Canada is joining forces with Mexico to challenge how the United States is interpreting the new rules that govern duty-free cars and trucks.
Mexico last week asked for a dispute resolution panel to challenge the stringent U.S. interpretation of the auto rules of origin enshrined in the U.S.-Mexico-Canada Agreement.
Rules of origin in the deal known as CUSMA in Canada dictate how much of a product must originate in the region in order to qualify for tariff-free status.
The new deal requires passenger vehicles to contain 75 per cent regional content, up from 62 per cent under NAFTA.
Canada says the U.S. is violating the terms of the agreement by adopting a stricter formula for how those thresholds are met.
It's the second major dispute to arise since the deal took effect after a panel ruled last week in favour of a U.S. complaint about how Canada is allocating its quotas for dairy imports.