On July 1, the USMCA and Annexes 31 A and 31 B signed with the United States and Canada, respectively, will enter into force. The goal of these annexes is to establish the mechanisms to guarantee compliance with the labor obligations established in Annex 23 A of the USMCA, specifically the right to unionize and effective collective bargaining.
It is important to note that the United States has exerted a lot of pressure on Mexico for the fulfillment of labor obligations. The United States can file a complaint against Mexico for simple suspicion of Denial of Rights, which includes the right to unionize and effective collective bargaining, encompassing the termination of collective protection contracts and the simulated representation of unions.
If Mexico considers that there are elements for the existence of the complaint, it will initiate a procedure investigating the Covered Entity (a workplace from which goods or services are exported to the United States or producing a good or service that competes with the United States and that is considered an Priority Activity. Among these are included (but not limited to) the following sectors: aerospace, automotive, auto parts, electronics, bread, steel, mining, cement and perfumery. These sectors will be reviewed every year.
In the event that the United States considers that Mexico did not duly respond to the complaint or the Covered Entity did not comply with the measures imposed by Mexico, the United States may request the installation of a Rapid Response Mechanism Panel, made up of three arbitrators, one from each country involved and a neutral from a third country; for this, as of July 1, the list of panelists from each of the USMCA member countries must be established.
The Panel has the power to impose measures to repair the Denial of Rights. The Covered Entity must comply with the ruling, otherwise, it will be the recipient of the tariff sanctions on the goods, products or services it exports.
In conclusion, our recommendation is to review that workers’ right to unionize is respected, as well as the existence of effective collective bargaining via the legitimization of collective bargaining agreements already determined by the Labor Reform or free unionization.
The procedures with Canada is the same than for United States, but for Mexico it will be required as well a court or judicial resolution executed in order to initiate the complaint and the Panel.
These changes generate new labor challenges and companies must study their alternatives to define the strategy to avoid tariff sanctions.
Our firm puts its team of experts at your disposal to prepare a strategic collective bargaining plan.