The U.S. Customs Service is resisting heavy pressure from Canadian Prime Minister Brian Mulroney and Honda of America Manufacturing Inc. to overturn a ruling that slaps Canadian-made Honda Civics with a 2.5% duty. Customs charges that the Civics are assembled from mostly Japanese parts so they don't satisfy the 50% North American content requirements for duty-free entry. Mulroney is trying to make the dispute a showdown on the future of free trade in North America, and Honda called a press conference on Feb. 13 to denounce theruling.

But Customs is hanging tough. In a Feb. 20 letter to Honda of America obtained by BUSINESS WEEK, U.S. Customs Commissioner Carol B. Hallett accuses the company of a "tremendously distorting public relations campaign" and blasts it for "public grandstanding." Honda insists "there should be public debate" on the issue and urges the U.S. to negotiate a resolution with the government of Canada.