Automotive Parts Tariffs: Section 232 and Beyond

U.S. automotive parts face multiple tariff layers including Section 232 national security tariffs on steel and aluminum (25% and 10% respectively), potential Section 232 auto tariffs (25% threatened but not implemented as of 2024), and complex USMCA rules requiring 75% regional value content for duty-free treatment. Parts classification under HTS codes 8708-8709 determines the applicable rates, which range from 0% to 25% depending on origin, material composition, and whether the part qualifies for trade agreement benefits.

In this guide, you'll learn:

• How Section 232 tariffs affect automotive steel and aluminum components
• USMCA's 75% regional value content requirement and its impact on parts sourcing
• Classification strategies for aftermarket versus OEM parts
• Special tariff considerations for electric vehicle components
• Cost calculation methods for landed automotive parts
• Compliance strategies to minimize tariff exposure

What Are Section 232 Automotive Tariffs?

Section 232 of the Trade Expansion Act of 1962 allows the President to impose tariffs on imports that threaten U.S. national security. For the automotive sector, Section 232 has been invoked twice with dramatically different outcomes.

Implemented Section 232 Tariffs (Steel & Aluminum): In 2018, the Trump administration imposed Section 232 tariffs on steel (25%) and aluminum (10%) from most countries [U.S. Department of Commerce, 2018]. These remain in effect and directly impact automotive parts containing these materials:

• Engine blocks and cylinder heads (steel/aluminum)
• Suspension components (steel)
• Wheels and rims (aluminum)
• Body panels and structural components (steel/aluminum)
• Fasteners and brackets (steel)

Threatened Section 232 Auto Tariffs (Not Implemented): In May 2019, the Commerce Department completed a Section 232 investigation into automobile and automotive parts imports, concluding they threatened national security. The investigation recommended 25% tariffs on imported vehicles and parts [U.S. Department of Commerce, 2019]. However, as of 2024, these tariffs have not been implemented. Instead, negotiations led to:

• Updated trade agreements (USMCA replacing NAFTA)
• Side letters with Japan and the EU limiting auto exports
• Continued monitoring of import levels

Current Impact on Importers: Even though vehicle-specific Section 232 tariffs weren't imposed, the steel and aluminum tariffs add significant costs. For example, a brake rotor (HTS 8708.30) made of steel imported from China faces:

Cost Component	Amount
FOB Price (China)	$15.00
Section 232 Steel Tariff (25%)	$3.75
Section 301 China Tariff (25%)	$3.75
Base Duty (2.5%)	$0.38
Total Tariff Cost	$7.88
Landed Cost (before freight)	$22.88

How Do USMCA Rules of Origin Affect Auto Parts?

The United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA in 2020, dramatically increased requirements for duty-free automotive trade. Understanding these rules is critical for parts importers and manufacturers.

Key USMCA Automotive Requirements:

1. 75% Regional Value Content (RVC): Vehicles must contain 75% North American content (up from 62.5% under NAFTA) to qualify for duty-free treatment [USMCA Text, 2020]

2. Steel & Aluminum Purchase Requirement: 70% of a vehicle's steel and aluminum must be purchased from North America

3. Labor Value Content (LVC): 40-45% of vehicle content must be made by workers earning at least $16/hour

4. Core Parts Requirement: Specific percentages for engines, transmissions, and other core components must be North American

USMCA Parts Classification:

Part Category	RVC Requirement	Tariff if Non-Compliant
Core Parts (engines, transmissions)	75%	2.5% base duty + Section 301 if applicable
Principal Parts (body panels, axles)	70%	2.5% base duty
Complementary Parts (seats, electronics)	65%	Varies (0-8%)
Aftermarket Parts	Not subject to USMCA	Standard tariff rates apply

Practical Example - Transmission Assembly:

A transmission manufacturer in Mexico sources components globally:

• Gears from South Korea: $200 (non-regional)
• Housing from Michigan: $300 (regional)
• Electronics from China: $150 (non-regional)
• Assembly labor (Mexico, $18/hour): $250 (regional)
• Other regional components: $100 (regional)

Total cost: $1,000 Regional content: $650 ($300 + $250 + $100) RVC percentage: 65%

This transmission does not qualify for USMCA duty-free treatment because it falls below the 75% requirement. When exported to the U.S., it faces a 2.5% duty plus any applicable Section 301 tariffs on the Chinese electronics.

Strategic Sourcing Implications: Many manufacturers have restructured supply chains to meet USMCA requirements:

• Shifted steel/aluminum sourcing to U.S., Mexican, or Canadian mills
• Relocated some component production to North America
• Implemented tracking systems to document regional content percentage
• Some opted to pay tariffs rather than restructure (especially for low-volume specialty vehicles)

What Are the Base Tariff Rates for Automotive Parts?

