Canada Auto Parts Duty: USMCA Exemption Details
On May 1, 2025, a directive issued by U.S. Customs and Border Protection (CBP) clarified that certain auto parts imported from Canada, meeting the criteria of the United States–Mexico–Canada Agreement (USMCA), will be exempt from the 25% tariffs announced by the Trump administration. These rules of origin notably require that 75% of a part's value be generated in North America to qualify for this benefit.
This announcement provides some stability for Canadian suppliers, particularly active in Ontario and Quebec, who heavily rely on the U.S. market. However, knock-down kits intended for the final assembly of vehicles are not covered by this measure and remain subject to the new tariffs.
The decision follows several weeks of uncertainty, during which broader tariffs on all imported vehicles and components had been considered. This regulatory ambiguity had raised concerns among major North American manufacturers, who feared an increase in production costs.
On April 29, President Trump signed an executive order introducing a tariff reduction mechanism applicable to parts used in vehicle assembly in the United States. This mechanism notably includes a partial refund, potentially reaching 3.75% of the vehicles' retail price in the first year, then 2.5% the following year, before its gradual elimination.
For Canadian manufacturers, this exemption underscores the strategic role of the USMCA as a framework for protection against trade friction. It nonetheless requires them to maintain strict compliance with the agreement's requirements, which may necessitate administrative and logistical adjustments.
In summary, the clarification provided by Washington allows Canadian automotive industry players to better anticipate the coming months, preserving their access to the U.S. market and solidifying their position in the North American ecosystem.