Tariffs on Foreign Automobiles and Automotive Parts

“Adjusting Imports of Automobiles and Automobile Parts Into the United States”

The presidential proclamation imposes tariffs on imported automobiles and certain automobile parts to address national security concerns. The Secretary of Commerce’s investigation determined that reliance on foreign automotive imports threatens national security by weakening domestic manufacturing and creating supply chain vulnerabilities. These risks were exacerbated by the COVID-19 pandemic and foreign industrial policies that provide unfair advantages to non-U.S. competitors.

Previous agreements, such as the United States-Mexico-Canada Agreement (USMCA), have not fully mitigated these risks, necessitating new tariffs to support U.S. automotive production and reduce dependency on foreign imports.

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New Tariffs on Automobiles and Auto Parts

1. Automobiles (Passenger Vehicles & Light Trucks)

• A 25% tariff applies to all imported passenger vehicles, including sedans, SUVs, crossovers, minivans, cargo vans, and light trucks.
• This tariff became effective at 12:01 a.m. EDT on April 3, 2025.

2. Automobile Parts

• A 25% tariff is imposed on specific imported automobile parts, such as engines, transmissions, powertrain components, and electrical systems.
• This tariff takes effect no later than May 3, 2025, with the exact date announced in a Federal Register notice.
• The Secretary of Commerce will establish a process within 90 days for domestic manufacturers to request additional automobile parts to be included in the tariff list.
• The Secretary must decide on these requests within 60 days, and newly approved parts will be subject to the 25% tariff immediately after publication in the Federal Register.

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USMCA Tariff Adjustments & Compliance Measures

USMCA Tariff Reductions

• Certain imported automobiles eligible for preferential tariff treatment under the USMCA may qualify for a tariff reduction if importers document U.S.-sourced content.
• U.S. content includes components that are fully obtained, produced, or significantly transformed within the U.S.
• If approved, the 25% tariff will apply only to the non-U.S. content of the vehicle.
• Formula: Non-U.S. content = Total vehicle value – U.S. content value.

Strict Compliance & Penalties

• If U.S. Customs and Border Protection (CBP) finds that an importer overstated U.S. content, the full 25% tariff will apply to the entire vehicle.
• This penalty is retroactive to April 3, 2025, and remains until the importer corrects the error.
• Additional penalties and fees may also be imposed.

Special Provisions for Auto Parts Under USMCA

• The 25% tariff on auto parts under USMCA preferential treatment will not take effect until a process is developed to apply the tariff only to non-U.S. content.
• The Secretary of Commerce, in consultation with CBP, will announce this process via Federal Register notice.
• However, this exemption does not apply to automobile knock-down kits or assembled parts compilations—only to individual parts.

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New Import Rules Effective April 3, 2025

A new tariff rule (Note 33) is added to the U.S. Harmonized Tariff Schedule (HTSUS):

• Applies to all imported passenger vehicles and light trucks.
• Vehicles remain subject to existing tariffs under free trade agreements or special programs, in addition to the 25% tariff.
• Vehicles eligible for duty reductions under Chapter 98 of the tariff schedule can still receive those benefits, but the additional 25% tariff will still apply.
• No lower tariff rates or exemptions under Chapter 99 apply to these vehicles.
• Other tariffs (such as anti-dumping or countervailing duties) remain in addition to the 25% tariff.

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Tariff Classifications Under HTSUS

1. Tariff Heading 9903.94.02

Applies to:

• Imported vehicles that are NOT considered passenger vehicles or light trucks, meaning they are not sedans, SUVs, crossovers, minivans, cargo vans, or light trucks.
• USMCA-eligible passenger vehicles and light trucks, if the importer documents U.S. content and receives approval from the Secretary of Commerce.
• The 25% tariff applies only to the non-U.S. content of approved vehicles.

2. Tariff Heading 9903.94.03

Applies to:

• Imported passenger vehicles and light trucks that qualify for USMCA preferential treatment.
• Importers must submit documentation to the Secretary of Commerce specifying the U.S. content.
• If approved, the 25% tariff will apply only to the non-U.S. content.
• Formula: Non-U.S. content = Total vehicle value – U.S. content value.

3. Tariff Heading 9903.94.04

Applies to:

• All imported passenger vehicles (sedans, SUVs, crossovers, minivans, and cargo vans) and light trucks that were manufactured at least 25 years before the date of importation.

4. Tariff Heading 9903.94.05 (Automobile Parts Tariff)

Applies to:

• Specific automobile parts, including engines, transmissions, tires, electronic components, and chassis.
• These parts are enumerated in the HTSUS and subject to the 25% tariff.
• The Secretary of Commerce may expand the list of parts subject to the tariff upon request from domestic manufacturers.

5. Tariff Heading 9903.94.06 (USMCA & Non-Passenger Vehicle Parts Tariff)

Applies to:

• Automobile parts that:
  1. Qualify for preferential treatment under USMCA, excluding automobile knock-down kits or assembled part compilations.
  2. Are NOT parts of passenger vehicles or light trucks.
• Ensures that USMCA-covered parts receive special treatment, while other non-passenger vehicle parts remain subject to different tariff rules.

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Key Takeaways:

✅ A 25% tariff on all imported passenger vehicles & light trucks.
✅ A 25% tariff on specified imported automobile parts.
✅ USMCA-based tariff reductions for vehicles & parts with significant U.S. content.
✅ Strict compliance rules to prevent misrepresentation of U.S. content.
✅ Different tariff categories for specific vehicle types and automotive parts.

The new tariffs aim to reduce reliance on foreign imports, support domestic production, and address national security risks by ensuring a strong and independent U.S. automotive industry.