Starting today, U.S. automobile manufacturers can apply for offsets of Section 232 duties on automobile parts, per a Federal Register notice published by the U.S. Department of Commerce. Commerce’s notice also provides that offsets, once granted, do not expire until the amount has been exhausted. Importers within U.S. automobile manufacturers’ supply chains may also benefit from the offset, but must first be identified by the manufacturer in their offset application. Being identified as eligible to decrement against a manufacturers’ offset at the outset of the application process will avoid potential delays in the application of offsets during the entry process.
Adjustments to Provide U.S. Manufacturers Greater Flexibility
In late March, acting under Section 232 of the Trade Expansion Act of 1962 (Section 232), the President issued Proclamation 10908, “Adjusting Imports of Automobiles and Automobile Parts Into the United States.” This imposed a 25% tariff on certain imports of automobiles and light trucks (effective April 3, 2025).
Proclamation 10908 also extended the 25% Section 232 tariffs to certain automobile and light truck parts. Shortly before the Section 232 tariffs on these additional products took effect on May 3, 2025; however, the President issued Proclamation 10925, “Amendments to Adjusting Imports of Automobiles and Automobile Parts Into the United States.” This second proclamation created a sort of rebate or “offset” system for U.S. Section 232 tariffs on automobile parts. It provided that a process would be created by which automobile manufacturers can apply for an offset equal to 3.75% of the aggregate Manufacturer’s Suggested Retail Price (MSRP) of all automobiles that they assembled in the U.S. between April 3, 2025, and April 30, 2026, later dropping to 2.5% of all automobiles that they assembled in the U.S. between May 1, 2026 and April 30, 2027.
Commerce Creates the Offset Process
Today’s notice comes slightly after the 30-day deadline envisioned by Proclamation 10925, but it nonetheless enables U.S. manufacturers to begin applying for the offsets. Specifically, U.S. manufacturers must submit the following documentation electronically by emailing autooffset@trade.gov. This must be done twice — once for offsets associated with production during the period ending April 30, 2026, and once for the offsets associated with production during the period ending April 30, 2027:
- Production Forecast: An estimated number of vehicles expected to be produced in the United States, identified by make, model, and plant location.
- MSRP: Total combined MSRP value of all vehicles identified above.
- Tariff Liability Estimate: Estimated Section 232 automobiles and automobile parts tariff liability, broken down by tariffs the manufacturer will incur directly and tariffs that the manufacturer’s suppliers will incur.
- Offset Calculation: Detailed calculation of offset amount for the reporting period, based on the percentages of the aggregate MSRP.
- Importers of Record: A list of importers that the manufacturer wishes to authorize to utilize the offset, including the importer’s importer of record (IOR) number and the amount of the offset allotted to that IOR.
- Certification: Signed certification from a senior officer of the manufacturer attesting to the submission’s accuracy and completeness.
The manufacturer may also include any additional information that it considers relevant to Commerce’s decision-making. Once the complete package has been submitted, Commerce may solicit follow-up information, and will otherwise notify approved manufacturers in writing and transmit to U.S. Customs and Border Protection the information necessary to administer the offset.
Practical Considerations
Commerce’s notice clarifies that offsets granted may continue to be used until exhausted, i.e., even after April 30, 2027. Commerce discerned “no deadline for use of the offset amount” in Proclamation 10925 and concluded that this approach would “provid[e] manufacturers flexibility…consistent with the Proclamation’s goals” and otherwise strengthen “United States vehicle assembly operations by encouraging companies to expand domestic production capacity.” In general, offsets will be applied at the time of entry summary filing. Thus, manufacturers may wish to begin preparing offset applications for prompt submission. Once granted, offsets cannot be traded, sold, or transferred.
Given the complexity of automotive supply chains, there is an opportunity for IORs within U.S. manufacturers’ supply chains to benefit from this novel process. However, Commerce’s notice indicates that timeliness is a significant consideration. As noted, a manufacturer applying for an offset must identify authorized IORs and the amount allotted to each such IOR in the manufacturers’ initial application for a given period. Although Commerce permits manufacturers to update its IOR list in the interim, Commerce will generally only pass such updates along to CBP on a biannual basis, in December and June. Thus, an IOR omitted from a manufacturer’s initial list could in theory have to wait until December 2025 before their offset eligibility can take practical effect. In such a scenario, it is unclear whether the offset could be applied retroactively to entries made before CBP was notified of the IOR’s eligibility to decrement against the manufacturer’s offset adjustment amount. Relatedly, although Proclamation 10925 and Commerce’s notice provide that these offsets can be applied for entries made on or after May 3, 2025, some process for retroactive application of an offset will be required for that to become a practical reality, given that it is now June. Either Commerce or CBP may address such details in a further notice.
Commerce has otherwise confirmed that the passenger vehicle and light truck automobile parts eligible to benefit from this offset are those classified under HTSUS subheadings made subject to 232 duties under Proclamation 10908, Annex I, Section B. An IOR will only be able to apply an offset to reduce Section 232 automotive tariff liability on such automobile parts. The notice provides that offset amounts “may not exceed the manufacturer’s total tariff liability on covered parts.” Given that Commerce’s application specifically requests the manufacturer’s direct Section 232 automotive tariff liability as well as the manufacturer’s supplier’s liability for such tariffs, this cap may encompass both entities’ amounts, notwithstanding the reference to “the manufacturer.” The notice does not at this point spell out the details of how this cap would operate vis-à-vis individual IORs authorized to decrement against a single sum total granted to a given manufacturer.
Consistent with other Administration trade initiatives, compliance is a focus of Commerce’s notice. Commerce will monitor manufacturers’ and authorized importers’ compliance. CBP may also conduct audits to ensure compliance. In this environment, manufacturers and IORs participating in or otherwise benefiting from this program may wish to ensure detailed, complete, and accurate recordkeeping regarding their eligibility for offsets and the amount of Section 232 automobile and light truck part duties incurred. Penalties may apply if inaccurate and incomplete information is submitted.
Making Use of New Procedures
Cassidy Levy Kent’s attorneys, compliance professionals, economists, and licensed customs brokers assist clients navigating tariff changes and maximizing the opportunities provided by novel tariff relief procedures. We have extensive experience counseling companies in the automotive industry in how to optimize their supply chains for tariff considerations and maintain U.S. market access. Our team stands ready to assist clients in evaluating eligibility, preparing applications, and navigating the regulatory framework governing this offset program. Please contact us with any questions about these developments.