Beyond Section 232 and USMCA considerations, automotive parts entering the U.S. face base tariff rates under the Harmonized Tariff Schedule (HTS). Parts classification under Chapter 87 is highly specific.

Common Automotive Parts Tariff Rates:

HTS Code	Description	Normal Trade Relations Rate	Notes
8708.10	Bumpers and parts	2.5%	Most common auto part rate
8708.21	Safety seat belts	2.5%
8708.29	Other body parts	2.5%	Includes doors, hoods, fenders
8708.30	Brake components	Free-8%	Varies by specific part type
8708.40	Gearboxes and parts	2.5%
8708.70	Road wheels and parts	2.5%	Aluminum wheels may face Section 232
8708.80	Suspension components	2.5%	McPherson struts, shock absorbers
8708.91	Radiators and parts	2.5%
8708.93	Clutches and parts	2.5%
8708.94	Steering wheels and columns	2.5%
8708.95	Airbags with inflator	2.5%	Safety equipment classification
8708.99	Other parts	2.5%	Catch-all category

OEM vs. Aftermarket Classification: The distinction between Original Equipment Manufacturer (OEM) parts and aftermarket parts doesn't change the HTS classification — both use the same codes based on the part's function. However, the distinction matters for:

• USMCA qualification: Only OEM parts integrated into vehicle production count toward RVC requirements
• Marketing and labeling: Aftermarket parts may have different marking requirements
• Section 301 tariffs: Apply equally to OEM and aftermarket parts from China

Classification Challenges: Automotive parts classification requires careful analysis:

1. Material Composition: A brake rotor classified as 8708.30 faces different rates than one classified as primarily iron/steel (Chapter 73)

2. Completeness: Incomplete or unfinished parts may be classified differently than finished parts

3. Assembly Components: A "kit" containing multiple parts may be classified by the most essential component

4. Electrical vs. Mechanical: Electronic control modules (8708.99) vs. purely electrical components (Chapter 85) have different treatment

Real Classification Example: An LED headlight assembly contains:

• Plastic housing (39% by value)
• LED bulbs and electronics (45% by value)
• Metal brackets and adjusters (16% by value)

Classification question: Is this 8512.20 (lighting equipment for vehicles) or 8708.29 (body parts)?

Answer: According to General Rule of Interpretation (GRI) 3, it's classified as 8512.20 because the essential character is the lighting function, not the structural body part function. This classification carries a 2.5% tariff rate but may have different Section 301 applicability depending on the electronics origin.

How Do Electric Vehicle Components Face Different Tariff Treatment?

Electric vehicles and their components present unique tariff considerations as the automotive industry shifts toward electrification. Many EV-specific components don't fit neatly into traditional automotive tariff classifications established for internal combustion vehicles.

Key EV Component Classifications:

Component	Likely HTS Code	Rate	Special Considerations
Lithium-ion battery packs	8507.60	3.4%	May qualify for IRA tax credits if assembled in North America
Battery management systems	8537.10	2.7%	Electronic control classification
Electric motors (traction)	8501.31-8501.33	2.5-6.7%	Power rating determines subclassification
Inverters/converters	8504.40	1.5%	Power electronics classification
Charging ports	8536.69	2.7%	Electrical connection devices
Onboard chargers	8504.40	1.5%	Static converter classification
Thermal management systems	8418.69	1-2%	Cooling equipment classification

Inflation Reduction Act (IRA) Interaction: While the IRA provides tax credits for EV purchases, it imposes strict sourcing requirements that interact with tariff policy:

• Critical minerals requirement: 40-80% (increasing annually) of critical minerals must be extracted or processed in the U.S. or free trade agreement countries
• Battery component requirement: 50-100% (increasing annually) of battery components must be manufactured or assembled in North America
• Foreign Entity of Concern (FEOC): Components from China, Russia, North Korea, or Iran are restricted starting in 2024-2025

Practical Impact: An EV battery pack imported from South Korea might face:

• 3.4% base tariff (HTS 8507.60)
• No additional Section 301 tariffs (South Korea not targeted)
• No Section 232 steel/aluminum tariffs if housing is minimal
• BUT vehicle may not qualify for IRA tax credits if critical minerals sourced from China

Strategic Considerations for EV Parts Importers:

1. Dual Sourcing: Many importers maintain supply chains from both Asian suppliers (cost-competitive) and North American suppliers (IRA-compliant)

2. Component Disassembly: Some importers receive battery packs in subassemblies to optimize classification and reduce tariff costs

3. Origin Documentation: Meticulous documentation of where minerals are mined and processed is now essential for IRA compliance

4. Technology Transfer: Some Asian suppliers are establishing North American production facilities to serve the U.S. EV market tariff-free

