consistent with the verification procedures set forth in Article
                5.9 of the USMCA and 19 U.S.C. 4532(e), Sec. 810.600(c) provides that
                the records described in this section must be made available to an
                authorized representative of the Department for inspection, copying,
                and transcription upon written request to the producer. The request
                will describe the records that are being sought, and the party
                receiving the request will have 30 days from the date of the written
                request to provide the requested records to the Department in an
                accessible format, unless the party has requested and obtained an
                extension of that time.
                 Consistent with Article 5.8 of the USMCA, Sec. 810.600(d) provides
                that importers must ensure that the records described in Sec. 810.600
                are maintained for 5 years from the date of importation of any vehicle
                for which preferential tariff treatment was claimed, and exporters and
                producers must ensure that the records described in Sec. 810.600 are
                maintained for 5 years from the date on which the certification of
                origin was completed. To the extent the producer relies in its
                certification on plants or facilities it does not operate, the plant or
                facility may maintain its records relevant to the producer's
                certification, provided the producer can ensure such records to support
                its certification are properly maintained and provided to the
                Department upon request within the 30-day timeframe provided for in
                Sec. 810.600(c). The same obligation applies where a plant or
                facility, whether operated by the producer or another entity, uses
                contract workers, such as workers employed through a staffing agency,
                or where the producer counts high-wage transportation or related costs
                for shipping toward its LVC obligations. Thus, in such instances, the
                producer must either have or be able to produce (or have the contractor
                produce) upon request within the 30-day timeframe provided for in Sec.
                810.600(c) the records described in this section for such workers, if
                such records are relevant to the producer's certification. The
                Department will accept records directly from a supplier or contractor
                where, for example, the producer and supplier or contractor have
                contracted for such an approach.
                 Subsection 810.600(e) details the specific records that must be
                preserved and maintained to demonstrate compliance with the high-wage
                material and manufacturing expenditures component and eligibility for
                the high-wage assembly expenditures credit. These records are necessary
                for the Department to verify that wages for all hours worked in direct
                production have been appropriately included in the computation of the
                average hourly base wage rate, and to ensure that benefits, bonuses,
                premium payments, incentive pay, overtime premiums, or other similar
                payments have been properly excluded from that calculation. Moreover,
                to enable the Department to verify that a producer's average hourly
                base wage rate calculation is correct, the records described in this
                section must cover the entirety of the time period used by the producer
                to calculate the average hourly base wage rate for each plant or
                facility relied upon to meet the LVC requirements.
                 Subsection 810.600(e) provides that producers must maintain certain
                records for all workers who worked at any plant or facility relied upon
                by the producer to meet the high-wage material and manufacturing
                expenditures component or to qualify for the high-wage assembly
                expenditures credit and who are subject to the FLSA recordkeeping
                requirements under 29 CFR 516.2. If such workers are employed outside
                the United States, but if employed in the United States would be
                subject to the recordkeeping requirements under 29 CFR 516.2, the
                producer must also maintain the records detailed in this subsection for
                such workers. Since, due to recordkeeping obligations under the FLSA,
                plants and facilities in the United States generally already maintain
                records for most workers who work in direct production, the
                requirements in Sec. 810.600(e) should impose little to no additional
                recordkeeping burden for those plants and facilities.
                 Producers must also maintain the records required under subsection
                810.600(e) for workers in any USMCA Country who have performed direct
                production work during the relevant time period but who are exempt from
                the recordkeeping requirements of 29 CFR 516.2, if the producer relied
                on those workers in its computation of the average hourly base wage
                rate. Such workers include, for example, workers who are exempt from
                the FLSA's minimum wage and overtime requirements under 29 CFR part 541
                [[Page 39796]]
                and those workers who would be exempt if employed in the United States
                (i.e., where the FLSA applies).
                 The specific records producers are required to maintain for the
                workers discussed above are outlined in Sec. Sec. 810.600(e)(1)-(6).
                Subsection 810.600(e)(1) explains that these records must contain, for
                each worker, the full name (or identifying symbol or number if one is
                used in place of the worker's name on any time, work, or payroll
                records), job title, home address, and other available contact
                information. These records are needed for the Department to determine
                which workers should be interviewed during a verification to obtain
                information about hours worked in direct production, job duties, and
                pay. This information also enables the Department to locate for
                interviews workers who are no longer working at the plant or facility
                in question.
                 Subsection 810.600(e)(2) provides that producers must keep records
                of the total number of daily and weekly hours worked by each worker.
                Such records are necessary to help the Department determine whether all
                hours worked in direct production were correctly included in the
                computation of the hourly base wage rate by, for example, comparing
                workers' hours worked in direct production with their total hours
                worked in the same time period. This subsection also explains that if a
                worker has a fixed schedule, working the same shifts and the same
                number of hours each week, the producer may instead maintain a record
                of the worker's scheduled hours. However, if this recordkeeping method
                is used, there must be verification by some method each week that the
                worker did in fact work the scheduled hours, and, in the occasional
                workweeks when the worker does not work the scheduled hours, a record
                of the actual hours worked each day and in total for those workweeks.
                 Subsection 810.600(e)(3) requires producers to keep certain
                earnings records. These earnings records include payroll records
                showing the date wages were paid and the time period covered by such
                wage payments, each worker's hourly rate of pay and basis of pay (e.g.,
                hourly, salary, piece rate, day rate, etc.), total daily or weekly
                straight-time earnings, total premium pay for any overtime hours
                worked, total pay for the pay period, and any deductions taken from
                each worker's pay. To the extent that a worker's rate of pay or
                straight-time earnings include benefits, bonuses, premium payments,
                incentive pay, or other similar payments excluded from the hourly base
                wage rate, as defined in Sec. 810.105(b)(1), the producer must keep
                records that clearly identify those payments and state the amount of
                such payments. This information is necessary for the Department to
                verify that each worker's hourly base wage rate was correctly
                calculated when computing the average hourly base wage rate for the
                relevant time period. For example, identifying the hourly rate and the
                basis of pay allows the Department to confirm that the hourly base wage
                rate has been correctly computed for workers who are paid on a salary,
                piece-rate, day-rate, or other basis. Identification of premiums,
                benefit payments, and other similar payments, such as incentive pay or
                bonuses, is necessary to ensure that such payments were not incorrectly
                included in the hourly base wage rate, while deductions must also be
                examined to ensure that the deductions were properly factored into the
                hourly base wage rate. WHD will apply the principles outlined in 29 CFR
                part 531 to determine whether a deduction may be included in the hourly
                base wage rate. For example, amounts deducted for board and lodging
                generally will be included in a worker's hourly base wage rate, while
                amounts deducted for tools and equipment will not.
                 Subsection 810.600(e)(4) provides that producers must keep records
                of any collective bargaining agreements, written agreements or
                memoranda, individual contracts, plans, trusts, employment contracts,
                or written memorandum summarizing oral agreements or understandings
                applicable to any workers who work in direct production. Such
                agreements help verify the average hourly base rate by showing the pay
                rates that have been agreed upon for such workers, as well as
                disclosing additional agreed-upon payments or benefits, so that the
                Department can confirm that such payments or benefits were not included
                in the computation of the average hourly base wage rate.
                 To ensure that the average hourly base wage rate has been
                calculated correctly for the high-wage material and manufacturing
                expenditures and the high-wage assembly expenditures components, Sec.
                810.600(e)(5) requires a record to be maintained of all hours worked in
                direct production, as defined at Sec. 810.105(b)(2), by workers at any
                plant or facility used to meet the high-wage component of the LVC
                requirements during the relevant time period. This record must include
                each worker's name, type of direct production work performed, hours
                worked by each worker that constitute direct production work, the
                hourly base wage rate paid to each worker for the direct production
                hours worked, and the total wages paid to workers for those direct
                production hours worked. These records must distinguish hours worked in
                direct production from other hours worked, to the extent that workers
                perform both direct production work and work not in direct production
                during the relevant time period. However, if at least 85 percent of a
                worker's total work hours are hours worked in direct production, a
                record may be kept of total work hours during the time period used for
                certification purposes. In that case, the recordkeeping system must
                also record hours worked in direct production and hours spent not
                performing direct production work in weeks when both types of work are
                performed, must record the hours at the time the work is performed, and
                must ensure the hours worked in direct production are clearly
                ascertainable so that WHD can verify, if necessary, that the 85 percent
                threshold was in fact reached for such workers.
                 If a producer uses high-wage transportation or related costs for
                shipping a high-wage part or component in calculating the high-wage
                material and manufacturing costs, Sec. 810.600(e)(6) requires
                maintenance of records demonstrating that the transportation,
                logistics, or material handling provider paid production workers
                performing the transportation of the part or component, such as drivers
                and loaders, an average hourly base wage rate of at least US$16. Such
                records might include, for example, the contracts with the
                transportation or shipping provider, collective bargaining agreements
                entered into by the transportation or shipping company, and other
                indications of the wages paid to these workers. This information is
                necessary to enable the Department to verify the accuracy of the
                producer's LVC calculations in those instances where transportation or
                related costs have been used to calculate the high-wage material and
                manufacturing expenditures.
                 Subsection 810.600(f) requires any producer claiming a credit for
                high-wage technology expenditures to maintain records demonstrating the
                wages paid by the producer for research and development or information
                technology work in North America, as well as the wages paid by the
                producer for production work in North America. The credit for high-wage
                technology expenditures is obtained through a comparison of
                expenditures on wages for research and development and information
                technology work in North America to expenditures on wages for
                production work in North America. Producers claiming this credit must
                therefore maintain a record of all wages
                [[Page 39797]]
                paid to workers who perform research and development and information
                technology work in North America, including the workers' names and the
                type of research and development or information technology work
                performed by each worker. Producers also must maintain a record of the
                total wages paid to workers who perform direct production work in North
                America, including the workers' names and the type of production work
                performed by each worker. Maintenance of records demonstrating this
                information is necessary for the Department to verify that the credit
                was calculated correctly.
                 The records listed in Sec. 810.600(e) are not necessarily an
                exhaustive list of the records producers must keep. As explained in
                Sec. 810.600(g), if a producer relied on any additional records not
                listed in Sec. Sec. 810.600(e) or (f) to support its calculations
                demonstrating that it meets the high-wage components of the LVC
                requirements, then the producer must also maintain those additional
                records. This requirement is consistent with 19 U.S.C.
                4532(c)(1)(a)(ii), which requires producers to have information on
                record to support the LVC calculations submitted in its certification.
                 Subsection 810.600(h) provides that nothing in Sec. 810.600 shall
                excuse any producer with facilities in the United States from complying
                with any recordkeeping or reporting requirement imposed by any other
                federal, state, or local law, ordinance, regulation, or rule. This
                includes, but is not limited to, recordkeeping requirements under the
                FLSA, the Family and Medical Leave Act, and state wage and hour laws,
                as well as any recordkeeping requirements concerning other components
                of the LVC requirements as set forth in regulations issued by CBP or
                any other federal agency.
                Subpart H--Administrative Review of the Department's Analysis and
                Findings
                Section 810.700 Administrative Review Procedures
                 This section describes the procedures the Department will use to
                engage in an administrative review of its initial verification analysis
                conducted under subpart F. As set forth in 19 U.S.C. 4532(e)(6), a
                protest filed with CBP under 19 U.S.C. 1514 (the Tariff Act of 1930)
                may relate to a producer's eligibility for preferential tariff
                treatment of a covered vehicle. If such a protest involves the
                Department's analysis relating to the high-wage components of the LVC
                requirements, the Secretary must conduct an administrative review of
                the decision and provide the results of that review to CBP. See 19
                U.S.C. 4532(e)(6)(A)(i)-(ii). The procedures outlined in this section
                describe how the Department will implement these requirements. In
                addition, and to promote simplicity and uniformity, the Department will
                follow these procedures when responding to a producer's appeal of a
                written notification under Sec. 810.410(b) that the high-wage
                components of the producer's certification were not properly filed due
                to an omission or error.
                 Under Sec. 810.700(a), consistent with 19 U.S.C. 4532(e)(6)(A)(i),
                upon being notified by CBP that a protest has been filed under 19
                U.S.C. 1514 that relates to the Department's analysis of the high-wage
                components of the LVC requirements, the Department will conduct an
                administrative review of its initial analysis.
                 Subsection 810.700(b) provides that this administrative review will
                be conducted either by the Administrator or by an official designated
                to be the presiding official by the Administrator. During the
                proceedings described below, the presiding official will possess the
                full authority of the Administrator. The presiding official must be of
                higher rank than the official who issued the initial verification
                analysis under review. This tiered approach ensures a robust
                administrative review process, and is consistent with WHD's process for
                reviewing its investigative findings under several other existing
                statutory enforcement regimes. Under subsection 810.700(c), the
                presiding official has the discretion to refer disputed questions of
                fact to the Chief Administrative Law Judge for a recommended decision.
                The Chief Judge must then designate an Administrative Law Judge to hear
                the disputed questions under the Department's rules of practice and
                procedure at 29 CFR part 18. The Administrative Law Judge must issue a
                recommended decision within 120 days of when the Administrator referred
                the questions of fact to the Chief Administrative Law Judge, or longer
                with consent of the parties. Ultimately, the Administrative Law Judge
                will issue a recommended decision to the presiding official on the
                referred question(s), which the presiding official has the discretion
                to accept or reject in whole or in part. Relatedly, under Sec.
                810.700(d), the presiding official has discretion to consider any
                evidence he or she deems relevant to rendering a determination and may
                request additional information from the protestor or additional
                verification from WHD.
                 Subsections 810.700(c) and (d) are intended to provide the
                Administrator with the flexibility and additional resources needed for
                ruling on the difficult factual questions that administrative reviews
                may present. This approach is similar to a process the Department may
                use when enforcing section 14(c) of the FLSA (which concerns payment of
                subminimum wages to workers with disabilities), and will help ensure
                that issues raised by producers are fully and properly considered. This
                thorough review will also promote efficiency by increasing the
                likelihood of satisfactorily resolving a protest at the administrative
                level, thereby decreasing the need for review before the Court of
                International Trade. The presiding official retains sole discretion to
                determine whether to refer factual questions to an administrative law
                judge, request additional verification by WHD, or to take both or
                neither of these steps. Factors that may influence the presiding
                official's decision may include, for example, the complexity of the
                factual issues presented or whether the protest raises issues or
                factual questions that did not arise during the initial verification.
                 Under subsection 810.700(e), the Administrator will strive to issue
                a decision within one year from the date the Administrator receives
                notice of the protest from CBP, not including any time during which
                additional verification or collection of information is taking place.
                While there is no adverse consequence to the Department for failing to
                meet this goal, see, e.g., Hitachi Home Electronics (America), Inc. v.
                U.S., 661 F.3d 1343 (Fed. Cir. 2011) (holding that Tariff Act did not
                provide a consequence for agency's failure to meet statutory deadline
                for government action), this timeframe comports with CBP's regulations,
                which state that CBP will review and act on a protest filed in
                accordance with 19 U.S.C. 1514 within two years from the date the
                protest was filed. See 19 CFR 174.21(a).
                 Under Sec. 810.700(f), and consistent with 19 U.S.C.
                4532(e)(6)(A)(ii), the Administrator will provide a copy of the
                Administrator's decision to CBP before the end of that time period.
                Subpart I--Whistleblower Protections
                Section 810.800 Prohibited Acts
                 Subpart I outlines anti-retaliation provisions provided for
                whistleblowers pursuant to 19 U.S.C. 4532(e)(5), which explicitly
                protects any person from retaliation for providing information relating
                to, or otherwise cooperating or seeking to cooperate with, a
                verification
                [[Page 39798]]
                of the LVC requirements, including a verification under subpart F. The
                Act provides that it is unlawful to ``intimidate, threaten, restrain,
                coerce, blacklist, discharge, or in any other manner discriminate
                against any person'' for such cooperation. 19 U.S.C. 4532(e)(5)(A).
                These protections are applicable to any person who engages in the
                protected activities, regardless of the person's employment status.
                Such protections are integral to effective verification of producers'
                compliance with the high-wage components of the LVC requirements, as
                verification of the average hourly base wage rate is dependent upon
                receiving accurate information from workers and others that they may
                not be willing to provide in the absence of such protections.
