President Trump announced April 29 measures designed to ease pending Section 232 import tariffs on automobile parts.
Under a March 26 presidential proclamation, a 25 percent tariff will take effect May 3 for auto parts, which include engines and engine parts, transmissions and powertrain parts, electrical components, and parts of passenger vehicles and light trucks classified under specified HTSUS subheadings. This tariff will apply to covered parts even if they qualify for special tariff treatment under a free trade agreement or preference program. However, parts eligible under the U.S.-Mexico-Canada Agreement (other than automobile knock-down kits of parts compilations) are exempt from the tariff until the Department of Commerce establishes a process to apply the tariff only to non-U.S. content.
The president has now issued a separate proclamation providing that, for automobiles assembled in the U.S., manufacturers will be eligible to apply for offsets to the Section 232 tariff in the amount of (1) 3.75 percent of the aggregate manufacturer’s suggested retail price value of all automobiles they assemble in the U.S. from April 3, 2025, through April 30, 2026, and (2) 2.5 percent of the aggregate MSRP value of all automobiles they assemble in the U.S. from May 1, 2026, through April 30, 2027.
According to a White House fact sheet, these percentage rates reflect the total duty that would be owed when the 25 percent tariff is applied to parts accounting for 15 percent of a U.S.-assembled automobile’s MSRP value in the first year and 10 percent the second year. For example, the fact sheet states, if a manufacturer builds a car in the U.S. that has 85 percent U.S. or USMCA content, the manufacturer effectively will not owe tariffs on that vehicle’s production for the first year. Similarly, if a manufacturer builds a car in the U.S. that is 50 percent U.S. or USMCA content and 50 percent imported from elsewhere, then instead of paying the tariff on the full 50 percent of the imported parts, the manufacturer effectively only pays on 35 percent for the first year.
The proclamation states that only automobiles that undergo final assembly in the U.S. are eligible to be included in this calculation. Further, the offset amount may only be used by importers of record authorized by the manufacturer and only to offset Section 232 tariffs on auto parts. Manufacturers with approved offsets may determine the importers of record eligible to decrement against those amounts, which may include suppliers in their supply chains for automobiles assembled in the U.S.
The Department of Commerce now has 30 days to establish a process by which manufacturers seeking a tariff offset will have to submit a substantial list of required documentation. Once notified of an approved offset U.S. Customs and Border Protection will confer it to the approved importer(s) of record “using processes and mechanisms consistent with CBP’s operational framework and tariff administration procedures, including offset against current tariff obligations due at the time of entry, or other lawful methods.”
The EO directs CBP to begin providing offsets as soon as practicable and allows the agency to request from importers of record information necessary to do so. Importers that claim and receive any offset in excess of the amount approved by the DOC may be assessed monetary penalties in the maximum amount permitted by law.
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