Immediate U.S. Tariff Updates

U.S. Tariff Update from NASCO Network

White House Amends Automobile Parts Tariffs to Ease Burden on U.S. Automakers

On April 29, 2025, President Trump signed a Proclamation amending the previously announced tariffs on automobile parts used in passenger vehicles and light trucks. This amendment follows Proclamation 10908, which announced 25% section 232 tariffs on imports of certain final, assembled passenger vehicles and light trucks (“automobiles”), effective April 3, 2025, and imports of certain automobile parts, set to take effect on May 3, 2025. All in-scope passenger vehicles and light trucks (including SUVs and other types of passenger vehicles) and automobile parts are listed in Annex I of Proclamation 10908.  Key automobile parts listed in Annex I of Proclamation 10908 include engines, engine parts, transmissions and powertrain parts, and certain electrical components.

Import Adjustment Offset for Automobile Parts used in the Final Assembly of Passenger Vehicles and Light Trucks in the United States

The Proclamation provides that automobile producers (i.e., OEMs) that perform final assembly of passenger vehicles and light trucks in the United States will be eligible for an “import adjustment offset” amount applicable to section 232 duties for automobile parts. Specifically, these credits will be available to OEMs in an amount equal to 3.75 percent of the aggregate Manufacturer’s Suggested Retail Price (MSRP) value of all in-scope automobiles assembled in the United States by that automobile producer from April 3, 2025, through April 30, 2026. For automobiles assembled in the United States between May 1, 2026, through April 30, 2027, OEMs will be eligible to receive 2.5 percent of the aggregate MSRP value. These percentages reflect the total duty that would be owed when a 25 percent duty is applied to parts accounting 15% (2025-26) and 10% 2026-27) of the automobile’s MSRP value, respectively.

These percentages derive from the Trump Administration’s consultations with the automobile manufacturers that the highest level of U.S. content, including engineering and research and development, in automobiles assembled in the United States is 85% at present (with an aspirational target of 90% in 2026-27).  The  White House Fact Sheet  that accompanied the Proclamation indicates that the Trump Administration has determined that of the 8 million automobiles assembled in the United States in 2024, the average domestic content was 50% and likely closer to 40%. According to the Administration, the import adjustment offset “will more quickly reduce reliance on foreign manufacturing and importation of automobiles and automobile parts; strengthen United States vehicle assembly operations by encouraging companies to expand domestic production capacity, which is critical to a strong domestic defense industrial base; shift manufacturing activity into the United States; increase domestic automotive research and development so that American-owned producers can produce cutting-edge technologies that are essential to the United States defense industrial base and our military superiority; create jobs in the automotive industry that increase the number of employees in the domestic automotive industry; and ensure that other benefits of production are concentrated in the United States.”

The import adjustment offset amounts will be available only to automobiles that undergo final assembly in the United States. The import adjustment offset amount may only be used by importers of record authorized by the automobile manufacturer, including the suppliers of the parts eligible for such offset amount. Specifically, a “manufacturer with an approved import adjustment offset amount may determine the importers of record eligible to decrement against that manufacturer’s import adjustment offset amount, and that list of importers of record may include suppliers in that manufacturer’s supply chain for automobiles assembled in the United States if the manufacturer so chooses.” As a result, the OEM ultimately decides which suppliers, if any, will be able to use that OEM’s import adjustment to offset the Section 232 25% automotive parts tariffs that will enter into force on May 3, 2025. The import adjustment offset amount, however, should not exceed the total amount attributable to the manufacturer’s total parts tariff liability.

On or before May 29, 2025, the Department of Commerce will establish a process by which manufacturers can submit the following information to obtain import adjustment offset:

1. Projected U.S. vehicle production volumes and final assembly plant locations;
2. Estimated tariff costs under Proclamation 10908, including direct and supplier-incurred amounts;
3. The total import offset amount requested, per the schedule set by the Secretary of Commerce;
4. A breakdown of importers of record authorized to use the offset, with corresponding importer of record numbers and allocations;
5. A signed certification from a senior officer affirming the accuracy and completeness of the information, based on reasonable due diligence.

Once a manufacturer’s submission is verified and deemed eligible, the Secretary of Commerce will approve the application and notify U.S. Customs and Border Protection (CBP) with the necessary details—including importer of record numbers and approved offset amounts. CBP will apply the offset to the approved importers using its standard procedures, such as reducing tariff obligations at the time of entry or through other lawful means. Should an importer claim an offset amount that exceeds the amount approved by the Department of Commerce for a particular manufacturer, CBP may assess monetary penalties in the maximum amount permitted by law. Further, OEM-supplier dynamics will require consideration as the Proclamation does not require the OEM to automatically allow the supplier to use the import adjustment offset; as a result, the supplier may incur the tariff but is not guaranteed an offset by the OEM, unless otherwise required to do so in the supplier agreement (e.g., a contractual provision requiring the pass through of rebates or credits).