                 The Act authorizes the Secretary to ``take such actions under
                existing law, including imposing appropriate penalties and seeking
                appropriate injunctive relief, as may be necessary to ensure compliance
                with this subsection and as provided for in existing regulations.'' 19
                U.S.C. 4532(e)(5)(B). Accordingly, the enforcement processes described
                in this section, including the filing of complaints, investigations,
                issuance of determinations, and the administrative review process, are
                modeled upon the Department's existing whistleblower and anti-
                retaliation protections, primarily the Department's regulations
                relating to the temporary employment in the United States of
                nonimmigrants under H-1B visas. The H-1B regulations provide an
                appropriate model of ``existing law'' to follow, in part because the
                statutory language relating to whistleblower protections under the H-1B
                program, as set forth in section 212(n)(2)(C)(iv) of the Immigration
                and Nationality Act, is very similar to the whistleblower protection
                language in the USMCA Implementation Act. See 8 U.S.C.
                1182(n)(2)(C)(iv). Moreover, as the H-1B program whistleblower
                protections essentially codified Department whistleblower regulations
                at the time, the H-1B statute and regulations are particularly
                appropriate to use as a basis to ensure that the regulations for
                enforcement of the USMCA whistleblower protections are consistent with
                existing whistleblower regulations. See 144 Cong. Rec. S12752 (Oct. 21,
                1998).
                 Subsection 810.800(b) of this subpart establishes the procedure for
                filing complaints and is modeled after the H-1B program's complaint
                process as set forth in 20 CFR 655.806. A complaint must be filed
                within 12 months after the alleged discriminatory act occurs, with the
                date of filing being the date of the postmark, facsimile transmittal,
                phone call, email communication, or, where a complaint is made in
                person, the date upon which the complaint is received. No particular
                form or method of complaint is required, so long as the complaint
                provides sufficient facts for the Administrator to determine whether
                there is reasonable cause to believe that a violation has occurred and
                an investigation is warranted. Where the Administrator determines that
                an investigation is warranted, the complaint shall be accepted for
                filing and an investigation shall be conducted. After the
                investigation, a written determination will be issued within 30
                calendar days of the date on which the complaint was filed, unless both
                the complainant and the subject of the investigation agree that
                additional time is warranted, or if, for reasons outside of the control
                of the Administrator, the Administrator needs additional time to obtain
                information from either party or other sources to determine whether a
                violation has occurred. Such reasons may include, for example, delays
                in receiving requested information from either the complainant or the
                subject of the investigation, difficulty scheduling interviews in the
                course of the investigation, or impediments in obtaining other
                information necessary to the investigation.
                 Subsection 810.800(c) explains the contents of a determination by
                the Administrator at the conclusion of an investigation. This
                subsection provides that the Administrator's determination, which is
                served on all interested parties and a copy of which is provided to the
                Chief Administrative Law Judge, will describe the Administrator's
                findings and the reason(s) for the Administrator's determination. Where
                the Administrator has determined that a violation has occurred, the
                determination will prescribe any appropriate remedies, including
                monetary relief, injunctive relief, civil money penalties of up to
                $50,000 per violation, and/or any other remedies assessed. Such
                remedies may include equitable relief, such as employment,
                reinstatement, promotion, compensation for any monetary loss incurred
                by the complainant as the result of the violation, or any other relief
                necessary to make the complainant whole. These remedies are consistent
                with the statutory language authorizing the Department to impose
                appropriate penalties and seek appropriate injunctive relief as may be
                necessary to ensure compliance with the whistleblower provisions, see
                19 U.S.C. 4532(e)(5)(B), and are also consistent with existing
                whistleblower statutes and regulations. See, e.g., 20 CFR 655.810. For
                example, the regulation provides that the Administrator has the
                authority to impose civil money penalties of up to $50,000 per
                violation of this section. This interpretation of ``penalties'' as used
                in the statute is consistent with the Department's interpretation of
                ``penalties'' as used in other statutes the Department enforces. See,
                e.g., 8 U.S.C. 1188(g)(2); 29 CFR 501.19. Additionally, the maximum
                penalty amount is appropriate to ensure compliance with these
                prohibitions on retaliation given the size of the firms that will be
                certifying under the USMCA and the centrality of these whistleblower
                provisions to the verification of the LVC provisions. The
                Administrator's determination will also inform the interested parties
                of their right to request a hearing, and that if a hearing is not
                requested within 15 days of the date of the determination, that
                determination becomes final.
                 Subsection 810.800(d) explains the procedures for administrative
                review of the Administrator's determination, which are consistent with
                standard Department administrative review procedures. Any party
                desiring review of a determination of the Administrator may request an
                administrative hearing by writing to the Chief Administrative Law
                Judge, who must receive the request no later than 15 calendar days from
                the date of the determination for it to be considered timely. Once a
                request for a hearing is timely filed, the Administrator's
                determination is inoperative unless and until the case is dismissed or
                an administrative law judge issues an order affirming the determination
                of the Administrator. All hearings shall be conducted in accordance
                with the standard procedures for administrative law judge hearings in
                29 CFR part 18. The administrative law judge will issue a decision
                within 60 days after the date of the hearing, and if any party desires
                review of the decision, the party must file a timely petition for
                review with the Administrative Review Board.
                 Subsection 810.800(e) details the process by which a party may
                appeal a decision of the administrative law judge, and is consistent
                with standard Department procedure for appeals to the Administrative
                Review Board. A party may appeal a decision of the administrative law
                judge by filing a petition for review with the Administrative Review
                Board within 30 days of the date of the administrative law judge's
                decision. If a petition for review is filed with the Administrative
                Review Board, the decision of the administrative law judge becomes
                [[Page 39799]]
                inoperative unless and until the Administrative Review Board issues an
                order affirming the administrative law judge's decision, or unless and
                until 30 calendar days have passed after the Administrative Review
                Board received the petition for review and the Administrative Review
                Board has not notified the parties that it will review the
                administrative law judge's decision.
                 Subsection 810.800(f) provides that an order of the Administrative
                Review Board is subject to discretionary review by the Secretary of
                Labor. See Secretary of Labor's Order 01-2020 (Feb. 21, 2020), 85 FR
                13186 (Mar. 6, 2020); see also Discretionary Review by the Secretary
                Direct Final Rule, 85 FR 13024-01 (Mar. 6, 2020). Secretary's Order 01-
                2020, inter alia, delegates to the Administrative Review Board
                authority and assigns responsibility to act for the Secretary of Labor
                in review or on appeal of ``any laws or regulations. . .enacted or
                promulgated [after the date of the Order] that provide for final
                decisions by the Secretary of Labor upon appeal,'' which encompasses
                these regulations. The Order further provides for Secretarial review of
                Administrative Review Board decisions regarding any of the covered laws
                or regulations. As the Order applies to decisions of the Administrative
                Review Board regarding these regulations, the procedures outlined in
                the Order apply to Secretarial review of Administrative Review Board
                decisions under this subpart, including the processes for referral of
                cases to the Secretary for review, review of cases by the Secretary,
                and the finality of Secretarial review.
                IV. Paperwork Reduction Act
                 The Paperwork Reduction Act of 1995 (``PRA''), 44 U.S.C. 3501 et
                seq., and its attendant regulations, 5 CFR part 1320, require the
                Department to consider the agency's need for its information
                collections, their practical utility, as well as the impact of
                paperwork and other information collection burdens imposed on the
                public, and how to minimize those burdens. The Department is seeking
                emergency approval related to the collection of information described
                herein. Persons are not required to respond to the information
                collection requirements until OMB approves them under the PRA. This IFR
                creates a new information collection specific to recordkeeping
                requirements necessary to verify compliance with the high-wage
                components of the LVC requirements under the USMCA and the Act. The
                Department has created a new information collection request and
                submitted the request to OMB for approval under OMB control number
                1235-0NEW (``High-wage components of Labor Value Content requirements
                under the USMCA'') for this action.
                 Summary: The Act implements the USMCA. Section 202A of the Act,
                codified at 19 U.S.C. 4532, in part implements Article 7 of the
                Automotive Appendix of the USMCA. The USMCA establishes LVC
                requirements for passenger vehicles, light trucks, and heavy trucks,
                pursuant to which an importer can only obtain preferential tariff
                treatment for a covered vehicle if the covered vehicle meets certain
                high-wage component requirements. The Act requires importers who claim
                preferential tariff treatment under the USMCA for goods imported into
                the United States from a USMCA Country, and vehicle producers whose
                goods are the subject of a claim for preferential tariff treatment
                under the USMCA, to make, keep, and, pursuant to rules and regulations
                promulgated by the Secretary, render for examination and inspection
                records and supporting documents related to the LVC requirements. See
                19 U.S.C. 1508(b)(4). The Act further grants the Secretary authority
                during the course of a verification to request any records relating to
                wages, hours, job responsibilities, or any other information in any
                plant or facility relied on by a producer of covered vehicles to
                demonstrate that the production of those vehicles meets the high-wage
                components of the LVC requirements. See 19 U.S.C. 4532(e)(4)(B).
                 Purpose and Use: This information collection requires certain data
                to be maintained and/or produced upon request. WHD staff will use the
                records provided by the producer upon request to verify producer
                compliance with the high-wage components of the LVC requirements, as
                set forth in the USMCA and the Act.
                 Technology: The regulations prescribe no particular order or form
                of records, and a producer may preserve records in forms of their
                choosing, provided that the producer can produce the specified records
                upon request and the producer's facilities are available for inspection
                and transcription of the records.
                 Minimizing Small Entity Burden: Although the recordkeeping
                requirements may involve small businesses, the Department minimizes
                respondent burden by requiring no specific order or form of records in
                responding to this information collection.
                 Public Comments: The Department is requesting emergency processing
                of this collection. As part of its continuing effort to reduce
                paperwork and respondent burden, the Department conducts a preclearance
                consultation program to provide the general public and federal agencies
                with an opportunity to comment on proposed and continuing collections
                of information in accordance with the PRA. This program helps to ensure
                that the requested data can be provided in the desired format,
                reporting burden (time and money) is minimized, collection instruments
                are clearly understood, and the impact of collection requirements on
                respondents can be properly assessed. The Department seeks public
                comments regarding the burdens imposed by this IFR. Commenters may send
                their views about this information collection to the Department in the
                same manner as all other comments (e.g., through the regulations.gov
                website). Anyone who submits a comment (including duplicate comments)
                should understand and expect that the comment will become a matter of
                public record and will be posted without change to http://www.regulations.gov, including any personal information provided. Any
                comments received specific to the information collection during the IFR
                comment period will be combined and submitted to OMB with comments
                received during the subsequent public notice and comment period that
                the Department will provide (in a notice in the Federal Register) to
                invite comments on the information collection requirements established
                through this IFR.
                 The Department has submitted the new information collection under
                1235-0NEW. Interested parties may receive a copy of the full supporting
                statement by sending a written request to the mailing address shown in
                the ADDRESSES section at the beginning of this preamble. In addition to
                having an opportunity to file comments with the Department, comments
                about the paperwork implications may also be addressed to OMB. Comments
                to OMB should be directed to: Office of Information and Regulatory
                Affairs, Attention OMB Desk Officer for the Wage and Hour Division,
                Office of Management and Budget, Room 10235, 725 17th Street NW,
                Washington, DC 20503; by Fax: 202-395-5806 (this is not a toll-free
                number); or by email: [email protected]. OMB will consider
                all written comments that the agency receives. Commenters are
                encouraged, but not required, to send the Department a courtesy copy of
                any comments sent to OMB. The courtesy
                [[Page 39800]]
                copy may be sent in the same manner as other comments directed to the
                Department.
                 The Department is particularly interested in comments that do the
                following:
                 Evaluate whether the proposed collection of information is
                necessary for the proper performance of the functions of the agency,
                including whether the information will have practical utility;
                 Comment on ways to enhance the quality, utility, and
                clarity of the information to be collected;
                 Evaluate the accuracy of the agency's estimate of the
                burden of the proposed collection of information, including the
                validity of the methodology and assumptions used;
                 Comment on ways to minimize the burden of the collection
                of information on those who are to respond, including through the use
                of appropriate automated, electronic, mechanical, or other
                technological collection techniques or other forms of information
                technology, e.g., permitting electronic submissions of responses.
                 Total annual burden estimates, which reflect the new responses for
                the recordkeeping information collection, are summarized as follows:
                 Type of Review: Approval of a new collection.
                 Agency: Wage and Hour Division, Department of Labor.
                 Title: High-Wage Components of the Labor Value Content Requirements
                under the USMCA.
                 OMB Control Number: 1235-0NEW.
                 Affected Public: Private Sector: businesses or other for-profits,
                farms, and not-for-profit institutions.
                 Estimated Number of Respondents: 9,455.
                 Estimated Number of Responses: 5,796,460.
                 Estimated Burden Hours: 205,911 hours.
                 Estimated Time per Response: Various.
                 Frequency: Various.
                V. Analysis Conducted in Accordance With Executive Order 12866,
                Regulatory Planning and Review, Executive Order 13563, Improved
                Regulation and Regulatory Review
                A. Introduction to Executive Orders
                 Under Executive Order 12866, OIRA determines whether a regulatory
                action is significant and, therefore, subject to the requirements of
                the Executive Order and OMB review.\8\ Section 3(f) of Executive Order
                12866 defines a ``significant regulatory action'' as an action that is
                likely to result in a rule that may (1) have an annual effect on the
                economy of $100 million or more, or adversely affect in a material way
                the economy, a sector of the economy, productivity, competition, jobs,
                the environment, public health or safety, or state, local, or tribal
                governments or communities; (2) create serious inconsistency or
                otherwise interfere with an action taken or planned by another agency;
                (3) materially alter the budgetary impacts of entitlement grants, user
                fees, or loan programs, or the rights and obligations of recipients
                thereof; or (4) raise novel legal or policy issues arising out of legal
                mandates, the President's priorities, or the principles set forth in
                the Executive Order. The Department has conducted a Regulatory Impact
                Analysis (RIA) to demonstrate this IFR's potential effects. The
                Department includes this analysis notwithstanding that this rule falls
                under 5 U.S.C. 553(a)(1).
                ---------------------------------------------------------------------------
                 \8\ 58 FR 51735 (Oct. 4, 1993).
                ---------------------------------------------------------------------------
                 Executive Order 13563 directs agencies to propose or adopt a
                regulation only upon a reasoned determination that its benefits justify
                its costs; that it is tailored to impose the least burden on society,
                consistent with achieving the regulatory objectives; and that, in
                choosing among alternative regulatory approaches, the agency has
                selected the approaches that maximize net benefits. Executive Order
                13563 recognizes that some benefits are difficult to quantify and
                provides that, when appropriate and permitted by law, agencies may
                consider and discuss qualitatively values that are difficult or
                impossible to quantify, including equity, human dignity, fairness, and
                distributive impacts.
                B. Overview of Analysis
                 This RIA discusses the costs, benefits, and transfers associated
                with the IFR. The baseline for this analysis is current production,
                prices, and trade under NAFTA. These impacts are limited to producers
                that import covered vehicles into the United States and parts
                manufacturers in America supplying parts to Canadian and Mexican
                producers for use in vehicles imported to the United States. They do
                not include, for example, the costs for U.S. vehicle exporters to
                comply with Mexican and Canadian USMCA regulations, which are outside
                the scope of this IFR. Where possible, the impacts are limited to the
                LVC requirement and exclude other changes from NAFTA to the USMCA.
                 The Department quantified two direct costs to businesses: (1)
                Regulatory familiarization costs and (2) recordkeeping costs.
                Annualizing over 10 years these costs are estimated to be $6.1 million
                per year at both a 3 percent and 7 percent discount rate. Producer
                adjustment costs, consumer costs, and Departmental costs are discussed
                qualitatively.
                 The Department estimated there are 6,140 establishments in the
                United States potentially impacted by this rulemaking. There may be
                transfers from employers to employees in some of these establishments
                if companies increase employee pay to meet the LVC requirements.\9\ The
                Department does not have the data necessary to estimate the magnitude
                of these transfers; however, the Department expects these to be small
                because the majority of U.S. workers presently performing direct
                production work in the affected industries already earn more than the
                required average of US$16 per hour. Another potential impact of the
                rule is shifting jobs from Mexico to the United States (and Canada),
                and a corresponding increase in the wages associated with those jobs.
                ---------------------------------------------------------------------------
                 \9\ The Department uses the terms ``employee'' and ``worker''
                interchangeably in this section.
                ---------------------------------------------------------------------------
                 The Department also discusses benefits and other intended effects
                qualitatively due to data limitations. These effects include new
                capital investments, increased U.S. automotive parts purchases, and
                increased employment.
                 The costs and benefits draw on the existing literature. These
                papers are referenced throughout this analysis and are summarized in
                Table 1.
