Effective 12:01 a.m. ET, April 3, 2025, the Government of the United States implemented a new tariff of 25% against all passenger vehicles (including sedans, SUVs, crossover utility vehicles, minivans, and cargo vans) imported into the U.S., irrespective of origin.
A 25% tariff will also apply to all automotive parts (including engines, engine parts, transmission, powertrain parts, and electrical components) imported into the U.S., irrespective of origin, effective 12:01 a.m. ET, May 3, 2025. Additional automotive parts may be added to the list within 90 days of the initial tariff proclamation of March 27, 2025.
These actions are being taken by Executive Order through the authority of Section 232 of the Trade Expansion Act of 1962, which permits the president to impose tariffs on the grounds of national security. Additional details on the justification for the tariffs can be found in the White House Fact Sheet.
USMCA exemption
The U.S. government is providing an indefinite period of transition during which automobiles and automotive parts originating in Canada and Mexico that meet the requirements of the United States-Mexico-Canada Agreement (USMCA) can be exempt from some or all of the 25% tariff.
Importers of USCMA-qualified automobiles may exclude the value of the vehicle’s U.S. content from the 25% tariff upon receiving approval from the U.S. Department of Commerce.
In addition, both the U.S. and non-U.S.-originating components of automobile parts that meet the requirements of the USMCA will be exempt. However, this exemption is only being made available until such time as the U.S. Department of Commerce can determine an effective means of collecting duties only on the non-U.S. components of those automotive parts.
Once this indefinite transitional period is over, importers of automotive parts whose imports meet the requirements of the USMCA must receive approval from the U.S. Department of Commerce in order to exclude the value of U.S.-originating components of vehicle parts from the 25% tariff.
Tariff application
It’s important to note that this tariff is being applied in addition to (not in place of) any pre-existing tariffs, including tariffs implemented against Canada and Mexico on March 4, 2025; tariffs on steel and aluminum derivatives; anti-dumping duties and countervailing duties.
For example, vehicles and automotive parts originating in Canada and Mexico that do not qualify for the USMCA will have this 25% tariff applied in addition to the 25% tariff that went into effect on March 4, 2025, and the 25% tariff on steel and aluminum derivatives that went into effect on March 12, 2025, plus the standard Most-Favored Nation tariff of 2.5% for a combined tariff-rate total of 77.5%.
Origin misrepresentation
The U.S. administration is warning importers they will be penalized severely in the event they overstate the U.S.-originating content of a vehicle or automotive part to reduce duty outlay, whether inadvertently or deliberately.
Importers found to have overstated the value of U.S.-originating content will have the tariff rate applied to the entire value of the vehicle (including U.S. components) and will have the tariff rate applied retroactively to April 3, 2025, on the full value of all automobiles of the same model imported by the same importer. Further, the 25% tariff rate will apply to the full value of the vehicle of the same model by the same importer from the date of overstatement until such date Customs and Border Protection (CBP) determines the overstatement is corrected.
USMCA certification
Importers of passenger vehicles and/or automotive parts who have not yet performed the necessary evaluation and documentation collection to support USMCA certification should do so as soon as possible. The certification process – particularly for importers of automobiles and automotive parts – can be lengthy due to the complexity of the products. Until certification has been secured, tariffs will apply.
No duty drawback will be made available for these tariffs.
Impact on Customs bonds
The implementation of a 25% tariff may push importers’ duty outlay beyond the value of their current customs surety bond. It is important to understand the impact of these tariffs to your customs surety and be proactive in addressing any surety shortfall. For more information, please refer to the article ‘New tariffs may require importers to secure and/or increase customs surety bonds‘.