The Secretary of Commerce, in consultation with the Secretary of the Treasury and the Commissioner of CBP, will develop the necessary rules and guidance for implementing the Proclamation.  An initial issue, which will likely be based on the May 29, 2025 submissions from the OEMs, will be a determination of what vehicles are subject to “final assembly in the United States.”  Similar provisions, such as Treasury’s May 2024 Final Rule  on the Inflation Reduction Act, defined final assembly as the process by which a manufacturer produces a vehicle “at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle.”  A similar approach may be used in the Section 232 context.

USMCA Automobile Parts

The Proclamation is silent regarding USMCA-certified automobile parts that are potentially subject to tariffs after May 3, 2025.  As indicated in the Thompson Hine Update of April 3, 2025 , the 25% tariff does not apply “to  automobile parts that qualify for preferential treatment under the USMCA until such time that the Secretary, in consultation with CBP, establishes a process to apply the tariff exclusively to the value of the non-U.S. content of such automobile parts and publishes notice in the Federal Register.”  While the Proclamation does not address whether USMCA-certified auto parts will remain exempt from the 25% tariffs, the White House Fact Sheet provides examples where “a manufacturer builds a car in the U.S. that has 85% U.S. or USMCA content, the manufacturer effectively will not owe tariffs on that vehicle’s production for the first year. If a manufacturer builds a car in the U.S. that is 50% U.S. or USMCA content and 50% imported from elsewhere, then instead of paying the tariff on the full 50% of the imported car parts, the manufacturer effectively only pays on 35% for the first year.”  The implication from these examples is that USMCA automobile parts will remain exempt from the Section 232 25% duties, while non-USMCA automobile parts will use the import adjustments offset to reach duty-free treatment, but guidance/confirmation is needed.

Non-U.S. Passenger Vehicles and Light Trucks and USMCA

For passenger vehicles and light trucks where the automobile producer does not perform final assembly in the United States (i.e., non-U.S. automobiles), Proclamation 10908 subjects such automobiles to 25% tariffs, with special provisions where the automobile is USMCA-certified (i.e., having 75% regional value content, 70% steel and aluminum content, and the requisite labor value content).  If USMCA-certified, Proclamation 10908 provides a process where the automobile manufacturer will provide the Secretary of Commerce with documentation as to the amount of U.S. content, and the 25% percent tariffs will only apply to the non-U.S. content in the automobile.  The OEMs and the Department of Commerce will be conducting this USMCA “domestic content” process parallel to the domestic, final assembly process due on or before May 29, 2025.

Stacking of International Emergency Economic Powers Act (IEEPA) and Section 232 Tariffs

Finally, the Trump Administration issued a separate EO (the “stacking EO”) on the same day as the Proclamation indicating that the automobile and automobile parts tariffs will not “stack” with the Canada and Mexico synthetic opioid/fentanyl tariffs, and the steel and aluminum tariffs.  The steel and aluminum tariffs will continue to stack with each other, but not with the automotive/auto parts tariffs and the Canada and Mexico synthetic opioid/fentanyl tariffs.   See Thompson Hine Update of April 30, 2025.

Conclusions

1. Non-USMCA, fully assembled passenger vehicles and light trucks imported into the United States are subject to Section 232 25% tariffs (i.e., not assembled at the final stage in the U.S).

• • These automobiles are not subject to the IEEPA Canada and Mexico synthetic opioid/fentanyl tariffs, the 25% Section 232 steel or aluminum tariffs nor the 10% baseline reciprocal tariffs.

2. USMCA-certified passenger vehicles and light trucks that are not assembled at the final stage in the U.S. are subject to 25% tariffs on non-U.S. content once certified by the Secretary of Commerce.

• • These automobiles are not subject to the IEEPA Canada and Mexico synthetic opioid/fentanyl tariffs, the 25% Section 232 steel or aluminum tariffs nor the 10% baseline reciprocal tariffs.

3. Passenger Vehicles and Light Trucks that are final assembled in the U.S. may use the import adjustment offset for in-scope automobile parts.

• • OEMs can claim import adjustment offset amounts equal to 3.75 % in year 1 and 2.5% in year 2 of aggregated MSRP for all of the OEM’s U.S. final assembly. Such amount will be held by CBP to offset any Section 232 automotive parts tariffs.  The Department of Commerce will establish a process by May 29, 2025 in which OEMs can submit the necessary information and obtain approval for the import adjustment offset amounts.