                [[Page 39801]]
                 Table 1--Summary of Reports on the Effects of the USMCA
                ------------------------------------------------------------------------
                 Report Method Main findings
                ------------------------------------------------------------------------
                Burfisher et al............. --Used a global, --Estimated
                 multisector, aggregate effects
                 computable-general- of USMCA were
                 equilibrium model relatively small.
                 to provide an --Reduction in trade
                 analytic assessment among the three
                 of five key North American
                 provisions of the partners but a
                 USMCA. combined net
                 --Examined the welfare gain.
                 effect of the --Reductions in
                 removal of U.S. trade costs and
                 tariffs on steel border
                 and aluminum inefficiencies.
                 imports from Canada --Decline in
                 and Mexico. automotive
                 production in U.S.,
                 Canada, and Mexico.
                 --Aggregate wages
                 are unaffected in
                 Canada and the U.S.
                Center for Automotive --Projected impacts --In all scenarios,
                 Research (CAR). on the U.S. new estimated increases
                 vehicle market and in new vehicle
                 broader economy prices and
                 based on ten decreases in new
                 scenarios of policy light-duty vehicle
                 combinations in sales, U.S. GDP,
                 Section 232 and vehicle
                 tariffs, USMCA, and dealership
                 Section 301 tariffs. employment.
                 --Data on current --Majority of the
                 vehicle models economic harm is
                 produced and sold due to Section 232
                 in North America tariffs.
                 not meeting USMCA --USMCA leads to a
                 ROO requirements. slight average
                 increase in the
                 U.S. consumer
                 prices of vehicles
                 assembled in Canada
                 or Mexico
                Office of the U.S. Trade --Short-term --Estimated that
                 Representative (USTR). quantitative impact over five years:
                 of the USMCA's --$34 billion in new
                 automotive ROO. automotive
                 --Data compiled from investments.
                 vehicle producers' --$23 billion in new
                 compliance plans annual auto parts
                 and public purchases.
                 announcements from --76,000 new
                 automobile automotive jobs.
                 companies.
                Reinsch et al............... --Examined the North --May result in
                 American automobile higher vehicle
                 industry and rules prices or fewer
                 of origin to make vehicle options.
                 broad conclusions --Costs due to
                 about the impact on USMCA's ROO are
                 global supply miniscule compared
                 chains. to those from
                 proposed Section
                 232 tariffs.
                 --Increase
                 production in U.S.
                 parts suppliers and
                 automobile
                 industries.
                 --Increase
                 investment in the
                 North American
                 automotive supply
                 chain.
                U.S. International Trade --Assessment of the --Increase in GDP of
                 Commission (USITC). likely impact of $68.2 billion.
                 the USMCA on the --Increase of
                 U.S. economy and 176,000 jobs.
                 specific industry --Increases in U.S.
                 sectors. exports to Canada
                 and Mexico of $19.1
                 and $14.2 billion,
                 respectively.
                 --Manufacturing
                 industries
                 experience the
                 largest percentage
                 gains in output,
                 exports, wages, and
                 employment.
                ------------------------------------------------------------------------
                C. Industry Profile
                 The Department estimated that in the United States there are 4,999
                firms and 6,140 establishments potentially affected by this rulemaking
                (Table 2).\10\ However, some of these firms and establishments will be
                only indirectly affected. Firm and establishment data are from the U.S.
                Census Bureau's 2017 Statistics of U.S. Businesses (SUSB).\11\ The
                Department believes that most affected companies will be in the North
                American Industry Classification System (NAICS) industries motor
                vehicle manufacturing (NAICS 3361), motor vehicle body manufacturing
                (NAICS 336211), motor vehicle parts manufacturing (NAICS 3363), and
                tire manufacturing (except retreading) (NAICS 326211). In this
                analysis, we refer to NAICS 336211, 3363, and 326211 collectively as
                ``parts manufacturing.''
                ---------------------------------------------------------------------------
                 \10\ An establishment is commonly understood as a single
                economic unit, such as a farm, a mine, a factory, or a store, that
                produces goods or services. Establishments are typically at one
                physical location and engaged in one, or predominantly one, type of
                economic activity for which a single industrial classification may
                be applied. An establishment contrasts with a firm, or a company,
                which is a business and may consist of one or more establishments.
                See BLS, ``Quarterly Census of Employment and Wages: Concepts,''
                https://www.bls.gov/opub/hom/cew/concepts.htm.
                 \11\ The 2017 data are the most recently available. See U.S.
                Census Bureau, Statistics of U.S. Businesses (SUSB). https://www.census.gov/programs-surveys/susb.html.
                ---------------------------------------------------------------------------
                 Among motor vehicle manufacturing firms, predominately affected
                companies are those with final assembly operations in Mexico or Canada,
                and that import covered vehicles (i.e., a passenger vehicle, light
                truck, or heavy truck) into the United States. In 2016, there were 17.5
                million new vehicles sold in the United States. Of these, 9.8 million
                were made in the United States and almost 2 million were made in
                Mexico.\12\ Importers include Fiat Chrysler, Ford, General Motors,
                Honda, Nissan, Toyota, Volkswagen, and more.\13\ The motor vehicle
                manufacturing NAICS also includes companies that are engaged in the
                vehicle manufacturing process but do not produce and sell covered
                vehicles, who may not be materially affected by this rulemaking.
                Because the Department is unable to determine exactly which companies
                may not be affected, all companies in this industry have been included
                in this analysis.
                ---------------------------------------------------------------------------
                 \12\ The Journal Times. 2018. 10 popular cars that were made in
                Mexico. https://journaltimes.com/news/national/10-popular-cars-that-were-made-in-mexico/collection_4e1650e4-ae47-505e-b4ce-d2191781a990.html#2. Note that this data may include vehicles that
                were produced or assembled in Mexico, and thus these figures may not
                reflect only final assembly operations.
                 \13\ Car and Driver. 2019. Every New Car That May Jump in Price
                from U.S. Tariffs on Mexican Imports. https://www.caranddriver.com/news/a27702580/car-prices-us-tariffs-mexican-imports/.
                ---------------------------------------------------------------------------
                 Among U.S. parts manufacturers, those predominately affected are
                companies who export parts to Mexico or Canada for use in vehicles
                imported
                [[Page 39802]]
                into the United States. The Department does not have information on how
                many of the 4,723 parts manufacturers in the United States do so.
                However, exports of parts to Mexico and Canada are widespread.
                Additionally, even parts manufacturers who do not export to Mexico or
                Canada may be indirectly impacted if parts production increases in the
                United States, where wages are generally higher, to meet the LVC
                requirements (see section V.F.). Some motor vehicle parts manufacturers
                may not be producing parts for covered vehicles (e.g., parts for
                vehicle repairs), but the Department does not have data on the number
                of these firms.
                 Other industries also may be affected but are not included in this
                profile. First, some entities in the transportation industry (NAICS 48)
                may also be affected due to the provision allowing producers to claim
                high-wage transportation or related costs in their calculation of high-
                wage material and manufacturing expenditures. Second, some entities
                that produce automotive advanced batteries in the storage battery
                manufacturing industry (NAICS 335911) may be affected due to the high-
                wage assembly expenditures credit. This NAICS includes 11 components,
                one of which is automobile storage battery manufacturing. In 2017, this
                detailed industry included only 123 firms and 164 establishments.\14\
                Third, some entities in the research and development (R&D) or
                information technology (IT) industries may be impacted by the high-wage
                technology expenditure credit if the work is contracted out.\15\
                Because the number of these entities in these industries is expected to
                be a small percentage of all firms in these industries, the Department
                has not included these entities in the industry profile.\16\
                ---------------------------------------------------------------------------
                 \14\ SUSB 2017.
                 \15\ If the R&D or IT work is performed by the automotive
                producer, these entities are already captured in the industry
                profile. Only outsourced R&D and IT would result in additional
                entities being impacted.
                 \16\ Additionally, to receive the high-wage assembly
                expenditures credit a producer needs to demonstrate only that a
                battery, transmission, or engine assembly plant meets the high-wage
                requirement. Because all transmission and engine plants are included
                in this industry profile, any associated costs at battery plants may
                just offset costs already attributed to engine or transmission
                plants.
                 \17\ Bureau of Transportation Statistics. 2020. Table 1-23:
                World Motor Vehicle Production, Selected Countries (Thousands of
                vehicles). https://www.bts.gov/content/world-motor-vehicle-production-selected-countries.
                 Table 2--Impacted Industries
                ----------------------------------------------------------------------------------------------------------------
                 Annual
                 Employees [a] Annual payroll receipts
                 Industry Firms Establishments (billions (billions
                 $2019) $2019)
                ----------------------------------------------------------------------------------------------------------------
                Total......................... 4,999 6,140 886,061 $54.0 $650.8
                 3361: Motor vehicle manuf. 276 328 208,364 16.8 348.0
                 336111: Automobile 162 175 82,780 7.2 119.0
                 manuf................
                 336112: Light truck & 49 66 99,097 7.9 201.6
                 utility vehicle......
                 336120: Heavy duty 74 87 26,487 1.8 27.4
                 truck manuf..........
                 Parts and manufacturing... 4,723 5,812 677,697 37.2 302.8
                 336211: Motor vehicle 632 733 47,964 2.5 15.1
                 body manuf...........
                 336300: Motor vehicle 4,010 4,965 584,224 31.9 269.5
                 parts manuf..........
                 326211: Tire manuf. 81 114 45,509 2.8 18.2
                 (except retreading)..
                ----------------------------------------------------------------------------------------------------------------
                Source: SUSB 2017.
                [a] Employees on payroll in the pay period including March 12. Includes employees on paid sick leave, holidays,
                 and vacations.
                 The volume of trade in vehicles and parts between the United
                States, Mexico, and Canada is substantial. According to the
                International Trade Administration, the United States exported $29.5
                billion in new automobiles and trucks to Canada and $3.3 billion to
                Mexico in 2019 (56 percent of total U.S. vehicle exports) (Figure 1).
                The United States also exported $62.1 billion in parts to these two
                countries (73 percent of all U.S. automotive parts exports). The United
                States imported $191.0 billion in new vehicles and parts from Canada
                and Mexico in 2019. Combined, the United States, Canada, and Mexico
                produced 18 percent of passenger cars and commercial vehicles globally
                in 2018.\17\
                BILLING CODE 4510-27-P
                [[Page 39803]]
                [GRAPHIC] [TIFF OMITTED] TR01JY20.011
                BILLING CODE 4510-27-C
                D. Costs
                 The Department quantified two direct costs to businesses: (1)
                Regulatory familiarization costs and (2) recordkeeping costs.
                Annualizing over 10 years, these costs are estimated to be $6.1 million
                per year at both a 3 percent and 7 percent discount rate (Table 3).
                Other potential costs are discussed qualitatively. These include
                additional costs to manufacturers (setup costs and pay adjustment
                costs), consumer costs (increase in vehicle prices due to costs more
                immediately borne by foreign manufacturers, decrease in vehicle
                options), and Departmental costs (setup and enforcement costs to DOL).
                 Table 3--Overview of Costs ($2019)
                ----------------------------------------------------------------------------------------------------------------
                 Costs ($1,000s)
                 -----------------------------------------------------------------
                 Regulatory
                 familiarization Recordkeeping Total
                ----------------------------------------------------------------------------------------------------------------
                 Individual Years
                ----------------------------------------------------------------------------------------------------------------
                Year 1........................................ $481.9 $6,060.4 $6,542
                Subsequent years.............................. 0 6,060.4 6,060
                ----------------------------------------------------------------------------------------------------------------
                 10-Year Annualized Costs
                ----------------------------------------------------------------------------------------------------------------
                3% real discount rate......................... 56.5 6,060.4 6,117
                7% real discount rate......................... 8.6 6,060.4 6,129
                ----------------------------------------------------------------------------------------------------------------
                 In addition to calculating aggregate costs, the Department also
                considers how the IFR would impact individual firms. The following
                numbers use Year 1 costs because costs will be largest in that year.
                For motor vehicle manufacturers, where 276 firms incur aggregate first
                year costs of $367,000, each firm would incur an average cost of
                $1,300. For parts manufacturers, where 4,723 firms incur aggregate
                first year costs of $6.2 million, the average cost per firm would be
                $1,308. If parts suppliers' costs for recordkeeping are fully passed on
                to motor vehicle manufacturers, and all costs are thus ultimately borne
                by motor vehicle manufacturers, and all manufacturers import affected
                vehicles into the United States, then the aggregate costs of $6.5
                million are incurred by 276 firms, for an average of $23,700 per firm.
                 Considered in relation to receipts, costs per firm are negligible,
                amounting to less than 0.002 percent of receipts when costs are passed
                along to vehicle manufacturing firms. Total costs per vehicle imported
                into the United States from Mexico or Canada are $1.42 per vehicle
                ($6.5 million divided by 4.6 million vehicles).\18\
                ---------------------------------------------------------------------------
                 \18\ Imports of New Passenger Vehicles, Light Trucks, Medium
                Trucks, and Heavy Duty Trucks in 2019. Source: International Trade
                Administration. 2020. Motor Vehicle Trade Data. https://legacy.trade.gov/td/otm/autostats.asp.
                ---------------------------------------------------------------------------
                [[Page 39804]]
                i. Regulatory Familiarization Costs
                 Regulatory familiarization costs represent direct costs to
                businesses for time spent reviewing the new regulation. To estimate the
                total regulatory familiarization costs, the Department used (1) the
                number of firms in the affected industries; (2) the number of estimated
                hours that each firm will spend reviewing the rule; and (3) the wage
                rate for the staff reviewing the rule. The Department applied different
                time estimates based on the type of manufacturing.
                 First, to estimate the number of firms in the affected industries,
                the Department used the 2017 SUSB to estimate that there are 276 firms
                in the motor vehicle manufacturing industry and 4,723 in the parts
                manufacturing industries. As discussed in section V.C., the Department
                believes that (1) most of the affected firms will be in these
                industries and (2) some of these firms may be only marginally affected
                if the vehicles, or parts manufactured for use in these vehicles, are
                not imported from Mexico or Canada. However, the Department includes
                all firms in these industries in calculating regulatory familiarization
                costs. The Department believes regulatory familiarization costs will
                occur at the firm level rather than the establishment level because
                importing decisions and processes happen at a centralized level.
                 Second, to estimate the number of hours each firm will spend
                reviewing the rule, the Department used two estimates that vary by
                industry. For firms in the motor vehicle manufacturing industry, the
                Department assumes that it will take, on average, 2.5 hours for each
                firm to review the rule. For parts manufacturers, the Department
                estimates that it will require, on average, 1.5 hours per firm. The
                first category of firms import vehicles and must perform the LVC
                calculations and apply for certification, thus necessitating more time
                to understand the rule's requirements. The parts manufacturers, on the
                other hand, will need only to become familiar enough with the rule to
                understand the type of wage data required to be kept.
                 Third, the Department assumes that a business operations specialist
                (SOC 13-1000) (or a staff member in a similar position) will review the
                rule.\19\ According to the Bureau of Labor Statistics' (BLS)
                Occupational Employment Statistics (OES), these workers in the
                transportation equipment manufacturing industry (NAICS 336) had a
                median wage of $38.03 per hour in 2019. Assuming benefits are paid at a
                rate of 46 percent \20\ of the base wage, and overhead costs are 17
                percent \21\ of the base wage, the reviewer's loaded hourly rate is
                $61.99.
                ---------------------------------------------------------------------------
                 \19\ Occupational Employment Statistics (OES). 2019. 13-1000
                Business Operations Specialists. https://www.bls.gov/oes/current/oes_stru.htm#13-0000.
                 \20\ Bureau of Labor Statistics (BLS). 2020. Employer Costs for
                Employee Compensation--December 2019. https://www.bls.gov/news.release/pdf/ecec.pdf.
                 \21\ Rice, C. 2002. Wage Rates for Economic Analysis of the
                Toxics Release Inventory Program. https://www.regulations.gov/document?D=EPA-HQ-OPPT-2003-0006-0067.
                ---------------------------------------------------------------------------
                 To derive the aggregate regulatory familiarization costs, the
                number of affected firms is multiplied by the number of hours per firm
                and the wage rate. In Year 1, regulatory familiarization costs are
                estimated to be $481,900 ([276 x 2.5 x $61.99] + ([4,723 x 1.5 x
                $61.99]). Regulatory familiarization costs in future years are assumed
                to be de minimis. This amounts to a 10-year annualized cost of $56,500
                at a discount rate of 3 percent or $68,600 at a 7 percent rate.
                ii. Recordkeeping Costs
                 In order to qualify for preferential tariff treatment, producers
                must demonstrate that they meet the high-wage components of the LVC
                requirements. This may require companies to keep additional records,
                request records from parts producers, perform the high-wage
                calculations, submit certification information, and respond to any DOL
                or CBP inquiries. Recordkeeping costs are quantified here, and comments
                are requested regarding the extent to which certification costs (e.g.,
                time spent filling out and submitting certifications forms) are
                attributable to this rule or to forthcoming CBP regulations (because
                CBP is the agency receiving producer certifications). One-time costs to
                adjust payroll or implement new recordkeeping systems are discussed
                qualitatively in section V.D.iii.
