US and Mexican labor unions and, separately, the US Government, have filed the first labor cases under the Rapid Response Mechanism (“RRM”) of the United States-Mexico-Canada Agreement (“USMCA”).  The RRM was a relatively late addition to the USMCA – the result of negotiations between the Trump Administration and House Democrats – and provides for facility-specific review by an independent panel, and remedies, in response to allegations of a “denial of rights” of free association and collective bargaining.  The USMCA is currently the only US free trade agreement to include a mechanism to address alleged labor rights violations at specific facilities in the territories of the Parties.

On May 10, 2021, the American Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”), Service Employees International Union (“SEIU”), Sindicato Nacional Independiente de Trabajadores de Industrias y de Servicios Movimiento 20/32 (“SNITIS”), and Public Citizen announced that they filed the first labor case under the RRM.  The petition alleges that auto parts manufacturer Tridonex, a subsidiary of Philadelphia-based Cardone Industries, has engaged in the following labor violations, including with respect to the current SITPME union that is active as the Tridonex facility:

• “Tridonex has denied its workers the opportunity to read or obtain copies of the collective bargaining agreement with SITPME.  Tridonex has failed to deposit its CBAs with the Federal Conciliation and Arbitration Board, as required by the Mexican Constitution.”
• “Tridonex and the SITPME union, acting as an agent of Tridonex, have jointly denied the Tridonex workers the opportunity to ratify their CBA, in violation of Art. 400 Bis of the Federal Labor Law.”
• “Tridonex and SITPME, acting as an agent of Tridonex, have jointly denied members of SITPME at Tridonex the right to elect their union leaders by personal, free, direct and secret vote, in violation of Art. 358.II of the Federal Labor Law.”
• “SITPME, acting as an agent of Tridonex, has failed to provide its members with legally-required financial information reports under Art. 373 and Art. 358.IV of the Federal Labor Law.”
• “Tridonex retaliated against workers who signed petitions to the Local CAB by firing more than 600 workers and compelling them to sign “voluntary” resignations in order to receive severance pay, in violation of Article 47 of the Federal Labor Law, and by denying other workers benefits agreed on through the CBA, in violation of Article 396 of the Federal Labor Law.”

The petition also specifies several labor infractions by the Government of the Mexican State of Tamaulipas, where the Tridonex facility is located:

• “By refusing to act on the demand for control of the CBA filed by SNITIS, the Government of Tamaulipas, acting as an agent of Tridonex, denied Tridonex workers the right to a personal, free, and secret vote to choose their union representative, as guaranteed by Art. 389 of the Federal Labor Law.”
• “The Government of Tamaulipas, acting as an agent of Tridonex, has subjected SNITIS leader and attorney Susana Prieto Terrazas to criminal charges, arrest, detention, and punitive conditional release terms in retaliation for her advocacy of the rights of workers at Tridonex and other companies in the State of Tamaulipas. As a result, she has been barred from entering the state of Tamaulipas or having any contact with the Labor Board office in Matamoros, and internally exiled to Chihuahua where the state government has issued criminal charges against her in relation to her union activities. These actions, taken in reprisal for the workers’ demand for democratic representation, have a chilling effect on workers’ freedom of association.”

Pursuant to a Mexico-specific annex contained in the agreement, USMCA requires that Mexico adopt and maintain particular provisions in its labor laws, including those aimed at ensuring “the right of workers to engage in concerted activities for collective bargaining or protection and to organize, form, and join the union of their choice.”  In light of the alleged denial of these and related rights, as specified above, review is permitted under the agreement’s RRM.

In terms of process, the Interagency Labor Committee for Monitoring and Enforcement (“Labor Committee”) – which oversees the United States’ domestic review process for RRM petitions – has 30 days to determine whether the petition includes “sufficient, credible evidence of a denial of rights.”  If the Labor Committee determines that the petition satisfies this criterion, the United States will request that Mexico review whether a denial of rights exists.  Mexico will then have 10 days to notify the Untied States as to whether it will conduct such review and, if so, an additional 35 days (45 days total) to report the results of the review and any remediation.  Should Mexico not conduct such review, or if the Parties are otherwise unable to reach a mutually-agreeable solution as to the existence or remediation of a denial of rights, either Party may move to request the formation of a Rapid Response Labor Panel (“RRLP”).

Depending on the nature of the Party’s panel request, a RRLP may proceed to “verify the Covered Facility’s compliance with the law in question and determine whether there has been a Denial of Rights” or “determine whether there has been a Denial of Rights.”  Under the former scenario, i.e., where verification is requested by the complainant Party, “{t}he panel shall formulate an appropriate request for verification, based on the circumstances and the nature of the allegations in the complainant Party’s petition and any other submissions from the Parties.”  A respondent Party’s refusal of the verification request permits the RRLP to proceed directly with issuing a determination as to the alleged denial of rights.  And, any interference of the verification process, if agreed to, may be taken into account by the RRLP in making its determination.  Under the latter scenario, i.e., where verification is not specifically requested by the complainant Party, the RRLP may “request a verification if it considers that a verification is necessary to assist…in making their determination.”

The RRLP must issue a determination as to the denial of rights within 30 days after conducting a verification or 30 days after it is constituted if there has not been a verification.  An affirmative panel finding of a denial of rights may lead to the imposition of remedies by the complainant Party, including the suspension of preferential tariff treatment for goods manufactured at the covered facility or the imposition of penalties on goods manufactured at or services provided by the covered facility.

Separately, on May 12, 2021, the Office of the United States Trade Representative (“USTR”) announced that the United States has requested that Mexico review whether workers at a General Motors (“GM”) facility in the Mexican State of Guanajuato are being denied the right of free association and collective bargaining.  This is the first instance in which a USMCA Party has itself moved to invoke the agreement’s RRM in connection with alleged labor violations.

According to USTR, USTR and the US Department of Labor received information “appearing to indicate serious violations of…. workers’ rights… in connection with a recent worker vote, organized by the existing union, to approve their collective bargaining agreement.”  Under the provisions governing the RRM, and as discussed above, Mexico will have 10 days to indicate whether it will conduct the requested review, and then, if it agrees to such review, an additional 35 days to complete the review and inform the United States of its determination, including any remediation.  If Mexico does not agree to conduct the review, or determines that workers’ rights have not been denied, the United States can ultimately request the formation of a RRLP, including on-site verification, as discussed above.

In the interim, and as provided for by USMCA, Ambassador Katherine Tai has directed the Secretary of the Treasury to suspend the liquidation of entries of goods from the particular GM facility at issue.  Liquidation may resume once there is an agreement by the Parties or a finding by a RRLP that there is no denial of rights.  Alternatively, and as discussed above, an affirmative panel finding of a denial of rights may lead to a number of remedies, including the suspension of preferential tariff treatment for goods manufactured at the covered facility or the imposition of penalties on goods manufactured at or services provided by the covered facility.

We will continue to monitor these and other developments related to the labor requirements of USMCA.