4. USMCA certified automotive parts used in passenger vehicles and light trucks will likely not be subject to Section 232 automotive 25% tariffs in years 1 and 2, but this has yet to be clearly confirmed.

• • Caution should be warranted regarding USMCA certified automotive parts and the 25% Section 232 steel or aluminum tariffs or the 10% baseline reciprocal tariffs, as it has not yet been clarified how USMCA certification interacts with the “Stacking EO.”  The issue is whether a good subject to duty, but having an exemption such as USMCA and accordingly paying 0% duty, is further exempted from the other “Stacking EO” tariffs.

5. Non-USMCA certified in-scope automotive parts used in passenger vehicles and light trucks that are not used in automobiles final, assembled in the United States are subject to Section 232 25% tariffs on the full value of the automobile part with no import adjustment offset.

• • Due to the “Stacking EO,” these parts are not subject to additional IEEPA Canada and Mexico synthetic opioid/fentanyl tariffs, the 25% Section 232 steel or aluminum tariffs nor the 10% baseline reciprocal tariffs.

President Trump Issues Clarification on Application of Various IEEPA Tariffs

On April 29, 2025, President Donald Trump issued an Executive Order (EO) clarifying that each of the tariffs he has imposed pursuant to the International Emergency Economic Powers Act (IEEPA) and Section 232 of the Trade Expansion Act of 1962, serve separate and distinct policy purposes, but should “not all have a cumulative effect (or ‘stack’ on top of one another)” to the extent that they apply to the same imported article.  Stating that the rate of duty resulting from stacking “exceeds what is necessary to achieve the intended policy goals,” the EO sets out the procedure for determining which tariffs will apply to an article when that article is subject to more than one tariff action.

The EO addresses the following tariffs:

• the 25% Section 232 tariffs on imports of automobiles and certain auto parts into the United States;
• the 25% IEEPA tariffs on Canada and Mexico to address the flow of synthetic opioids/fentanyl into the United States;
• the 25% Section 232 tariffs on imports of steel articles into the United States; and
• the 25% Section 232 tariffs on imports of aluminum articles into the United States.

The EO states that:

• Items subject to the Section 232 automobile and auto part tariffs, will not be subject to the other listed tariffs.
• Items subject to the IEEPA tariffs on Canada or Mexico will not be subject to the Section 232 tariffs on imports of aluminum or steel articles.
• Items subject to the aluminum or steel tariffs may be subject to both aluminum and steel tariffs if the article satisfies all conditions necessary for application of those additional tariffs.

The action provides relief to companies that faced the potential stacking of the automotive/auto parts tariffs, the Canada and Mexico synthetic opioid/fentanyl tariffs, and the steel and aluminum tariffs.  The steel and aluminum tariffs will continue to stack with each other, but not with the automotive/auto parts tariffs and the Canada and Mexico synthetic opioid/fentanyl tariffs.  As between these four classes of tariffs, there is an open question as to whether the “subject to tariffs” language in Section 3 of the EO means tariffs as applied prior to any exemption such as the United States Mexico Canada Agreement (USMCA) exemption provided in the Canada and Mexico synthetic opioid/fentanyl tariffs.  Specifically, articles of Canada and Mexico are subject to IEEPA tariffs, but are exempt from such tariffs if the articles may be USMCA certified (see Update of March 6, 2025).  As those articles would have a no duty pursuant to IEEPA, the question remain as to whether they would still be subject to duty under the 25% Section 232 automotive/auto parts tariffs or steel or aluminum tariffs, if applicable (see Update of March 12, 2025 (25% Section 232 tariffs on steel and aluminum) and Update of March 27, 2025 (25% Section 232 tariffs on automotive/auto parts)).  The spirit of the EO suggests that one of the tariffs would be paid by the importer of record—i.e., there is not a blanket exemption via USMCA.  Guidance is required from the relevant agencies.

However, the EO clearly indicates that the synthetic opioid/fentanyl tariffs imposed against articles of China under IEEPA are still subject to stacking.  Additionally, if an imported article is subject to both a tariff action listed above and one not listed, then the different tariffs will continue to be cumulative. However, articles subject to the above tariffs are expressly exempted from the 10% “baseline” reciprocal tariffs (see Update of April 10, 2025).  In addition, an imported article that is subject to tariffs listed above “may still be subject to other applicable duties, taxes, fees, exactions, and charges” such as the Section 301 tariffs imposed against China during the first Trump Administration and continued under President Biden and any antidumping and countervailing duties (see Update of September 16, 2024).  Of key importance, the effect of this EO is retroactive for all entries of articles made on or after March 4, 2025, and importers may request refunds.

It is expected that Customs and Border Patrol (CBP) will be issuing clarifying information and guidance shortly via its Cargo Systems Messaging Service (CSMS).