                 In its estimate of recordkeeping costs, the Department has included
                all establishments in affected industries in the calculation, even
                though some establishments may not be engaged in imports from Mexico or
                Canada. The Department also believes that once the systems are in place
                and establishments have been trained on the necessary requirements, the
                ongoing recordkeeping costs will be minimal. Although establishments
                will need to track employees' hours worked in direct production and the
                hours worked not in direct production, the Department does not believe
                that this additional burden will be substantial. Many firms use
                sophisticated payroll software to track workers' wages and hours, and
                many manufacturing employees likely already clock in and out for their
                hours worked. Therefore, compiling these values for the LVC computation
                should be relatively straightforward. The Department estimates that
                additional recordkeeping will require 1 hour of recordkeeping per
                establishment every two weeks (assuming a pay period is two weeks), for
                a total of 26 hours per year. The same time estimate is used for both
                motor vehicle manufacturers and parts manufacturers.\22\ Small parts
                manufacturers may not have similarly advanced payroll software, and
                thus recordkeeping may be more onerous, but these small establishments
                also have fewer employees' data to track. Thus, the Department has
                chosen to use the same time estimate for all establishments.
                ---------------------------------------------------------------------------
                 \22\ Most assembly plants used in the high-wage assembly
                expenditure credit are included in the affected entities counts and
                costs, but R&D and IT firms are not included. However, these
                additional companies would be affected only if the automobile
                producers contract out for R&D or IT services.
                ---------------------------------------------------------------------------
                 The Department believes a payroll and timekeeping clerk (SOC 43-
                3051), or similar worker, would be responsible for this work.\23\
                Payroll and timekeeping clerks in the transportation equipment
                manufacturing industry earn a loaded hourly wage rate of $37.96 ($23.29
                x 1.46 x 1.17). Multiplying the number of affected establishments (328
                motor vehicle manufacturers plus 5,812 parts manufacturers) by the
                number of hours per establishment per year (26) by the loaded hourly
                wage rate ($37.96) yields a total annual recordkeeping cost of $6.1
                million ($0.3 million for motor vehicle manufacturers and $5.7 million
                for parts manufacturers).
                ---------------------------------------------------------------------------
                 \23\ OES. 2019. 43-3051 Payroll and Timekeeping Clerks. https://www.bls.gov/oes/current/oes433051.htm.
                ---------------------------------------------------------------------------
                iii. Producer Adjustment Costs
                 Firms may incur three types of one-time adjustment costs: Those to
                implement new systems; those to adjust employee pay; and those to
                adjust their supply chain. These costs may differ between vehicle
                manufacturers and parts manufacturers. They will also differ between
                firms meeting the LVC requirements and those that do not. The
                Department has not quantified these costs due to lack of data. For
                example, the Department does not have data showing how many firms will
                incur few adjustment costs because they already meet the LVC
                requirements. For those not meeting the LVC requirements, the
                [[Page 39805]]
                Department does not have data showing whether (and how) firms will
                adjust pay, contract with new suppliers, or forego the preferential
                tariff treatment. The Department requests comments on the time and
                expense required for these adjustments.
                 In general, the Department believes the average annualized
                adjustment cost per firm will be small. The Department believes most
                producers in the United States either already meet the LVC requirements
                or would be able to with minor adjustments. Additionally, these are
                predominately one-time costs. However, for firms not meeting the LVC
                requirements, these costs may be more substantial.
                 Producers generally use advanced payroll and inventory software and
                already track production workers' hours and wages. Therefore, setting
                up systems to compile internal wage and hour data is expected to be
                straightforward. However, producers also may need to coordinate with
                and request wage data from parts suppliers, assembly plants used to
                obtain the high-wage assembly expenditures credit, and entities used to
                obtain the high-wage technology expenditures credit. According to the
                United States International Trade Commission (USITC), a ``single
                vehicle manufacturer can have hundreds of suppliers providing thousands
                of parts for a single vehicle.'' \24\ Even a small amount of time spent
                per supplier could result in a sizable amount of time when
                aggregated.\25\ However, vehicle producers only need to request data
                from enough suppliers to meet the high-wage components of the LVC
                requirements. If these requirements can be met using wages paid by
                companies owned by the vehicle producer, no records from outside parts
                manufacturers would be necessary.
                ---------------------------------------------------------------------------
                 \24\ United States International Trade Commission (USITC). 2019.
                U.S.-Mexico-Canada Trade Agreement: Likely Impact on the U.S.
                Economy and on Specific Industry Sectors. https://www.usitc.gov/publications/332/pub4889.pdf.
                 \25\ For a somewhat analogous example, please see https://www.regulations.gov/document?D=FAR-2014-0025-0933.
                ---------------------------------------------------------------------------
                 Parts manufacturers, which tend to be smaller, may not have as
                advanced payroll software and thus may require more adjustments to
                their systems to track wages and hours. According to USITC, ``[m]any
                parts manufacturers do not have the compliance staff necessary to
                demonstrate to manufacturers that they meet RVC [regional value
                content] or LVC requirements and will need to hire staff and develop
                new compliance processes.'' However, as USITC noted, industry and
                government are working to minimize these costs by standardizing the
                certification process.\26\ Additionally, the smallest companies, which
                would be the least likely to have systems in place, would also likely
                have small contributions to meeting the LVC requirements, and thus
                their data may not be necessary.
                ---------------------------------------------------------------------------
                 \26\ Id.
                ---------------------------------------------------------------------------
                 Pay adjustment costs would occur if a firm either increases base
                pay or adjusts pay components (e.g., a shift from benefits to base pay)
                to meet the LVC requirements. This would include time to assess whether
                increasing pay is preferable to paying the higher tariff rates,
                determine which employees' pay rates to adjust, and enact these
                changes. The Department believes that pay adjustment costs would be
                small because U.S. vehicle manufacturing firms are generally able to
                meet the LVC requirements without adjusting pay at their U.S. plants
                (see section V.E.).
                 If vehicle producers do not meet the LVC requirements, they may
                begin purchasing parts from higher-wage suppliers.\27\ These supply
                chain adjustments involve multiple costs. Producers would have to
                identify which suppliers to change, negotiate new contracts, and
                validate the new parts. The Department believes that supply-chain
                adjustments would predominately occur for high-cost parts, which would
                have a larger impact on the LVC calculation. Alternatively, producers
                may move R&D or IT services to North America to qualify for the high-
                wage technology credit. Additional information on impacts to the supply
                chain are provided in Reinsch et al., (2019).\28\
                ---------------------------------------------------------------------------
                 \27\ Even if prices at these higher-wage parts facilities are
                higher, this may still be a cost-minimizing solution if using such
                suppliers qualifies the producer for preferential tariff treatment.
                 \28\ Reinsch, W. et al., 2019. The Impact of Rules of Origin on
                Supply Chains: USMCA's Auto Rules as a Case Study. CSIS Scholl Chair
                of International Business. https://www.csis.org/analysis/impact-rules-origin-supply-chains-usmcas-auto-rules-case-study.
                ---------------------------------------------------------------------------
                iv. Increase in Vehicle Prices
                 Vehicle prices for U.S. consumers may increase as a result of the
                high-wage components of the LVC requirements. The Department has
                identified five channels through which prices may increase. Which
                increases, if any, actually occur will depend on the manufacturers'
                cost-minimizing responses.
                 1. U.S. manufacturers increase pay to meet the high-wage component
                (although this impact would be experienced as a cost by consumers, it
                is categorized as a transfer under Circular A-4; as explained in
                section V.E., on rule-induced transfers, the Department believes this
                will be uncommon).
                 2. Mexican manufacturers increase pay to meet the high-wage
                component.
                 3. Production is shifted from the lower-wage Mexican market to the
                higher-wage U.S. or Canadian markets, due to a reduction in Mexico's
                competitive advantage (see section V.F.).
                 4. R&D or IT is moved from lower-wage labor markets overseas to
                North America (resulting in cost increases) to qualify for the high-
                wage technology expenditures credits.
                 5. Higher tariffs on Mexican or Canadian imports to the United
                States result in higher prices for U.S. consumers (although the amounts
                collected as tariffs would be experienced as costs by consumers, under
                Circular A-4, they would be categorized as a transfer to the federal
                government; accompanying deadweight loss is a cost, with consumer
                welfare reductions discussed below).\29\
                ---------------------------------------------------------------------------
                 \29\ The most-favored-nation (MFN) tariff rates would apply.
                These are 2.5 percent for passenger vehicles and 25 percent for
                cargo vehicles, including light-duty pickup trucks and vans.
                ---------------------------------------------------------------------------
                 Researchers have generally predicted small impacts of the USMCA on
                vehicle prices. The aggregate effect is small because many vehicle
                models meet the LVC requirements (and will have few new costs) or do
                not qualify under the current NAFTA requirements (and will likely not
                be impacted by these changes). The literature has generally not
                disaggregated the impact of the high-wage components of the LVC
                requirements from other parts of USMCA's vehicle rules of origin (ROO)
                requirements. The following studies discuss the potential impact on
                consumer prices:
                [[Page 39806]]
                 The Office of the United States Trade Representative
                (USTR) wrote that ``automakers and parts manufacturers have indicated
                to USTR that the USMCA's rules will not [. . .] significantly affect
                consumer vehicle prices.'' \30\
                ---------------------------------------------------------------------------
                 \30\ Office of the United State Trade Representative (USTR).
                2019. Estimated Impact of the United States-Mexico-Canada Agreement
                (USMCA) on the U.S. Automotive Sector. https://ustr.gov/sites/default/files/files/Press/Releases/USTR%20USMCA%20Autos%20White%20Paper.pdf.
                ---------------------------------------------------------------------------
                 The Center for Automotive Research (CAR) expects the
                change in price for U.S. vehicle imports to be ``relatively small.''
                \31\
                ---------------------------------------------------------------------------
                 \31\ Center for Automotive Research (CAR). 2019. U.S. Consumer &
                Economic Impacts of U.S. Automotive Trade Policies. https://www.cargroup.org/wp-content/uploads/2019/02/US-Consumer-Economic-Impacts-of-US-Automotive-Trade-Policies-.pdf.
                ---------------------------------------------------------------------------
                 The USITC estimated ``prices for all vehicles would
                undergo a modest increase (ranging from 0.37 percent for pickup trucks
                to 1.61 percent for small cars).'' \32\
                ---------------------------------------------------------------------------
                 \32\ USITC. 2019. U.S.-Mexico-Canada Trade Agreement: Likely
                Impact on the U.S. Economy and on Specific Industry Sectors. https://www.usitc.gov/publications/332/pub4889.pdf.
                ---------------------------------------------------------------------------
                 Burfisher et al. (2019) contend that the new automotive
                rules of origin would lead to higher vehicle prices.\33\ They estimated
                that the LVC requirements would result in a welfare loss to Americans
                of $380 million. This loss is attributed to the increased prices of the
                vehicles and parts imported from Canada and Mexico.
                ---------------------------------------------------------------------------
                 \33\ Burfisher, M. et al., 2019. NAFTA to USMCA: What is Gained?
                International Monetary Fund Working Paper. https://www.imf.org/en/Publications/WP/Issues/2019/03/26/NAFTA-to-USMCA-What-is-Gained-46680.
                ---------------------------------------------------------------------------
                 CAR considered specifically the impact that tariffs would have on
                prices paid by U.S. consumers. They estimated 24 vehicle models
                produced in Canada and Mexico that meet the current NAFTA requirements
                would not meet the new USMCA ROO requirements (considering both the LVC
                and the RVC requirements). The average potential tariff for these 24
                vehicle models is estimated to be $635.\34\ CAR notes that these 24
                vehicles fail multiple criteria of the USMCA ROO. Thus, producers are
                unlikely to make the necessary changes to obtain the preferential
                tariff. Because these tariff costs are on a small subset of models, the
                average impact on vehicle prices will be small. Additionally, these
                tariffs may result in a shift in consumption towards U.S.-manufactured
                models or models meeting the USMCA requirements.
                ---------------------------------------------------------------------------
                 \34\ CAR. 2019. U.S. Consumer & Economic Impacts of U.S.
                Automotive Trade Policies. https://www.cargroup.org/wp-content/uploads/2019/02/US-Consumer-Economic-Impacts-of-US-Automotive-Trade-Policies-.pdf.
                ---------------------------------------------------------------------------
                v. Decrease in Consumer Choice
                 As explained above, CAR has identified 24 vehicle models produced
                in Canada and Mexico that meet the current NAFTA requirements but would
                not meet the new USMCA ROO requirements. Because these vehicles fail
                multiple criteria of the USMCA ROO, the sale of these vehicles in the
                United States may cease or significantly decrease. This is demonstrated
                by the fact that manufacturers have already announced plans to end
                North American production or U.S. sales of half of these models. This
                possibility has also been confirmed by an industry representative
                interview conducted by USITC.\35\ To the extent that these discontinued
                model lines would be the first preference of some consumers, this
                decrease in consumer choice may result in a decrease in consumer
                welfare. Additionally, producers may reduce the number of options in
                order to streamline the production process and offset USMCA compliance
                costs.\36\
                ---------------------------------------------------------------------------
                 \35\ USITC. 2019. U.S.-Mexico-Canada Trade Agreement: Likely
                Impact on the U.S. Economy and on Specific Industry Sectors. https://www.usitc.gov/publications/332/pub4889.pdf.
                 \36\ Reinsch, W. et al., 2019. The Impact of Rules of Origin on
                Supply Chains: USMCA's Auto Rules as a Case Study. CSIS Scholl Chair
                of International Business. https://www.csis.org/analysis/impact-rules-origin-supply-chains-usmcas-auto-rules-case-study.
                ---------------------------------------------------------------------------
                vi. Decrease in Vehicle Sales and Impact on Gross Domestic Product
                (GDP)
                 If vehicle prices increase, this may result in fewer new vehicle
                sales and smaller domestic production. According to USITC, the price
                increase resulting from the USMCA requirements would lead to an
                estimated 140,200 fewer cars sold, representing about 1.25 percent of
                vehicles sold in the United States in 2017.\37\ Similarly, it estimates
                that U.S. passenger vehicle production would decline by 1.31 percent
                and pickup truck production by 0.07 percent. This may result in a
                decrease in consumer welfare and a negative impact on GDP. However, the
                Department believes the increase in domestic parts production may
                offset any, and will offset some, negative impact on GDP (see section
                V.F.).
                ---------------------------------------------------------------------------
                 \37\ USITC. 2019. U.S.-Mexico-Canada Trade Agreement: Likely
                Impact on the U.S. Economy and on Specific Industry Sectors. https://www.usitc.gov/publications/332/pub4889.pdf. (Using a partial
                equilibrium model with a price elasticity of -1. Using a less price-
                elastic value of -0.4, the projected decrease in new vehicle sales
                would be 66,200, see Table G.1.)
                ---------------------------------------------------------------------------
                 If vehicle sales decrease, there may be secondary impacts on
                vehicle dealerships. However, some of the decrease in new vehicle sales
                may be offset by an increase in used car sales. And, as noted above,
                the potential reduction is fairly small as a share of total sales.
                vii. Competitiveness of U.S. Produced Vehicles and Exports
                 If Mexican or Canadian exporters do not meet the high-wage
                components of the LVC requirements, then they (or their suppliers) must
                either increase employee compensation or pay the higher non-
                preferential tariff rates. This would likely increase the cost of these
                vehicles, and make domestically produced vehicles more competitive. The
                USMCA's impact on U.S. vehicle exports is outside the scope of this
                rule because those costs will be incurred largely due to the
                corresponding Mexican or Canadian regulations. As discussed in section
                V.F., estimates differ regarding the net effect on U.S. exports of
                vehicle parts.
                viii. Department of Labor Costs
                 Under this IFR, the Department would evaluate certifications
                submitted by vehicle producers for omissions or errors, participate in
                the verification of whether production meets the high-wage components
                of the LVC requirements, conduct administrative reviews of these
                verifications if necessary, and review whistleblower complaints. The
                Department would incur both one-time setup costs and recurring costs.