Charging Infrastructure Equipment: Commercial EV charging stations (HTS 8504.40.95) face only 1.5% tariffs but may be subject to:

• Buy America provisions for government-funded installations
• State-specific incentives requiring domestic content
• Utility interconnection requirements affecting equipment specifications

Example Cost Comparison - EV Motor:

A traction motor for an EV (rated at 120kW) imported from two different sources:

Source	FOB Price	Tariff Rate	Section 301	Landed Cost (tariffs only)
Germany	$800	2.5% ($20)	N/A	$820
China	$650	2.5% ($16.25)	25% ($162.50)	$828.75

Despite the lower FOB price from China, Section 301 tariffs make the German motor cost-competitive, demonstrating how tariff policy is reshaping EV supply chains.

What Are the Compliance Strategies for Automotive Parts Importers?

Navigating the complex web of automotive tariffs requires proactive compliance strategies. Mistakes can result in penalties, delayed shipments, and unexpected costs.

Classification Accuracy: Automotive parts classification errors are among the most common customs violations. With over 50 subheadings under HTS 8708 alone, precision matters.

Best Practices:

• Obtain binding rulings from CBP for high-volume parts
• Document the primary function and essential character of multi-material parts
• Review classifications annually as products evolve
• Maintain detailed technical specifications and engineering drawings
• Consider the "use" test: parts designed for specific vehicle systems should be classified accordingly

USMCA Documentation: To claim USMCA benefits, importers must maintain:

1. USMCA Certification of Origin: Valid for multiple shipments over 12 months
2. Production Records: Documenting regional value content calculations
3. Material Sourcing Documentation: Proving steel/aluminum origin
4. Wage Records: For labor value content requirements (particularly relevant for Mexican production)

Certificate Validity: Unlike NAFTA certificates that were signed by exporters, USMCA allows certification by the exporter, producer, or importer. However, all parties remain responsible for accuracy. CBP can verify claims up to 5 years after importation [19 CFR 182.72].

Section 232 Exclusion Requests: Companies can request exclusions from Section 232 steel and aluminum tariffs if:

• The product is not available in sufficient quantity or quality from U.S. sources
• The tariff causes substantial harm to the requesting company
• The exclusion serves U.S. national security interests

As of 2023, CBP has processed over 500,000 exclusion requests with approximately 25% approval rate [U.S. Department of Commerce, 2023]. However, the exclusion process is product-specific and time-consuming (typically 90-120 days).

Section 301 Tariff Engineering: For parts sourced from China, companies employ various strategies:

1. Supply Chain Relocation: Shifting production to Vietnam, Thailand, Mexico, or other countries
2. Substantial Transformation: Performing sufficient processing in third countries to change origin
3. Component Sourcing: Importing components from China and assembling in non-tariff countries
4. Product Redesign: Modifying parts to change HTS classification to lower-tariff categories

Caution on Transshipment: CBP actively investigates transshipment schemes where goods are routed through third countries to evade tariffs without substantial transformation. Penalties include:

• Tariff assessment at the true country of origin rates
• Civil penalties up to the domestic value of the merchandise
• Criminal prosecution in egregious cases

Record Keeping Requirements: Automotive parts importers must maintain for 5 years:

• Commercial invoices and packing lists
• Bills of lading and entry documentation
• USMCA certifications and supporting calculations
• Technical specifications and product descriptions
• Correspondence regarding classification decisions
• Payment records showing actual transaction values

Risk Assessment and Audit Preparation: CBP conducts focused assessments and audits on automotive importers, particularly those claiming USMCA benefits or exclusions. Preparation includes:

• Conducting internal compliance audits annually
• Reconciling entry data with accounting records
• Testing USMCA calculations for accuracy
• Training staff on classification and valuation principles
• Engaging customs brokers with automotive expertise

TariffCenter.AI Use Case: Many small and medium automotive parts importers use TariffCenter.AI to monitor tariff changes, calculate landed costs across multiple sourcing scenarios, and identify potential USMCA qualification pathways for their products. The platform's AI-powered classification suggestions help reduce the risk of costly classification errors.

How Are Automotive Tariffs Likely to Evolve?

The automotive tariff landscape continues to evolve with policy changes, trade negotiations, and industry shifts toward electrification.

Current Trends (2024):

1. Section 232 Review: Ongoing discussions about removing or modifying steel and aluminum tariffs, particularly for key trading partners like Canada and Mexico

2. Section 301 Review: Some Chinese automotive electronics face increased scrutiny, with potential tariff rate increases to 50-100% on specific products

3. USMCA 6-Year Review: Scheduled for 2026, potentially bringing modifications to regional value content requirements

4. IRA Implementation: Battery