The Double-Edged Sword of the RRM: Labor Justice or Trade Leverage under the USMCA?

In an era where people seek immediate remedy to their problems and technology and commerce have brought the world together, countries are also searching for new ways to solve controversies at a faster pace, to stop bureaucratic processes that may delay justice. 

This was the intention of the newly created, Rapid Response Labor Mechanism (RRM), introduced in the United States-Mexico-Canada Agreement (USMCA), which creates an innovative legal framework that empowers the United States and Canada to take targeted action against facilities in Mexico that exports services or good to such countries (covered facility) where workers are denied rights of freedom of association and collective bargaining (denial of rights). 

This groundbreaking mechanism bridges a critical gap between trade policy and labor justice, holding businesses to account through a binational process that could end up in severe penalties (i.e. suspension of preferential tariff treatment for goods produced at the facility, imposition of penalties, and in extreme cases, denial of entry of those goods), thus, allowing swift action when violations are alleged. This creates direct pressure on employers to align their labor practices with both domestic law and international commitments 

Although after 5 years of enforcement (USMCA came into force on July 1, 2020), the RRM has developed into a mechanism where the most powerful countries in the treaty (USA and Canada) impose harder terms to their weaker counterpart (Mexico) by trying to expand the scope of the mechanism to multiple labor transgressions and impose aggressive remediation actions against domestic and foreign companies based in Mexico, that may lead to shutting operations, with the ultimate goal of returning investment to their countries. 

From Trade to Labor: The USMCA’s Breakthrough 

The integration of the RRM into the USMCA marked a significant and unexpected shift in trade policy, placing labor enforcement at the heart of the agreement. While foreign observers were surprised by this development, Mexican legal experts recognized it as the culmination of deep, long-standing domestic labor reforms. These began with the 2017 constitutional amendment and included Mexico’s ratification of ILO Convention 98 in 2018 and sweeping 2019 changes to the Federal Labor Law. 

Key elements of Mexico’s reform included the establishment of the Federal Center for Conciliation and Labor Registration (CFCRL) to ensure transparency in union and contract registration; the replacement of politically influenced labor boards with independent labor courts; the introduction of union democracy measures like secret ballots; and the mandatory legitimization of over 500,000 collective bargaining agreements by direct and secret worker vote, a process completed in 2023. These reforms laid the groundwork for the implementation of the RRM, aligning Mexico’s labor standards with its international commitments. 

The Legal Framework: Annexes 31-A and 31-B 

Unlike traditional trade dispute mechanisms, which are cumbersome and politically sensitive, the RRM is intentionally designed to be fast and focused:

1.- The RRM can be triggered based on a presumption of a denial of rights, particularly freedom of association and collective bargaining, at a covered facility. The U.S. and Canada have established internal procedures to vet such complaints, with a 30-day window from receipt to determine admissibility. This internal determination precedes a formal request to Mexico. 

2.- Once a complaint is deemed admissible, the U.S. or Canada must submit a formal review request to Mexico via the Ministry of Economy (SE), the designated point of contact under the USMCA. 

Importantly, in Mexico, a complaint may be initiated without prior adjudicative findings. In contrast, the U.S. and Canada require that the facility in question have already been subjected to a compulsory order from their respective National Labor Relations Boards before a reciprocal complaint against Mexico can be filed—highlighting a structural asymmetry in enforcement.

3.- Upon receiving a formal request, Mexico has 45 days to investigate and determine whether a denial of rights has occurred. This includes gathering evidence, engaging stakeholders, and issuing a written position.  

4.- If a denial of rights is found, a State-to-State consultation process will be opened within the next 10 days to produce a remediation plan.  

5.- If the complaining party is not satisfied, it may notify Mexico, through the Ministry of Economy (SE), of its intention to impose trade sanctions unilaterally, with 15 days' notice. At this point, Mexico may invoke a labor panel to resolve the matter. During this phase, trade sanctions are suspended until the panel issues its ruling. 

Notably, Canada or the U.S. may delay the settlement of customs accounts tied to the implicated facility even before a denial of rights is legally established, exerting economic pressure during the investigative stage. 