                It is unclear how much time would be spent on these tasks or how
                frequently they will be performed. For example, the Department does not
                yet know how many certifications it will review, or verifications it
                will conduct, each year. Accordingly, these costs have not been
                estimated.
                E. Potential Transfers
                 Earnings transfers from automobile and automobile parts
                manufacturing companies to U.S. employees may occur if wages are raised
                to meet the high-wage components of the LVC requirements in order to
                qualify for preferential tariff treatment. The Department has not
                quantified this potential transfer because (1) it is expected to be
                small and (2) there are data limitations, such as a lack of wage rates
                by firm or the labor share of value in production of parts or assembly
                of cars.
                 The Department provides some numbers here to demonstrate why
                transfers in the United States are expected to be small. The Department
                used the 2019 Current Population Survey (CPS) Outgoing Rotation Group
                [[Page 39807]]
                data to estimate current earnings of employees working in production
                occupations in the automobile manufacturing industry. The CPS is a
                monthly survey of about 60,000 households that is jointly sponsored by
                the U.S. Census Bureau and BLS. The CPS Outgoing Rotation Group is a
                subset of the CPS sample with more detailed information.
                 The Department estimated the average hourly rates earned by
                production workers in the motor vehicle manufacturing industry.\38\
                About 89 percent of these workers are paid hourly. For hourly workers,
                their reported regular hourly wage rate, excluding tips, overtime, and
                commissions was used.\39\ For non-hourly workers, the Department
                calculated an hourly wage rate using usual weekly earnings and usual
                hours worked per week.\40\ If a non-hourly worker usually worked
                overtime (more than 40 hours per week), a regular hourly rate was
                calculated based on an assumption of the worker receiving 1.5 times
                their regular hourly rate for overtime hours worked.
                ---------------------------------------------------------------------------
                 \38\ Occupation is identified with the variable ``peio1ocd'' and
                codes 7710 to 8965. Industry is identified with the variable
                ``peio1icd'' and code 3570 (motor vehicles and motor vehicle
                equipment manufacturing). Census industry code 3570 equates to NAICS
                codes 3361, 3362, and 3363.
                 \39\ The CPS variable is ``prernhly.''
                 \40\ The CPS variables are ``prernwa'' and ``pehrusl1.'' The
                Department excluded two observations of non-hourly workers who
                responded to the usual hours question that their ``hours vary.''
                ---------------------------------------------------------------------------
                 Based on the CPS data, the Department estimated that the national
                average hourly rate was $18.81 and about 36 percent of these production
                workers earned less than $16 per hour.\41\ Additionally, to better
                approximate the hourly rates of workers by plant, the Department
                estimated the average hourly wage of workers by state. Among states
                with at least 5 observations, the average hourly wage was less than $16
                in only 4 of the 26 states. However, the average hourly wage rate was
                at least $15.70 in these four states, so any increases in wages to meet
                the $16 average rate will likely be minimal. Additionally, any
                potential transfers would likely decrease over time as wages grow.
                ---------------------------------------------------------------------------
                 \41\ The Department excluded four observations from this
                analysis with hourly rates less than the applicable minimum wage.
                ---------------------------------------------------------------------------
                 These findings are consistent with other studies evaluating the
                impact of the USMCA's automotive ROO requirements. USTR indicated that
                automobile manufacturers would have at most minor changes to meet the
                USMCA rules as ``all automakers with a presence in North America have
                indicated to USTR that they will be able to meet the requirements of
                the new rules--and that they intend to do so (rather than forego
                preferential tariff treatment)--if they are able to benefit from the
                reasonable transition periods available in the agreement to make
                changes to their supply chains.'' \42\ Burfisher modeled the impacts of
                the change from NAFTA to USMCA, finding that for the economy as a
                whole, ``[w]ages for unskilled and skilled labor are unchanged in
                Canada and the United States due to USMCA.'' \43\
                ---------------------------------------------------------------------------
                 \42\ USTR. 2019. Estimated Impact of The United States-Mexico-
                Canada Agreement (USMCA) On the U.S. Automotive Sector. https://ustr.gov/sites/default/files/files/Press/Releases/USTR%20USMCA%20Autos%20White%20Paper.pdf.
                 \43\ Burfisher, M. et al., 2019. NAFTA to USMCA: What is Gained?
                International Monetary Fund Working Paper. https://www.imf.org/en/Publications/WP/Issues/2019/03/26/NAFTA-to-USMCA-What-is-Gained-46680.
                ---------------------------------------------------------------------------
                 A secondary wage effect may occur if the inflow of production,
                assembly, parts manufacturing, R&D, and IT into the U.S. drives up
                demand for this work and consequently labor prices. The Department
                expects these secondary impacts to be small because the expected
                increase in employment is small relative to the size of the labor
                market.
                F. Benefits
                 The inclusion of the high-wage components in the LVC requirements
                may incentivize domestic investment, production, and employment, and
                the accompanying gain in producer surplus would qualify as a benefit
                for purposes of this regulatory impact analysis. As noted in section
                V.E., most domestic production is already conducted by workers earning
                at least $16 per hour. Canadian workers also generally meet this
                requirement. However, Mexican workers tend to earn less than workers in
                other USMCA Countries and so producers may need to increase Mexican
                wages or transfer vehicle or parts production to higher-wage U.S. (or
                Canadian) plants to meet this requirement.\44\ If not, Mexican-produced
                covered vehicles would not qualify for preferential tariff treatment.
                Regardless, the cost for Mexican imports would likely increase. This
                would reduce the competitive advantage of Mexican manufacturing and may
                result in production flowing into the United States.
                ---------------------------------------------------------------------------
                 \44\ Average assembly and parts hourly wages are above US$20 per
                hour in Canada. Mexican hourly wages for auto assembly averaged
                US$7.34 and for automotive parts averaged US$3.41 in 2017. CAR.
                2018. NAFTA Briefing: Review of Current NAFTA Proposals and
                Potential Impacts on the North American Automotive Industry. https://www.cargroup.org/wp-content/uploads/2018/04/nafta_briefing_april_2018_public_version-final.pdf.
                ---------------------------------------------------------------------------
                 These effects are explained and quantified in several papers. The
                analyses consider the impacts of all changes to the automotive ROO.
                Therefore, the quantified impacts associated with the high-wage
                components of the LVC requirements may be smaller than the totals
                presented.
                 A USTR white paper quantified three main impacts in the United
                States of USMCA's changes in the ROO: \45\
                ---------------------------------------------------------------------------
                 \45\ USTR. 2019. Estimated Impact of The United States-Mexico-
                Canada Agreement (USMCA) On the U.S. Automotive Sector. https://ustr.gov/sites/default/files/files/Press/Releases/USTR%20USMCA%20Autos%20White%20Paper.pdf.
                ---------------------------------------------------------------------------
                 New capital investments of $34 billion over 5 years.
                 Increased U.S. automotive parts purchases of $23 billion
                annually.
                 A gain of 76,000 jobs.
                 The USITC also estimated the impacts of USMCA's automotive ROO on
                employment and investment.\46\ They conducted a more complex analysis
                using a partial equilibrium model. Their numbers are smaller than those
                estimated by USTR. They estimated a net increase of approximately
                28,100 full-time equivalent employees and an increase in investment of
                $632 million per year. These net increases consider both expected
                decreases in vehicle production in the United States and increased
                parts production.\47\ The USITC estimated that the increase in parts
                production will outweigh the decrease in vehicle production.
                ---------------------------------------------------------------------------
                 \46\ USITC. 2019. U.S.-Mexico-Canada Trade Agreement: Likely
                Impact on the U.S. Economy and on Specific Industry Sectors. https://www.usitc.gov/publications/332/pub4889.pdf.
                 \47\ The net increase in employment is comprised of an increase
                of 29,700 for parts production and a reduction of 1,600 for vehicle
                production. The net increase in investment includes an increase of
                $683 million for parts production and a reduction of $51 million for
                vehicle production.
                ---------------------------------------------------------------------------
                 Conversely, in a working paper by Burfisher, the authors argue that
                the new automotive ROO would lead to a decline in both North American
                vehicle and parts production by shifting production outside the region
                and reducing demand for new vehicles.\48\ If so, the impacts projected
                by USTR and USITC would not be realized. The authors used a global,
                multisector, computable-general-equilibrium model to assess the impacts
                of certain USMCA provisions on trade, welfare, GDP, vehicle prices,
                wages, and rents. They
                [[Page 39808]]
                argue that the increased compliance costs associated with the RVC and
                LVC requirements would lead to an increase in imports from non-USMCA
                Countries because the advantage associated with preferential tariff
                treatment has been reduced. If North American manufacturers no longer
                qualify for preferential tariff treatment, the previous incentive to
                produce parts or vehicles in North America has been removed and
                manufacturing may shift overseas.\49\
                ---------------------------------------------------------------------------
                 \48\ Burfisher, M. et al., 2019. NAFTA to USMCA: What is Gained?
                International Monetary Fund Working Paper. https://www.imf.org/en/Publications/WP/Issues/2019/03/26/NAFTA-to-USMCA-What-is-Gained-46680.
                 \49\ Reinsch, W. et al., 2019. The Impact of Rules of Origin on
                Supply Chains: USMCA's Auto Rules as a Case Study. CSIS Scholl Chair
                of International Business. https://www.csis.org/analysis/impact-rules-origin-supply-chains-usmcas-auto-rules-case-study.
                ---------------------------------------------------------------------------
                VI. Initial Regulatory Flexibility Analysis
                 The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq.,
                as amended by the Small Business Regulatory Enforcement Fairness Act of
                1996, Public Law 104-121 (1996), requires federal agencies engaged in
                rulemaking to consider the impact of their proposals on small entities,
                consider alternatives to minimize that impact, and solicit public
                comment on their analyses. The RFA requires the assessment of the
                impact of a regulation on a wide range of small entities, including
                small businesses, not-for-profit organizations, and small governmental
                jurisdictions. Accordingly, the Department examined the regulatory
                requirements of the IFR to determine whether it would have a
                significant economic impact on a substantial number of small entities.
                Costs to small businesses are expected to be de minimis.
                 The Department used the Small Business Administration (SBA) size
                standards to identify the number of businesses that are small
                entities.\50\ For the affected industries, the SBA small business size
                standards range from 1,000 to 1,500 employees. These thresholds are
                shown in Table 4.
                ---------------------------------------------------------------------------
                 \50\ SBA, Summary of Size Standards by Industry Sector, 2019,
                www.sba.gov/document/support--table-size-standards.
                 Table 4--SBA Small Business Size Standards for Affected Industries
                ------------------------------------------------------------------------
                 Size threshold
                 NAICS Industry (number of
                 employees)
                ------------------------------------------------------------------------
                326211..................... Tire manufacturing (except 1,500
                 retreading).
                336100..................... Motor vehicle manufacturing 1,500
                336211..................... Motor vehicle body 1,000
                 manufacturing.
                336310..................... Motor vehicle gasoline 1,000
                 engine and engine parts
                 manufacturing.
                336320..................... Motor vehicle electrical 1,000
                 and electronic equipment
                 manufacturing.
                336330..................... Motor vehicle steering and 1,000
                 suspension components
                 (except spring).
                336340..................... Motor vehicle brake system 1,250
                 manufacturing.
                336350..................... Motor vehicle transmission 1,500
                 and power train parts
                 manufacturing.
                336360..................... Motor vehicle seating and 1,500
                 interior trim
                 manufacturing.
                336370..................... Motor vehicle metal 1,000
                 stamping.
                336390..................... Other motor vehicle parts 1,000
                 manufacturing.
                ------------------------------------------------------------------------
                 The Department applied these thresholds to the U.S. Census Bureau's
                2012 Economic Census to obtain the number of entities with employment
                below the small business threshold.\51\ The ratios of small to large
                establishments, firms, and receipts were then applied to the more
                recent 2017 SUSB data. Lastly, receipts were inflated to 2019 dollars
                using the GDP deflator.\52\ The Department estimated there are 4,835
                small affected firms (97 percent of the total affected) and 5,218 small
                affected establishments (85 percent of the total) (Table 5).
                ---------------------------------------------------------------------------
                 \51\ The 2012 data are the most recently available with receipts
                data disaggregated by detailed size categories. https://www.census.gov/data/tables/2012/econ/susb/2012-susb-annual.html.
                 \52\ Bureau of Economic Analysis. 2020. Table 1.1.9. Implicit
                Price Deflators for Gross Domestic Product. https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&nipa_table_list=13.
                ---------------------------------------------------------------------------
                 Costs include two components: (1) Regulatory familiarization and
                (2) recordkeeping (as calculated in section V.D.). The Department used
                the same assumptions for costs regardless of entity size. However,
                because larger entities have more establishments, their estimated costs
                tend to be larger than for smaller entities. Some types of costs may be
                higher for small entities than large entities and some may be lower, so
                the Department has chosen not to adjust per-entity costs based on
                entity size. For example, smaller entities have fewer employees that
                will need to be considered in the LVC calculation, making recordkeeping
                costs lower. Conversely, smaller entities may have less advanced
                payroll software, making recordkeeping costs higher. According to
                Reinsch, ``larger, multinational firms in general are better equipped
                to examine and adapt to new rules of origin, whereas smaller firms will
                face upfront costs related to analysis of the rule and administrative
                tasks in adapting to them. Those unequal costs could cause smaller
                firms to unwittingly be out of compliance with the new rules or forced
                into financial belt tightening that otherwise would not occur.'' \53\
                ---------------------------------------------------------------------------
                 \53\ Reinsch, W. et al., 2019. The Impact of Rules of Origin on
                Supply Chains: USMCA's Auto Rules as a Case Study. CSIS Scholl Chair
                of International Business. https://www.csis.org/analysis/impact-rules-origin-supply-chains-usmcas-auto-rules-case-study.
                ---------------------------------------------------------------------------
                 Total costs to small businesses in Year 1 are estimated to be $5.6
                million (86 percent of total costs) (Table 5). This equates to an
                average of $1,162 per small firm ($1,165 for vehicle manufacturers and
                $1,161 for parts manufacturers). Costs in subsequent years would be
                smaller because regulatory familiarization costs are limited to Year 1.
                These estimates do not include producer adjustment costs, as explained
                in section V.D.iii. Inclusion of adjustment costs would increase the
                estimated cost per small business in the first few years when these
                adjustments are being made.
                [[Page 39809]]
                 Table 5--Small Businesses Affected, Applying 2012 Small Business Proportions to 2017 Data
                ----------------------------------------------------------------------------------------------------------------
                 Annual Total year 1
                 receipts costs Costs as a
                 Industry Firms Establishments (billions (millions percent of
                 $2019) $2019) receipts
                ----------------------------------------------------------------------------------------------------------------
                Total......................... 4,835 5,218 $138.2 $5.6 0.004
                 336100: Motor vehicle 255 261 12.2 0.3 0.002
                 manuf....................
                 336111: Automobile 147 147 4.3 0.2 0.004
                 manuf................
                 336112: Light truck & 42 46 2.8 0.1 0.002
                 utility vehicle......
                 336120: Heavy duty 66 69 5.1 0.1 0.002
                 truck manuf..........
                 Parts manufacturing....... 4,580 4,957 126.0 5.3 0.004
                 336211: Motor vehicle 606 661 9.1 0.7 0.008
                 body manuf...........
                 336300: Motor vehicle 3,903 4,224 115.2 4.5 0.004
                 parts manuf..........
                 326211: Tire manuf. 71 73 1.6 0.1 0.005
                 (except retreading)..
                ----------------------------------------------------------------------------------------------------------------
                Source: SUSB 2017, SUSB 2012.
                \a\ Employees on payroll in the pay period including March 12. Includes employees on paid sick leave, holidays,
                 and vacations.
                 The impact of this rule was calculated as the ratio of annual cost
                per entity to average receipts per entity. The annual cost per entity
                is less than 0.01 percent of average annual receipts. The impact of
                this IFR on small entities will be de minimis. The Department certifies
                that the IFR will not have a significant economic impact on a
                substantial number of small entities.
                 The Department also considered costs relative to receipts for the
                smallest affected firms by both industry and size. As shown in Table 6,
                even for the smallest firms (those with fewer than 500 employees),
                costs are well below one percent of receipts in Year 1. These costs
                assume single-establishment firms. Costs would be somewhat higher for
                multi-establishment firms; however, multi-establishment firms are
                uncommon in these industries and size categories.
