The automotive market is becoming more international with every new model year: Ford is not only globalizing its production efforts but now calling the shots for Mazda; the Germans will soon be building cars on U.S. soil; more than half of the Japanese vehicles sold in the U.S. are built in North America; the next new Cadillac model will be built in Germany; and automakers the world over are sharing technology, design, and virtually entire cars, at record levels. For buyers who place nationality high on their priority list, this creates an ever-growing gray area in which it's getting harder to draw border lines.
That's why the new American Automobile Labeling Act was enacted. The AALA was passed by Congress in 1992 (when the country's "buy American" temperament was at its most vocal point) and went into effect on Oct. 1, 1994. The law requires that all cars and light trucks produced after that date carry a content label specifying several things: the combined percentage of U.S./Canadian parts, any other countries (up to two) that supplied more than 15 percent of the vehicle's parts, where the vehicle is assembled, and the country from which the engine and transmission are sourced.
With 19 import-badged vehicles now built in the U.S., and 33 American-badged vehicles imported from outside U.S. borders, there likely will be some people surprised by what they read on these labels. For the vast majority of vehicles, though, there won't be anything eye-opening. After all, not many Toyota buyers are going to dealers' lots expecting to find American cars, and vice versa for Ford or Chevy buyers.
So, is this really a useful tool for the consumer, or simply more government red tape? Consider, too, that this is the third different formula developed by a government agency to attempt to differentiate between domestic and import vehicles. The Environmental Protection Agency makes the distinction for Corporate Average Fuel Economy (CAFE) considerations, while the Federal Trade Commission does the same for tariff administration, although each uses different rules.
Certainly, where a vehicle is assembled and where its engine and transmission come from are pretty clear-cut. Coming up with accurate national percentages, though, isn't an easy pie to slice. For instance, it's impossible to gauge actual American content because parts produced in the U.S. and Canada are lumped together. This isn't new. Canada is considered domestic by both the EPA and the FTC.
What counts as domestic content? The EPA figures in all costs associated with producing, distributing, and marketing the vehicle. The AALA, on the other hand, focuses only on parts content. Importers, however, feel that this picture is distorted by the fact that though the labor involved in making vehicle parts is included in the calculations, the labor involved in the final assembly of the vehicle isn't. This exclusion leaves out the approximately 33,000 American workers who build import-badged cars in U.S. assembly plants.
Another gray area comes from the fact that two different standards are used to determine the North American content of a part, depending on whether the parts supplier is independent or owned by the automaker. To allow independents to maintain some accounting privacy, the law allows them to round off their calculations. If a component uses 70 percent or more domestic content, then the total value of the part is counted as domestic. If it's below 70 percent, none of the value is counted. For example, a Delco battery in a Geo Prizm counts toward the vehicle's North American content (because Delco is owned by GM), while the same battery installed on a Toyota Corolla-in the same plant-doesn't.
NHTSA itself points out that the declared North American content of identical cars could theoretically range from 11 to 53 percent, depending on whether the parts suppliers are independent or owned by an automaker.
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