Updated: April 4, 2025
Published: November 12, 2024

Tariffs have remained a key topic of discussion following the transition to the new U.S. executive administration. On April 2nd, the U.S. announced a tariff increase on imported automotive goods, which is expected to have major consequences for manufacturers, suppliers, and consumers. Specifically, all imported passenger vehicles and light trucks are now subject to a 25% tariff, in addition to any existing duties or tariffs. However, vehicles that qualify for duty-free treatment under the USMCA Free Trade Agreement are exempt from this tariff. One of the most immediate effects of this policy is that Stellantis has temporarily halted production at a plant in Mexico and another in Canada.

Higher tariffs on vehicles and auto parts will drive up production costs for automakers, especially those reliant on global supply chains, leading to price increases for consumers. Domestic manufacturers may see short-term benefits as foreign competition faces higher barriers to entry, but retaliatory tariffs from other nations could hurt U.S. exports, disrupting international trade relationships. Note that Germany has stated they “will not give in” to tariff increases and China has accused the U.S. of violating World Trade Organization rules. As the industry navigates these changes, companies will need to adapt their strategies to mitigate financial pressures and maintain competitiveness.

Leveraging strategic cost management and efficient import management practices is essential when it comes to navigating the complexities of global trade. This gives automotive manufacturers a competitive advantage. It is fair to say that the automotive industry is complex to navigate. However, with the right people, processes and systems, effective cost management can be achieved.

Cutting Duties and Tariffs 

Your cost management plan should begin with reducing unnecessary charges. Strategically minimizing the amount of tariffs paid can directly impact the bottom line. Automakers can use Foreign-trade zones (FTZs), free trade agreements (FTAs), and duty drawbacks to generate substantial savings.

• FTZs: FTZs come with advantages like reduced or deferred duties on imported parts. Furthermore, companies using FTZs benefit from streamlined customs procedures, and reduced Merchandise Processing Fees (MPF) through weekly entries. 
• FTAs: Through collaboration between countries, FTAs reduce or eliminate tariffs on international trade. This facilitates cost-effective sourcing. Utilizing FTAs heightens competitiveness and lowers total landed costs. FTAs can be complex. One example is the USMCA trade deal that includes a labor component for goods to qualify. As a result, many automotive companies have been hesitant to leverage this FTA. However, it is worthwhile considering the total cost of goods, and transportation times when deciding where to source goods.
• Duty Drawbacks: Exporting materials as part of finished vehicles permits organizations to recover duties and tariffs on those materials.

Import Management

Managing imports is time-consuming, and requires specialist knowledge. Key factors include classification and admissibility requirements. Getting these right safeguards against potential hangups that could cause delays. Finding a solution that manages the various aspects of the importation process makes managing these challenges much easier.

• Broker entry process: There is a significant amount of paperwork involved in importing goods. Even if you are paying a broker, attention to detail is necessary. Using a digital solution and self-filing can lower costs considerably.
• Proper classification: Navigating varying tariff schedules and proper classification is very detailed. However, it is possible to streamline the classification processes with machine learning. Artificial intelligence can assist the classification process to boost accuracy and avoid incorrect duty payments. 
• Admissibility requirements: Organized documentation is necessary for clean imports. Parts “stuck in customs” yield costs. Furthermore, lower customer satisfaction due to delays is likely.
• Supplier Screening: To reduce risk, you need to automatically screen suppliers and all parties within the supply chain. This mitigates your company’s regulatory exposure, as well as potential penalties, fines and damage to your reputation. Increasing regulations like the UFLPA and German Supply Chain Act dictate that screening is an ongoing effort to avoid unexpected supply disruptions.

QAD’s Import Solutions for the Automotive Industry

QAD’s import management solutions make navigating the complexity of automotive manufacturing more efficient. By managing admissibility requirements, supplier screenings, documentation generation and recordkeeping, QAD gives your organization more control over every step in the process.

Additionally, by finding ways to reduce duties and tariffs, QAD global trade solutions help cut costs. Ultimately, managing the processes and the costs associated with the importation of products can increase customer satisfaction and help your business grow.