                 Table 6--Year 1 Costs and Receipts of the Smallest Businesses, With One Establishment, by Industry and Size
                ----------------------------------------------------------------------------------------------------------------
                 Receipts per
                 Year 1 cost firm per year Year 1 cost
                 Industry per firm (millions as a percent
                 ($2019) $2019) of receipts
                ----------------------------------------------------------------------------------------------------------------
                336100: Motor vehicle manuf.:
                 0-4 employees............................................... $1,142 $1.58 0.07
                 5-9 employees............................................... 1,142 3.81 0.03
                 10-19 employees............................................. 1,142 29.64 0.00
                 20-99 employees............................................. 1,142 25.14 0.00
                 100-499 employees........................................... 1,142 95.43 0.00
                336211: Motor vehicle body manuf.:
                 0-4 employees............................................... 1,080 0.96 0.11
                 5-9 employees............................................... 1,080 1.80 0.06
                 10-19 employees............................................. 1,080 3.30 0.03
                 20-99 employees............................................. 1,080 10.75 0.01
                 100-499 employees........................................... 1,080 44.12 0.00
                336300: Motor vehicle parts manuf.:
                 0-4 employees............................................... 1,080 0.76 0.14
                 5-9 employees............................................... 1,080 1.79 0.06
                 10-19 employees............................................. 1,080 3.73 0.03
                 20-99 employees............................................. 1,080 12.62 0.01
                 100-499 employees........................................... 1,080 67.13 0.00
                326211: Tire manuf. (except retreading):
                 0-4 employees............................................... 1,080 0.49 0.22
                 5-9 employees............................................... 1,080 1.71 0.06
                 10-19 employees............................................. 1,080 2.87 0.04
                 20-99 employees............................................. 1,080 10.78 0.01
                 100-499 employees........................................... 1,080 164.27 0.00
                ----------------------------------------------------------------------------------------------------------------
                Source: SUSB 2017.
                VII. Unfunded Mandates Reform Act Analysis
                 The Unfunded Mandates Reform Act of 1995 (UMRA) \54\ requires
                agencies to prepare a written statement for rules with a federal
                mandate that may result in increased expenditures by state, local, and
                tribal governments, in the aggregate, or by the private sector, of $156
                million ($100 million in 1995 dollars adjusted for inflation) or more
                in at least 1 year.\55\ This statement must (1) identify the
                authorizing legislation; (2) present the estimated costs and benefits
                of the rule and, to the extent that such estimates are feasible and
                relevant, its estimated effects on the national economy; (3) summarize
                and evaluate
                [[Page 39810]]
                state, local, and tribal government input; and (4) identify reasonable
                alternatives and select, or explain the non-selection, of the least
                costly, most cost-effective, or least burdensome alternative. This IFR
                is not expected to result in aggregate costs of $156 million per year
                to governments; however, costs may reach this threshold for the private
                sector.
                ---------------------------------------------------------------------------
                 \54\ See 2 U.S.C. 1501.
                 \55\ Calculated using growth in the Gross Domestic Product
                deflator from 1995 to 2019. Bureau of Economic Analysis. Table
                1.1.9. Implicit Price Deflators for Gross Domestic Product.
                ---------------------------------------------------------------------------
                VIII. Executive Order 13132 (Federalism)
                 This rule does not have substantial direct effects on the states,
                on the relationship between the national government and the states, or
                on the distribution of power and responsibilities among the various
                levels of government. Therefore, in accordance with section 6 of
                Executive Order No. 13132, 64 FR 43255 (Aug. 4, 1999), this rule does
                not have sufficient federalism implications to warrant the preparation
                of a federalism summary impact statement.
                IX. Effects on Families
                 The undersigned hereby certifies that this rule would not adversely
                affect the well-being of families, as discussed under section 654 of
                the Treasury and General Government Appropriations Act, 1999.
                X. Executive Order 13175, Indian Tribal Governments
                 This rule would not have substantial direct effects on one or more
                Indian tribes, on the relationship between the federal government and
                Indian tribes, or on the distribution of power and responsibilities
                between the federal government and Indian tribes.
                List of Subjects in 29 CFR Part 810
                 Labor, Wages, Hours of work, Trade agreement, Motor vehicle,
                Tariffs, Imports, Whistleblowing.
                 Signed at Washington, DC, this 24th day of June, 2020.
                Cheryl M. Stanton,
                Administrator, Wage and Hour Division.
                0
                For the reasons set out in the preamble, the Department of Labor amends
                Title 29 of the Code of Federal Regulations by adding part 810 to read
                as follows:
                PART 810--HIGH-WAGE COMPONENTS OF THE LABOR VALUE CONTENT
                REQUIREMENTS UNDER THE UNITED STATES-MEXICO-CANADA AGREEMENT
                IMPLEMENTATION ACT
                Subpart A--General
                810.1 Introduction.
                810.2 Purpose and scope.
                810.3 Definitions and use of terms.
                Subpart B--Calculating the High-Wage Component of Material and
                Manufacturing Expenditures
                810.100 Scope and purpose of this subpart.
                810.105 Calculating the average hourly base wage rate.
                810.110 Examples of direct production work.
                810.115 Paid meal time and paid break time.
                810.120 Part-time, temporary, seasonal, and contract workers.
                810.125 Workers paid on a non-hourly basis.
                810.130 Executive, Management, Research and Development,
                Engineering, and Other Personnel.
                810.135 Interns, students, and trainees.
                810.140 High-wage transportation or related costs for shipping a
                high-wage part or material.
                810.145 Currency exchange.
                810.150 Adjustment of the average hourly base wage rate.
                Subpart C--Calculating the High-Wage Technology Expenditures Credit
                810.200 High-wage technology expenditures credit.
                Subpart D--Calculating the High-Wage Assembly Expenditures Credit
                810.300 High-wage assembly expenditures credit.
                Subpart E--Certification Provisions
                810.400 Scope and purpose of this subpart.
                810.405 Certification.
                810.410 Administrator's review for omissions or errors.
                Subpart F--Verification of the Labor Value Content's Wage Components
                810.500 Scope and purpose of this subpart.
                810.505 Scope of verification.
                810.510 Notice to a producer that a verification of compliance with
                labor value content requirements has been initiated.
                810.515 Conduct of verifications.
                810.520 Confidentiality.
                810.525 Notice provided to CBP regarding the Administrator's
                findings.
                810.530 Verification of labor value content compliance for producers
                subject to alternative staging regime.
                Subpart G--Recordkeeping Requirements
                810.600 Recordkeeping requirements.
                Subpart H--Administrative Review of the Department's Analysis and
                Findings
                810.700 Administrative review procedures.
                Subpart I--Whistleblower Protections
                810.800 Prohibited acts.
                 Authority: 19 U.S.C. 1508(b)(4) & 19 U.S.C. 4535(b).
                Subpart A--General
                Sec. 810.1 Introduction.
                 This part provides the Department of Labor's rules to implement and
                administer the high-wage components of the labor value content
                requirements, as provided in the Agreement between the United States of
                America, the United Mexican States, and Canada, and the United States-
                Mexico-Canada Agreement Implementation Act.
                Sec. 810.2 Purpose and scope.
                 (a) The USMCA replaces the 1994 North American Free Trade
                Agreement. The USMCA Preamble states that the parties to the agreement
                are resolved to, among other things, ``facilitate trade in goods and
                services between the Parties by preventing, identifying, and
                eliminating unnecessary technical barriers to trade, enhancing
                transparency, and promoting good regulatory practices,'' and that the
                Parties are resolved to ``promote the protection and enforcement of
                labor rights, the improvement of working conditions, the strengthening
                of cooperation and the Parties' capacity on labor issues.''
                 (b) The purpose of the USMCA Implementation Act is to implement the
                USMCA. Section 202A of the Act, codified at 19 U.S.C. 4532, in part
                implements Article 7 of the Automotive Appendix. This Article
                establishes a labor value content requirement for passenger vehicles,
                light trucks, and heavy trucks, pursuant to which an importer can
                obtain preferential tariff treatment for a covered vehicle only if it
                meets certain minimum percentage benchmarks concerning the portion of
                the vehicle produced by workers who meet certain wage requirements, as
                described in subparts B, C, and D.
                Sec. 810.3 Definitions and use of terms.
                 As used in this part--
                 Administrative law judge. Administrative law judge means a
                Department of Labor official appointed pursuant to 5 U.S.C. 3105.
                 Administrator. Administrator means the Administrator of the Wage
                and Hour Division, United States Department of Labor, and such
                authorized representatives as may be designated to perform any of the
                functions of the Administrator under this part.
                 Alternative staging regime. Alternative staging regime means the
                alternative to the standard staging regime, and provides for a
                different phase-in of the LVC requirements and additional time to meet
                those requirements.
                 Annual purchase value. Annual purchase value, as defined in the
                Uniform Regulations, means the sum of the values of high-wage materials
                purchased annually by a producer for use in the production of passenger
                vehicles, light trucks, or heavy trucks in
                [[Page 39811]]
                a plant located in the territory of a USMCA Country.
                 Automotive Appendix. Automotive Appendix means the Appendix to
                Annex 4-B of the USMCA.
                 Automotive good. Automotive good means a covered vehicle or a part,
                component, or material listed in the Automotive Appendix.
                 CBP. CBP means United States Customs and Border Protection,
                including its Commissioner.
                 Covered vehicle. Covered vehicle means a passenger vehicle, light
                truck, or heavy truck.
                 Department. Department means the United States Department of Labor.
                 High-wage components of the LVC requirements. High-wage components
                of the LVC requirements means the high-wage components of material and
                manufacturing expenditures, information technology expenditures, and
                assembly expenditures.
                 LVC. LVC means labor value content.
                 Plant and/or Facility. These terms are used interchangeably
                throughout this part and invoke the terms' meanings as found in the
                USMCA, Uniform Regulations, and applicable CBP guidance and
                regulations.
                 Producer. Producer means an individual or entity who engages in the
                production and/or assembly of automotive goods in North America. Except
                where indicated otherwise, the term ``producer'' encompasses the terms
                ``importer'' and ``exporter'' and their definitions as found in the
                Uniform Regulations, CBP regulations, and Appendix 5, Article 5.1 of
                the USMCA.
                 Secretary. Secretary means the Secretary of Labor or the
                Secretary's designee.
                 Uniform Regulations. Uniform Regulations means the regulations
                agreed upon by the United States of America, the United Mexican States,
                and Canada, pursuant to Chapter 5, Article 5.16 of the USMCA,
                regarding, in part, the interpretation, application, and administration
                of Chapter 4 (Rules of Origin) and Chapter 5 (Origin Procedures) of the
                USMCA.
                 USMCA. USMCA means the Agreement between the United States of
                America, the United Mexican States, and Canada.
                 USMCA Country(ies). USMCA Country means the United States of
                America, the United Mexican States, or Canada. USCMA Countries means
                any combination of the United States of America, the United Mexican
                States, and Canada. These regulations use these terms interchangeably
                with the term ``North America.''
                 USMCA Implementation Act. USMCA Implementation Act means the United
                States-Mexico-Canada Agreement Implementation Act, Pub. L. 116-113, 134
                Stat. 11 (2020), which is codified at 19 U.S.C. 1508, as amended, and
                19 U.S.C. 4501 et seq.
                 WHD. WHD means the Wage and Hour Division of the U.S. Department of
                Labor.
                Subpart B--Calculating the High-Wage Component of Material and
                Manufacturing Expenditures
                Sec. 810.100 Scope and purpose of this subpart.
                 (a) Section 202A(e) of the USMCA Implementation Act authorizes the
                Secretary, in cooperation with the Secretary of the Treasury, to
                participate in a verification of whether covered vehicle production
                complies with the high-wage components of the LVC requirements set
                forth in Article 7 of the Automotive Appendix or, if the producer is
                subject to the alternative staging regime, under Articles 7 and 8 of
                the Automotive Appendix. This subpart addresses calculation of the
                high-wage material and manufacturing expenditures component of the LVC
                (referred to in the Uniform Regulations as high-wage material and labor
                expenditures).
                 (b) The regulations in this subpart describe how producers can meet
                the high-wage-related aspect of the material and manufacturing
                expenditures component, which concerns whether workers engaged in
                direct production work at a plant or facility included in a producer's
                material and manufacturing expenditures calculation earn an average
                hourly base wage rate of at least US$16 per hour. All other aspects of
                material and manufacturing expenditures are addressed in the Uniform
                Regulations and regulations and/or guidance issued by CBP or other
                federal agencies.
                Sec. 810.105 Calculating the average hourly base wage rate.
                 (a) The average hourly base wage rate (also referred to in the
                USMCA as the production wage rate, and in the Uniform Regulations as
                the average base hourly wage rate) is calculated by dividing the total
                base wages paid for all hours worked in direct production at a plant or
                facility by the total number of hours worked in direct production at
                that plant or facility. The average hourly base wage rate must be at
                least US$16 per hour for the plant or facility to count toward a
                producer's LVC obligation.
                 (b) The three components of this calculation are computed as
                follows:
                 (1) Hourly base wage rate is the rate of compensation a worker is
                paid for each hour worked in direct production.
                 (i) Benefits, bonuses, premium payments, incentive pay, overtime
                premiums, and all other similar payments are excluded from the hourly
                base wage rate.
                 (ii) Amounts deducted from a worker's pay that are for the benefit
                of the worker and are reasonable may be included in the hourly base
                wage rate. The principles in determining whether deductions are for the
                benefit of the worker and are reasonable, and thus may be included as
                part of the hourly base wage rate, are explained in more detail in 29
                CFR part 531.
                 (2) Hours worked in direct production means all time a worker
                spends personally involved in the production of passenger vehicles,
                light trucks, heavy trucks, or parts used in the production of these
                vehicles at a plant or facility located in a USMCA Country, or directly
                involved in the set-up, operation, or maintenance of equipment or tools
                used in the production of those vehicles or parts at that plant or
                facility. The total number of hours worked in direct production at a
                plant or facility, as referenced in paragraph (a) of this section, is
                calculated by adding together hours in direct production (as calculated
                under paragraphs (b)(2)(i) and (ii)) for all workers who perform direct
                production work at that plant or facility.
                 (i) Except for workers described in Sec. 810.130, if at least 85
                percent of a worker's total work hours are hours worked in direct
                production, the worker's total work hours are considered hours worked
                in direct production, and are included in the average hourly base wage
                rate calculation.
                 (ii) Except for workers described in Sec. 810.130, if less than 85
                percent of a worker's total work hours are hours worked in direct
                production, only the worker's hours worked in direct production are
                included in the average hourly base wage rate calculation.
                 (3) Total base wages is calculated using a two-step process. First,
                multiply each worker's hourly base wage rate (for the time period
                described in paragraph (d) of this section) by that worker's number of
                hours worked in direct production at that rate (for the same time
                period). Second, add the values calculated in step one to obtain total
                base wages paid for all hours worked in direct production at the plant
                or facility.
                 (c) The producer must include all hours worked in direct production
                at a plant or facility (other than by workers described in Sec.
                810.130) when calculating the average hourly base wage rate for that
                plant or facility. Where a worker is paid by a third party
                [[Page 39812]]
                (such as a temporary employment agency), only the wages received by the
                worker are included in the average hourly base wage rate calculation.
                 (d) The producer must elect one of the following periods to
                calculate the average hourly base wage rate:
                 (1) The producer's previous fiscal year;
                 (2) The previous calendar year;
                 (3) The quarter or month to date in which the vehicle is produced
                or exported;
                 (4) The producer's fiscal year to date in which the vehicle is
                produced or exported; or
                 (5) The calendar year to date in which the vehicle is produced or
                exported.
                Sec. 810.110 Examples of direct production work.
                 (a) Direct production work includes production of passenger
                vehicles, light trucks, or heavy trucks, or parts for these vehicles,
                as well as the set-up, operation or maintenance of tools or equipment
                used in the production of those vehicles and parts. The work may take
                place on a production line, at a workstation, on the shop floor, or in
                another production area. Direct production work includes material
                handling of vehicles or parts; inspections of vehicles or parts,
                including inspections that are normally categorized as quality control
                and, for heavy trucks, pre-sale inspections carried out at the place
                where the vehicle is produced; on-the-job training regarding the
                execution of a specific production task; and maintaining and ensuring
                the operation of the production line or production area and the
                operation of tools and equipment used in the production of vehicles or
                parts, including the cleaning of the line or production area and the
                places around it.
                 (b) Except for workers described in Sec. 810.130, time spent (by,
                for example, line supervisors and team leads) providing on-the-job
                training regarding the execution of a specific production task or
                relieving a worker in the performance of direct production duties is
                direct production work. Time spent managing or supervising workers is
                not direct production work.
                Sec. 810.115 Paid meal time and paid break time.
