U.S. Customs, 25% tariff exemption for automotive parts meeting USMCA criteria

Cars at the port of Richmond, California, USA (Source: AP)

The US government has decided not to apply the planned 25% tariff on auto parts that meet the standards of the United States-Mexico-Canada Agreement (USMCA). The tariff exemption will take effect from May 3 local time, allowing a considerable amount of auto parts produced in Canada and Mexico to be imported into the United States without tariffs.

The US Customs and Border Protection (CBP) clarified on its website on the 1st that items eligible for preferential tariffs under the USMCA are excluded from this parts tariff imposition. However, some forms such as knock-down kits or specific component modules are not included in the exemption.

This measure is a follow-up to President Trump's executive order to address the backlash and confusion from the parts industry since March. President Trump signed an executive order on the 29th of last month that states that tariffs will only selectively apply to non-US parts and will avoid overlapping tariff burdens on USMCA member countries. This was intended to adjust the overlap between existing tariffs intended to counter the influx of narcotics from Mexico and Canada and parts tariffs.

This CBP notice is a document guiding the practical implementation procedures of the executive order. President Trump specified that it would allow retroactive applications for refundable items according to standard procedures, and refunds will also be issued.

There has been ongoing criticism from the industry that the guidelines on whether USMCA standards apply and the detailed procedures have been ambiguous, causing confusion in import plans and supply chain operations. The Wall Street Journal (WSJ) analyzed that this latest CBP guideline resolved such confusion and provided clear standards to the industry.

Meanwhile, if they do not meet USMCA standards, a 25% tariff will apply to parts for various transportation vehicles, including passenger cars, SUVs, CUVs, minivans, and light trucks, from 12:01 a.m. on the 3rd.