6.- Labor panels are tripartite, impartial bodies composed of labor law experts selected by lottery from pre-approved rosters. Once convened, the panel has 5 business days to confirm jurisdiction by verifying: Identification of the workplace, relevant legal violations; and sufficient supporting evidence. 

From day 5 onward, the panel may request that Mexico conduct an on-site verification, which includes: Documentary reviews, worker interviews and other investigatory steps as justified. 

The day after the panel requests an on-site verification, the SE will inform the workplace owner, who will have 7 business days to consent. If they refuse, the panel may automatically affirm a denial of rights, significantly raising the stakes for non-cooperation. If accepted, the inspection must be completed within 30 days, and the panel has 30 days from its formation or the end of the verification to issue its final determination. 

Labor Reform or Leverage? The RRM’s Role in Cross-Border Accountability 

The RRM has already contributed to an undeniable shift in labor culture and corporate accountability in Mexico. Its deterrent effect—encouraging employers to preemptively clean up labor practices—may be just as impactful as the 31 cases that have gone to formal review⁴; however, despite its innovation, the RRM has raised concerns: 

• Sovereignty: Some Mexican stakeholders view the mechanism as allowing foreign intervention in domestic labor affairs. While the Mexican government retains primary jurisdiction, the possibility of U.S. or Canadian oversight is politically sensitive. 

• One-Sided Enforcement: The mechanism currently applies only to Mexican facilities, as neither the U.S. nor Canada have undergone similar scrutiny under the RRM, specially because of the condition to go through the National Labor Relations Boards of USA or Canada. 

• Nationalist goals: The evident asymmetry between the RRM process for USA and Mexico has been exploited to protect domestic industries in the U.S. and attract investment. 

Below you will find the most relevant cases that prove sometimes the RRM has been followed with political or economic purposes: 

1. The VU Manufacturing case (January 2023) illustrates how the RRM can produce adverse outcomes for Mexico despite valid labor violations. The Michigan-based company, operating in Piedras Negras, Coahuila, was found to have denied workers their rights to freedom of association and collective bargaining. However, instead of implementing the remediation plan⁵, the company chose to shut down its Mexican operations, terminating 400 employees. Notably, the U.S. did not pursue accountability for the American headquarters involved in the violations, limiting its role to recommending that worker dismissals comply with Mexican labor law—highlighting the asymmetry and limited cross-border accountability inherent in the RRM process 

2. The Minera San Martín case (August 2023) involved the U.S. attempting to apply the RRM to a zinc mine in Zacatecas, Mexico, despite the facility not directly exporting goods to the U.S. The U.S. argued that because Mexico as a whole exported zinc, the mine qualified as a "covered facility." However, the dispute, which stemmed from a strike dating back to 2007, was ultimately dismissed by a panel. The panel ruled that the USMCA—and thus the RRM—could not be applied retroactively to address conflicts predating the agreement.  

3. The Atento Servicios case (January 2024) involves a Mexican call-center company that does not provide services directly to the U.S. but was nonetheless deemed a “covered facility” by the U.S. under the RRM. Mexico cooperated by investigating and implementing a remediation plan to avoid trade disruptions⁷. However, the U.S. was dissatisfied and initiated an ongoing panel, arguing that if a service is consumed in the U.S.—regardless of where it is actually provided—that alone qualifies it as a “traded service” under the USMCA. This expansive interpretation could allow the U.S. to claim jurisdiction over any goods or services traded between the countries (regardless it is provided from Mexico or not), raising concerns over overreach and broadening the RRM’s scope unjustifiably. 

4. The Pirelli case (August 2024) involved allegations that employees at a tire plant in Silao were working under a collective bargaining agreement (CBA) that failed to meet minimum standards and that they were misled by the company and union. After investigation, Mexican authorities found no denial of rights, as the CBA had been harmonized with the Rubber Industry National Agreement and was approved by workers via a secret ballot overseen by the International Labor Organization. Despite this, the U.S. was dissatisfied and initiated an ongoing panel, asserting the right to oversee Mexican labor law compliance broadly—effectively challenging Mexican administrative and judicial authority and pushing the RRM

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