                 Paid meal time and paid break time are counted as direct production
                work for purposes of determining whether at least 85 percent of a
                worker's total work hours are hours worked in direct production.
                However, if less than 85 percent of a worker's total work hours are
                worked in direct production, paid meal time and paid break time are not
                included in the average hourly base wage rate calculation.
                Sec. 810.120 Part-time, temporary, seasonal, and contract workers.
                 (a) Part-time, temporary, and seasonal workers. Hours of part-time
                workers, temporary workers, and seasonal workers are treated the same
                as hours of full-time workers for purposes of calculating the average
                hourly base wage rate.
                 (b) Employees. The average hourly base wage rate calculation
                includes workers' hours regardless of whether the workers have an
                employment relationship with the producer.
                Sec. 810.125 Workers paid on a non-hourly basis.
                 (a) General. If any worker performing direct production work is
                compensated by a method other than hourly, such as a salary, piece-
                rate, or day-rate basis, the worker's hourly base wage rate shall be
                calculated by converting the salary, piece-rate, or day-rate to an
                hourly equivalent. This hourly equivalent is then multiplied by the
                number of hours worked in direct production for purposes of calculating
                the average hourly base wage rate.
                 (b) Examples. (1) Where the salary, piece-rate, or day-rate wage is
                paid to a worker on a weekly or bi-weekly pay period basis, the total
                salary, piece-rate, or day-rate compensation for that pay period will
                be divided by the total number of hours worked in the pay period to
                determine the hourly equivalent.
                 (2) Where the salary, piece-rate, or day-rate wage is paid to a
                worker on a semi-monthly pay period basis, the total salary, piece-
                rate, or day-rate compensation will be converted to a weekly equivalent
                by multiplying the compensation by 24 (semi-monthly pay periods in a
                year) and dividing by 52 (weeks per year). This weekly equivalent will
                be divided by the total number of hours worked in the week to determine
                the hourly equivalent.
                 (3) Where the salary, piece-rate, or day-rate wage is paid to a
                worker on a monthly pay period basis, the total salary, piece-rate, or
                day-rate compensation will be converted to a weekly equivalent by
                multiplying the compensation by 12 (monthly pay periods in a year) and
                dividing by 52 (weeks per year). This weekly equivalent will be divided
                by the total number of hours worked in the week to determine the hourly
                equivalent.
                Sec. 810.130 Executive, Management, Research and Development,
                Engineering, and Other Personnel.
                 The average hourly base wage rate does not include any hours worked
                by:
                 (a) Executive or management staff who generally have the authority
                to make final decisions to hire, fire, promote, transfer and discipline
                employees;
                 (b) Workers engaged in research and development; or
                 (c) Engineers, mechanics, or technicians, if such personnel are not
                responsible for maintaining and ensuring the operation of the
                production line or tools and equipment used in the production of
                vehicles or parts.
                Sec. 810.135 Interns, students, and trainees.
                 Hours worked by an intern, student, or trainee who does not have an
                express or implied compensation agreement with the employer are not
                considered hours worked in direct production, and therefore are not
                included in the average hourly base wage rate calculation.
                Sec. 810.140 High-wage transportation or related costs for shipping a
                high-wage part or material.
                 (a) High-wage transportation or related costs for shipping a high-
                wage part or material within the USMCA Countries may be used to
                calculate high-wage material and manufacturing costs if those costs are
                not otherwise included in the annual purchase value.
                 (b) Where the requirements of paragraph (a) of this section are
                met, the producer may claim in its calculation of high-wage material
                and manufacturing expenditures high-wage transportation or related
                costs for shipping a high-wage part or material within the USMCA
                Countries, for each transportation, logistics, or material handling
                provider that paid an average hourly base wage rate of at least US$16
                per hour to its direct production workers performing these services.
                Such workers would include drivers and loaders.
                 Sec. 810.145 Currency exchange.
                 The high-wage component of material and manufacturing expenditures
                (and assembly expenditures under Sec. 810.300) is expressed in U.S.
                dollars--US$16 per hour. Rules governing currency exchange are set
                forth and addressed in the Uniform Regulations and regulations and/or
                guidance issued by the Department of the Treasury and/or CBP.
                Sec. 810.150 Adjustment of the average hourly base wage rate.
                 If the USMCA Countries agree to adjust the dollar amount of the
                average hourly base wage rate requirement, WHD will publish a notice of
                the
                [[Page 39813]]
                adjusted rate in the Federal Register. The regulations in this part
                will apply with respect to the adjusted rate in the same manner they
                applied with respect to the US$16 per hour rate.
                Subpart C--Calculating the High-Wage Technology Expenditures Credit
                Sec. 810.200 High-wage technology expenditures credit.
                 (a) A producer may receive a 10 percent credit towards its total
                LVC requirement by demonstrating that the sum of its annual
                expenditures in North America on wages for research and development and
                information technology is equal to or greater than 10 percent of its
                annual expenditures on production wages in North America. If a
                producer's annual expenditures in North America on wages for research
                and development and information technology is less than 10 percent of
                the producer's annual expenditures in North America on production
                wages, then the producer is eligible for a credit equal to the actual
                percentage of the producer's annual expenditures in North America on
                wages for research and development and information technology as a
                percentage of its total annual expenditures in North America on
                production wages.
                 (b) The three components of this calculation are computed as
                follows:
                 (1) Annual expenditures in North America on wages for research and
                development means total annual corporate spending in North America on
                wages for research and development, including prototype development,
                design, engineering, testing, or certifying operations.
                 (2) Annual expenditures in North America on wages for information
                technology means total annual corporate spending in North America on
                wages for information technology, including software development,
                technology integration, vehicle communications, and information
                technology support operations.
                 (3) Annual expenditures on production wages in North America means
                total annual corporate spending on wages for production of passenger
                vehicles, light trucks, and heavy trucks in North America.
                Subpart D--Calculating the High-Wage Assembly Expenditures Credit
                Sec. 810.300 High-wage assembly expenditures credit.
                 (a) A producer may receive a single credit of five percent towards
                the total LVC requirement if it demonstrates any one of the following:
                 (1) Operation of (or a long term contract with) a ``high-wage''
                engine assembly plant in North America with a minimum annual production
                capacity of originating engines;
                 (2) Operation of (or a long term contract with) a ``high-wage''
                transmission assembly plant in North America with a minimum annual
                production capacity of originating transmissions; or
                 (3) Operation of (or a long term contract with) a ``high-wage''
                advanced battery assembly plant in North America with a minimum annual
                production capacity of originating advanced battery packs.
                 (b) A plant is ``high-wage'' for purposes of this section if it has
                an average hourly base wage rate of at least US$16 per hour for the
                entire plant. The US$16 per hour average hourly base wage rate for
                high-wage assembly expenditures credit is determined by calculating the
                average hourly base wage rate in the same manner as detailed in Sec.
                810.105.
                 (c) Minimum annual production capacity levels are set forth in the
                USMCA and in guidance issued by CBP and are outside the Department's
                authority.
                 (d) The definition of ``long term contract'' is set forth in the
                Uniform Regulations.
                 (e) If a plant used by a producer to satisfy the material and
                manufacturing expenditures component of the LVC requirement meets the
                requirements of paragraph (a) of this section, the producer may use
                that plant to qualify for the high-wage assembly expenditures credit.
                Subpart E--Certification Provisions
                Sec. 810.400 Scope and purpose of this subpart.
                 Section 202A(c)(1)(B) of the USMCA Implementation Act requires the
                Secretary, in consultation with CBP, to ensure that a vehicle
                producer's LVC certification does not contain omissions or errors
                before the certification is considered properly filed. The regulations
                in this subpart describe the scope of the Secretary's review under this
                statutory provision, and what certification information a vehicle
                producer submits to CBP related to that review. All matters other than
                reviewing the high-wage components of the LVC certification for
                omissions or errors are outside of the Secretary's purview, and are
                addressed in the Uniform Regulations and regulations and/or guidance
                issued by CBP or other federal agencies.
                Sec. 810.405 Certification.
                 (a) To satisfy its certification obligation under section
                202A(c)(1)(B)(i) of the USMCA Implementation Act pertaining to the
                high-wage components of the LVC requirements, WHD will review for
                omissions or errors the following information relating to the high-wage
                components of the LVC requirements, which the producer of the covered
                vehicle (rather than the importer or exporter) submits to CBP.
                 (1) The certifying vehicle producer's name, corporate address,
                Federal Employer Identification Number or alternative unique
                identification number of the producer's choosing, such as a Business
                Number (BN) issued by the Canada Revenue Agency, Registro Federal de
                Contribuyentes (RFC) number issued by Mexico's Tax Administration
                Service (SAT), Legal Entity Identifier (LEI) number issued by the
                Global Legal Entity Identifier Foundation (GLEIF), or an identification
                number issued to the person or enterprise by CBP, and a point of
                contact for the certifying vehicle producer.
                 (2) The vehicle class, model line, and/or other category indicating
                the motor vehicles covered by the certification.
                 (3) The time period the producer of the covered vehicle is using
                for its LVC calculations. For purposes of calculating the LVC, a
                producer of the covered vehicle may use any one of the time periods
                used for calculating the average hourly base wage rate, as described in
                Sec. 810.105(d).
                 (4) The name, address, and Federal Employer Identification Number
                or alternative unique identification number of the producer's choosing,
                such as a Business Number (BN) issued by the Canada Revenue Agency,
                Registro Federal de Contribuyentes (RFC) number issued by Mexico's Tax
                Administration Service (SAT), Legal Entity Identifier (LEI) number
                issued by the Global Legal Entity Identifier Foundation (GLEIF), or an
                identification number issued to the person or enterprise by CBP, for
                each plant or facility the producer of the covered vehicle is relying
                on to meet the high-wage material and manufacturing expenditures
                component of the LVC requirements.
                 (5) A statement that the average hourly base wage rate, calculated
                consistent with Sec. 810.105, meets or exceeds US$16 per hour for each
                plant or facility identified in paragraph (a)(4) of this section.
                 (6) If applicable, a statement that the producer is using high-wage
                transportation or related costs to meet the high-wage material and
                [[Page 39814]]
                manufacturing expenditures component. If the producer is using high-
                wage transportation or related costs, the producer must identify the
                company name, address, and Federal Employer Identification Number or
                alternative unique identification number of the producer's choosing,
                such as a Business Number (BN) issued by the Canada Revenue Agency,
                Registro Federal de Contribuyentes (RFC) number issued by Mexico's Tax
                Administration Service (SAT), Legal Entity Identifier (LEI) number
                issued by the Global Legal Entity Identifier Foundation (GLEIF), or an
                identification number issued to the person or enterprise by CBP, for
                each company the producer used to calculate its high-wage
                transportation or related costs.
                 (7) If applicable, a statement that the producer is using the high-
                wage technology expenditures credit to meet the LVC requirements. If
                the producer is using the high-wage technology expenditures credit, a
                producer must identify the percentage the producer is claiming as a
                credit towards the total LVC requirement.
                 (8) If applicable, a statement that the producer is using the high-
                wage assembly expenditures credit to meet the LVC requirements. If the
                producer is using the high-wage assembly expenditures credit, the
                producer must identify the following:
                 (i) The name, address, and Federal Employer Identification Number
                (for U.S. plants) or alternative unique identification number of the
                producer's choosing, such as a Business Number (BN) issued by the
                Canada Revenue Agency, Registro Federal de Contribuyentes (RFC) number
                issued by Mexico's Tax Administration Service (SAT), Legal Entity
                Identifier (LEI) number issued by the Global Legal Entity Identifier
                Foundation (GLEIF), or an identification number issued to the person or
                enterprise by CBP for the assembly plant the producer used to qualify
                for the high-wage assembly expenditures credit; and
                 (ii) A statement that the average hourly base wage rate, calculated
                consistent with Sec. Sec. 810.300 and 810.105, meets or exceeds US$16
                per hour for the assembly plant used to qualify for the high-wage
                assembly expenditures credit.
                 (b) Producers of covered vehicles must ensure that records are kept
                of information to support the calculations submitted under paragraphs
                (a)(5), (7), and (8)(ii). Producers must be able to provide records
                upon request by the Department, as described in Sec. 810.600(c), but
                the records may be physically maintained by a supplier or contractor.
                The Department will accept records directly from a supplier or
                contractor where, for example, the producer and supplier or contractor
                have contracted for such an approach.
                 (c) This section applies to all producers of covered vehicles
                during the alternative staging regime period and after the alternative
                staging regime period ends.
                Sec. 810.410 Administrator's review for omissions or errors.
                 (a) The Administrator will review the information submitted under
                Sec. 810.405(a) for omissions or errors. If the Administrator
                determines that the high-wage components of the certification contain
                no omissions or errors, WHD will notify CBP that the high-wage
                components of the certification have been properly filed.
                 (b) If the Administrator determines that the high-wage components
                of the certification contain an omission or error, and therefore the
                certification has not been properly filed, WHD will provide written or
                electronic notice of the deficiency to CBP. CBP will require the
                producer of the covered vehicle to respond with a modified
                certification or otherwise. If, upon review of the response, the
                Administrator determines that the high-wage components of the
                certification contain no errors or omissions, WHD will notify CBP that
                the high-wage components of the certification have been properly filed.
                If, upon review of the response, the Administrator continues to find an
                omission or error, or if no response is submitted, WHD will provide
                written or electronic notification to CBP that the high-wage components
                of the certification have not been properly filed. The producer may
                appeal the Administrator's determination pursuant to Sec. 810.700.
                Subpart F--Verification of the Labor Value Content's Wage
                Components
                Sec. 810.500 Scope and purpose of this subpart.
                 Section 202A(e)(1) of the USMCA Implementation Act gives the
                Secretary, in conjunction with the Secretary of the Treasury, authority
                to verify whether a covered vehicle complied with the LVC requirements
                set forth in Article 7 of the Automotive Appendix, or if the producer
                is subject to the alternative staging regime, under Articles 7 and 8 of
                the Automotive Appendix. The Secretary's role in conducting
                verifications is limited to verifying compliance with the high-wage
                components of the LVC requirements. All matters other than the high-
                wage components of the LVC verification are outside of the Secretary's
                purview and are addressed in the Uniform Regulations and regulations
                and/or guidance issued by the Department of the Treasury, CBP, or other
                federal agencies.
                Sec. 810.505 Scope of verification.
                 (a) The Administrator may verify, through investigation, whether
                the producer complied with the high-wage components of any part of the
                LVC requirements, including material and manufacturing expenditures,
                technology expenditures, and assembly expenditures. The producer is
                responsible for all aspects of compliance with the high-wage components
                of the LVC requirements at its plants and facilities as well as the
                plants or facilities of the suppliers and contractors listed in the
                producer's certification.
                 (1) For verifications of the wage component of high-wage material
                and manufacturing expenditures, the Administrator may verify whether
                the average hourly base wage rate in any plant or facility relied on by
                the producer in its certification meets the US$16 per hour requirement.
                If the producer's certification includes transportation or related
                costs for shipping as part of its LVC calculation, the Administrator
                may verify whether any transportation, logistics, or material handling
                provider relied on by the producer in its certification meets the US$16
                per hour requirement.
                 (2) For verifications of high-wage technology expenditures, the
                Administrator may verify that a producer properly claimed a credit for
                annual expenditures on wages for research and development, information
                technology, and production in North America.
                 (3) For verifications of high-wage assembly expenditures, the
                Administrator may verify whether an engine, transmission, or advanced
                battery assembly facility that a producer relied on in its
                certification has an average hourly base wage rate of at least US$16
                per hour.
                 (b) The Administrator may, as appropriate:
                 (1) Examine, or cause to be examined, upon 30-day notice, any
                record (including any statement, declaration, document, or
                electronically generated or machine-readable data) described in the
                notice with reasonable specificity.
                 (2) Request information from any officer, worker, or agent of a
                producer of automotive goods, as necessary, that may be relevant with
                respect to whether the production of covered vehicles
                [[Page 39815]]
                meets the high-wage components of the LVC requirements set forth in
                Article 7 of the Automotive Appendix, or if the producer is subject to
                the alternative staging regime, Articles 7 and 8 of the Automotive
                Appendix. This information may be obtained under oath, by deposition or
                otherwise, at the discretion of the Administrator.
                 (c) The Administrator is authorized to request and examine records
                relating to wages, hours, job responsibilities, or any other
                information in any plant or facility relied on by a producer of covered
                vehicles to demonstrate that the production of such vehicles by the
                producer meets the LVC requirements set forth in Article 7 of the
                Automotive Appendix or, if the producer is subject to the alternative
                staging regime, Articles 7 and 8 of the Automotive Appendix.
