How to tell if your car or truck is "American"

Special To The Auto Channel
From The Center for Automotive Research (CAR)

Ann Arbor, MI February 24, 2017; While simple in concept, the question of whether a given vehicle is a domestic product, or just how American a car is, turns out to be very difficult to answer. Is a vehicle domestic or American if:

• the original nationality of its brand or the location of its ultimate corporate parent is the United States?
• the location of final assembly is in the United States?
• the majority of parts and components are manufactured in the United States?
• the majority of production costs are incurred in the United States?

Under U.S. law, there are three systems to determine “domestic content” in answering how American a vehicle is: the American Automobile Labeling Act (AALA), which is what is printed on the vehicle window sticker; the Corporate Average Fuel Economy (CAFE) two-fleet rule that divides cars into domestic and foreign fleets for purposes of determining fuel economy compliance; and nearly every trade agreement which contains rules of origin governing the eligibility of traded goods for favorable trade treatment, such as the North American Free Trade Agreement (NAFTA).

AALA, CAFE, and NAFTA each base the determination of domestic content primarily on where production costs are incurred, but each differs in important ways. First, AALA rules cover U.S. and Canadian content in its domestic content calculations, whereas CAFE and NAFTA include U.S., Canadian, and Mexican content as part of their domestic content calculations. Second, each system includes different types of costs. AALA includes the value added of parts and components produced in the U.S. and Canada as domestic. NAFTA domestic content calculations include everything that AALA does PLUS vehicle assembly costs, supplier manufacturing costs, and all overhead. CAFE includes everything that NAFTA does PLUS transportation costs, manufacturers’ profits, and sales/general/administrative costs as domestic content.

The chart below illustrates these differences, and the table following provides additional detail on how domestic content is determined under three U.S. classification systems. Because each calculation is different, there currently is no single, easy way to identify the U.S.-only content of a car or truck sold in the United States.

Domestic Content Determination for the Same Vehicle Under AALA, NAFTA, and CAFE Systems

Determination of Domestic Content under AALA, NAFTA, and CAFE

System	“Domestic” Geography	Domestic Content Calculation
AALA	U.S., Canada	(U.S. and Canadian Value Added in Parts and Materials) (Total Value of Parts and Materials) Engines and Transmissions: Country of greatest value added is considered the origin Vehicles: Final assembly location is stated   System makes significant use of rounding, roll-up/down, and companies can use alternative calculation methods, with approval.
NAFTA	U.S., Canada, Mexico	(Domestic Input Costs + Processing Costs + Direct Labor Costs + Production Equipment Cost + Overhead +  Certain other expenses) (Total Product Value)   Vehicles are tariff-free if regional content is > 62.5%; for parts, > 60%   Extensive tracing is required to prevent roll-up and roll-down of content going into assemblies
CAFE	U.S., Canada, Mexico	(Total Value of Imported Components + Import Transportation and Insurance Costs) (Dealer Acquisition Cost)   A vehicle is part of the domestic fleet if the import share of dealer acquisition cost is < 0.25 :