                 (d) The Administrator will conduct its verification consistent with
                the timelines set forth in Article 5.9 of the USMCA.
                Sec. 810.510 Notice to a producer that a verification of compliance
                with labor value content requirements has been initiated.
                 CBP will notify a producer that a verification of LVC compliance
                has been initiated, including whether the verification concerns the
                high-wage components of the producer's LVC certification. This
                notification applies to verifications of compliance with the LVC
                referred to the Administrator by CBP, as well as verifications the
                Administrator has initiated with CBP.
                Sec. 810.515 Conduct of verifications.
                 The Administrator shall conduct verifications as may be appropriate
                and, in connection therewith, enter and inspect any places, inspect any
                records and make transcriptions or copies thereof, question any
                persons, and gather any other information as deemed necessary by the
                Administrator to determine compliance regarding the matters which are
                the subject of the verification. Upon request by the Administrator, an
                employer or other entity whose plant or facility is subject to
                verification shall make available to the Administrator all records,
                information, persons, and places that the Administrator deems necessary
                to copy, transcribe, question, or inspect to determine compliance
                regarding the matters which are the subject of the verification. In
                conducting any verifications, the Administrator will coordinate with
                CBP and other federal agencies (including requesting information from
                such agencies) as appropriate.
                Sec. 810.520 Confidentiality.
                 The Administrator shall, to the full extent of the law, protect the
                confidentiality of any person who provides information to the
                Department in confidence in the course of a verification or otherwise
                under this subpart.
                Sec. 810.525 Notice provided to CBP regarding the Administrator's
                findings.
                 The Administrator will provide verification findings and analysis
                to CBP, which retains the authority to make the final determination of
                LVC compliance, based in part on the Administrator's verification
                findings.
                Sec. 810.530 Verification of labor value content compliance for
                producers subject to alternative staging regime.
                 The verification procedures outlined in this subpart apply to
                producers whether or not they are subject to the alternative staging
                regime, as outlined in Articles 7 and 8 of the Automotive Appendix.
                Subpart G--Recordkeeping Requirements
                Sec. 810.600 Recordkeeping requirements.
                 (a) General. The Administrator is authorized by section
                206(b)(4)(B) of the USMCA Implementation Act to require a producer to
                make, keep, and render for examination and inspection, records and
                supporting documentation related to a producer's certification of
                compliance with the LVC requirements set forth in Article 7 of the
                Automotive Appendix or, if the producer is subject to the alternative
                staging regime, under Articles 7 and 8 of the Automotive Appendix.
                 (b) Form of records. No particular order or form of records is
                required, and records may be maintained in any medium; however, the
                Administrator prefers electronically generated or machine-readable
                data.
                 (c) Inspection of records. The records described in this section
                must be made available to an authorized representative of the
                Department for inspection, copying, and transcription upon written
                request to the producer. The request will describe with reasonable
                specificity the records that are being sought, and the party receiving
                the request will have 30 days from the date of the written request to
                provide the requested records, unless the party receiving the request
                has requested and obtained an extension of this time period at the
                discretion of the Department.
                 (d) Period of retention. Importers must ensure that records
                specified in these regulations are kept for 5 years from the date of
                importation of any vehicle for which preferential tariff treatment was
                claimed, and exporters and producers must ensure that records specified
                in these regulations are kept for 5 years from the date on which the
                certification of origin was completed, or for a longer period if the
                USMCA Countries so specify. Producers must be able to provide records
                upon request by the Department, as described in Sec. 810.600(c), but
                the records may be physically maintained by a supplier or contractor.
                The Department will accept records directly from a supplier or
                contractor where, for example, the producer and supplier or contractor
                have contracted for such an approach.
                 (e) Records to be preserved to demonstrate compliance with the
                high-wage material and manufacturing expenditures component and
                eligibility for the high-wage assembly expenditures credit. The records
                and information listed in this paragraph must be maintained for each
                worker for whom records must be maintained pursuant to 29 CFR 516.2 and
                who worked at any plant or facility relied upon by a producer to meet
                the high-wage material and manufacturing expenditures component or the
                high-wage assembly expenditures credit of the LVC requirements, during
                the time period the producer used for calculating the LVC. For workers
                who are employed outside the United States, but if employed in the
                United States would be subject to the recordkeeping requirements under
                29 CFR 516.2, the producer must also maintain the records detailed in
                this paragraph for such workers. These records must also be maintained
                for any other worker (in any USMCA Country) who performed direct
                production work at the plant or facility during the time period used
                for calculating the LVC, even if such workers do not fall within the
                recordkeeping requirements of 29 CFR 516.2.
                 (1) Worker information. Full name (and identifying symbol or number
                if used in place of the worker's name on any time, work, or payroll
                records), job title, home address, and other available contact
                information.
                 (2) Time records. The total number of daily and weekly hours
                worked. For workers who work a fixed schedule, the producer may instead
                maintain records that show the schedule of daily and weekly hours the
                worker normally works instead of the hours worked each day and each
                workweek. However, if this method is used, in weeks in which a worker
                adheres to this schedule, the worker must indicate by check mark,
                statement or other method that such hours were in fact actually worked,
                and
                [[Page 39816]]
                in weeks in which more or less than the scheduled hours are worked, the
                records must show the exact number of hours worked each day and each
                week.
                 (3) Earnings records. Payroll records showing the date wages were
                paid and the time period covered by such wage payments, each worker's
                hourly rate of pay and basis of pay (hourly, salary, piece rate, day
                rate, etc.), total daily or weekly straight-time earnings, total
                premium pay for overtime hours (if any), total pay for the pay period,
                and any deductions taken from each worker's pay, including the amount
                and reason for the deduction. To the extent that a worker's rate of pay
                or straight-time earnings include benefits, bonuses, premium payments,
                incentive pay, or other similar payments excluded from the hourly base
                wage rate, as defined at Sec. 810.105, records must clearly identify
                those payments and state the amount of such payments.
                 (4) Certificates, agreements, plans, notices, collective bargaining
                agreements, etc. Any collective bargaining agreements, written
                agreements or memoranda, individual contracts, plans, trusts,
                employment contracts, or written memorandum summarizing oral agreements
                or understandings applicable to any workers who work in direct
                production.
                 (5) Direct production records. A record of all hours that workers
                have worked in direct production, as defined at Sec. 810.105(b)(2),
                including the workers' names, type of direct production work performed,
                hours worked by each worker that constitute direct production, hourly
                base wage rate paid to each worker for the direct production hours
                worked, and total wages paid to workers for those direct production
                hours worked. A producer's records must distinguish hours worked in
                direct production from other hours worked, to the extent that workers
                perform both direct production work and work not in direct production
                during the relevant time period. However, if at least 85 percent of a
                worker's total work hours are hours worked in direct production, the
                producer may simply record such workers' total hours worked during the
                relevant time period, so long as the producer can show that its
                recordkeeping system indicates when such workers work hours not in
                direct production when such situations occur.
                 (6) Records relating to high-wage transportation or related costs
                for shipping. Producers must maintain any records relied upon to
                establish the wages their transportation, logistics, or material
                handling service providers paid to their direct production workers
                performing these services. Such records may include, for example,
                contracts for transportation or shipping, union contracts entered into
                by transportation or shipping providers, and other contracts that
                reflect the rates paid to workers employed by transportation or
                shipping contractors that are relied upon by producers to establish
                transportation or related costs for shipping.
                 (f) Records to be preserved to demonstrate eligibility for the
                high-wage technology expenditures credit. If a producer is using high-
                wage technology expenditures to meet the high-wage components of the
                LVC requirements, the producer must maintain a record of the total
                wages paid to workers in North America who perform research and
                development or information technology work, as defined at Sec.
                810.200(b)(1) and (2), including the workers' names and type of
                research and development or information technology work performed. The
                producer must also maintain a record of the total wages paid to workers
                in North America who perform direct production work, as defined at
                Sec. 810.200(b)(3), including the workers' names and type of
                production work performed.
                 (g) Calculations relating to labor value content requirements.
                Producers must also maintain any additional records not described in
                paragraphs (e) and (f) of this section that they relied on to support
                the calculations used to establish they meet the high-wage components
                of the LVC requirements.
                 (h) Relation to other recordkeeping requirements. Nothing in this
                section shall excuse any producer from complying with any recordkeeping
                or reporting requirement imposed by any other federal, state or local
                law, ordinance, regulation, or rule. This includes, but is not limited
                to, any recordkeeping requirements concerning other components of the
                LVC requirements as set forth in regulations issued by CBP or any other
                federal agency.
                Subpart H--Administrative Review of the Department's Analysis and
                Findings
                Sec. 810.700 Administrative review procedures.
                 (a) Initiation of review. Upon receipt from CBP of a notice of a
                protest filed under 19 U.S.C. 1514 that meets the requirements of the
                regulations at 19 CFR part 174 and relates to the Department's analysis
                of the high-wage components of the LVC requirements, the Department
                will conduct an administrative review of its initial analysis.
                 (b) Procedure for review. Review of the Department's analysis will
                be conducted by the Administrator, or the Administrator's designee, as
                the presiding official. When a presiding official is designated by the
                Administrator, the official must rank higher than the official who
                issued the decision that is the subject of the protest.
                 (c) Proceeding before an administrative law judge. In any case
                where the presiding official determines, in the discretion of that
                official, that it is appropriate, and there exist disputed questions of
                fact, the presiding official may refer those questions to the Chief
                Administrative Law Judge for a recommended decision.
                 (1) Upon receipt from the Administrator, the Chief Administrative
                Law Judge shall designate an administrative law judge to hear the
                disputed questions of fact.
                 (2) Hearings held under this subpart shall be conducted under the
                Department's rules of practice and procedure for administrative
                hearings found in 29 CFR part 18.
                 (3) The recommended decision of the administrative law judge shall
                be issued within 120 days of when the Administrator referred the
                questions of fact to the Chief Administrative Law Judge, or longer with
                consent of the parties.
                 (4) The recommended decision shall be limited to a determination of
                the questions of fact presented by the Administrator, and shall include
                a statement of findings and recommendations, with reasons and bases
                therefore, for each question of fact presented by the Administrator.
                 (5) The Administrator shall have discretion to accept or reject the
                findings of the administrative law judge in full or in part.
                 (d) Scope of review. The presiding official, in a review under
                paragraph (b) of this section, shall have the discretion to consider
                any evidence relevant to rendering a determination under this section.
                In the event that new evidence or a new legal argument is made by the
                protestor in a review under paragraph (b) of this section, the
                presiding official may request additional information from the
                protestor, and/or additional verification by WHD.
                 (e) Time frame for review. The Administrator will strive to issue a
                decision under this section within 1 year from the date the
                Administrator receives the notice of protest from CBP. This timeframe
                does not include the time during which any additional
                [[Page 39817]]
                verification or collection of additional information may take place in
                response, for example, to newly raised issues.
                 (f) Results of review. After considering the relevant evidence and
                issues, the Administrator shall provide a determination containing the
                results of the administrative review to CBP.
                Subpart I--Whistleblower Protections
                Sec. 810.800 Prohibited acts.
                 (a) Discrimination. (1) It is unlawful to intimidate, threaten,
                restrain, coerce, blacklist, discharge, or in any other manner
                discriminate against any person because the person has--
                 (i) Disclosed information to a federal agency or to any person
                relating to a verification of the producer's compliance with the LVC
                requirements, or
                 (ii) Cooperated or sought to cooperate in a verification concerning
                the producer's compliance with the LVC requirements.
                 (b) Complaints. (1) Any person who believes that he or she has been
                discriminated against in violation of this section may file a complaint
                alleging such discrimination.
                 (2) The complaint shall be filed with WHD. A complaint may be filed
                at any WHD local office; the address and telephone number of local
                offices may be found in telephone directories or at the following
                internet address: http://www.dol.gov/whd.
                 (3) Within 12 months after the alleged discriminatory act occurs, a
                person who believes that he or she has been discriminated against may
                file, or have filed by any person on that person's behalf, a complaint
                alleging such discrimination. The date of the postmark, facsimile
                transmittal, phone call, or email communication will be considered to
                be the date of filing. If the complaint is filed in person, by hand-
                delivery, or other means, the complaint is filed upon receipt.
                 (4) No particular form of complaint is required, and complaints may
                be filed in person, in writing, or over the telephone. If oral, the
                complaint shall be reduced to writing by the WHD official who receives
                the complaint. The complaint shall set forth sufficient facts for the
                Administrator to determine whether there is reasonable cause to believe
                that a violation as described in paragraph (a) of this section has been
                committed and, therefore, that an investigation is warranted.
                 (5) If the Administrator determines that an investigation of a
                complaint is warranted, the complaint shall be accepted for filing; an
                investigation shall be conducted and a determination issued within 30
                calendar days of the date of filing. The time for the investigation may
                be increased with the consent of both parties (the whistleblower and
                the party that allegedly engaged in discrimination), or if, for reasons
                outside of the control of the Administrator, the Administrator needs
                additional time to obtain information from either party or other
                sources to determine whether a violation has occurred. No hearing or
                appeal pursuant to this subpart shall be available regarding the
                Administrator's determination of whether an investigation on a
                complaint is warranted.
                 (c) Administrator's determination. (1) Following an investigation,
                the Administrator shall issue a written determination. Such
                determination shall be served on all known interested parties by
                personal service or by certified mail at the parties' last known
                addresses. Where service by certified mail is not accepted by the
                party, the Administrator may exercise discretion to serve the
                determination by regular mail.
                 (2) The Administrator shall file with the Chief Administrative Law
                Judge, U.S. Department of Labor, a copy of the complaint and the
                Administrator's determination.
                 (3) The Administrator's determination shall:
                 (i) Set forth the determination of the Administrator and the reason
                or reasons therefore, and in the case of a finding of violation(s),
                prescribe any remedies, including monetary relief, injunctive relief,
                civil money penalties of up to $50,000 per violation, and/or any other
                remedies assessed.
                 (ii) Inform the interested parties that they may request a hearing
                pursuant to paragraph (d) of this section.
                 (iii) Inform the interested parties that in the absence of a timely
                request for a hearing, received by the Chief Administrative Law Judge
                within 15 calendar days of the date of the determination, the
                determination of the Administrator shall become final and not
                appealable.
                 (iv) Set forth the procedure for requesting a hearing, and give the
                addresses of the Chief Administrative Law Judge (with whom the request
                must be filed) and the representative(s) of the Solicitor of Labor
                (upon whom copies of the request must be served).
                 (d) Administrative review of the Administrator's determination. (1)
                Any party desiring review of a determination issued under paragraph (c)
                of this section, including judicial review, shall make a request for
                such an administrative hearing in writing to the Chief Administrative
                Law Judge at the address stated in the notice of determination. If such
                a request for an administrative hearing is timely filed, the
                Administrator's determination shall be inoperative unless and until the
                case is dismissed or the administrative law judge issues an order
                affirming the decision.
                 (2) The request for such hearing shall be received by the Chief
                Administrative Law Judge, at the address stated in the Administrator's
                notice of determination, no later than 15 calendar days after the date
                of the determination.
                 (3) Copies of the request for a hearing shall be sent by the
                requestor to the WHD official who issued the Administrator's notice of
                determination, to the representative(s) of the Solicitor of Labor
                identified in the notice of determination, and to all known interested
                parties.
                 (4) The hearing shall be conducted in accordance with the
                procedures set forth in 29 CFR part 18.
                 (5) Within 60 calendar days after the date of the hearing, the
                administrative law judge shall issue a decision. If the Administrator
                or any party desires review of the decision, including judicial review,
                a petition for review by the Administrative Review Board shall be filed
                pursuant to paragraph (e) of this section.
                 (e) Appeal of a decision of the administrative law judge. Any party
                desiring review of the decision of the administrative law judge may
                appeal that decision by filing a petition for review with the
                Administrative Review Board within 30 days of the date of the
                administrative law judge's decision. If a petition for review is filed,
                the decision of the administrative law judge shall be inoperative
                unless and until the Administrative Review Board issues an order
                affirming the decision, or unless and until 30 calendar days have
                passed after the Administrative Review Board's receipt of the petition
                for review and the Administrative Review Board has not issued notice to
                the parties that the Administrative Review Board will review the
                administrative law judge's decision.
                 (f) Review of an order of the Administrative Review Board. An order
                of the Administrative Review Board under this subpart is subject to
                discretionary review by the Secretary of Labor (as provided in
                Secretary of Labor's Order 01-2020 or any successor to that order).
                [FR Doc. 2020-14014 Filed 6-29-20; 11:15 am]
                BILLING CODE 4510-27-P
                

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