When I began exploring how Free Trade Agreements (FTAs) could reduce tariffs on my steel imports, I realized how much money I had been leaving on the table. I had always focused on finding the right supplier, but I didn’t realize that where the product was made—and how it was processed—could dramatically affect the final cost. Learning how to apply FTAs helped me avoid unnecessary tariffs and boost my profit margins.
Yes, importing custom steel parts can reduce or eliminate tariffs under Free Trade Agreements (FTAs) like USMCA 1, CAFTA-DR 2, and KORUS 3, provided that the products meet the Rules of Origin (RoO) requirements. These agreements allow eligible goods to enter the U.S. with preferential tariff treatment, but additional duties like Section 232 still apply.
What are the key FTAs that apply to steel parts imports?
The most relevant FTAs for U.S. steel part imports include USMCA (with Mexico and Canada), CAFTA-DR (Central America and Dominican Republic), and KORUS (South Korea). Each agreement provides tariff relief, but only if the imported goods meet specific origin rules.
Major FTAs Covering Steel Parts
| Agreement | Countries Involved | Relevance to Steel Parts |
|---|---|---|
| USMCA | U.S., Mexico, Canada | Allows duty-free import if RoO met |
| CAFTA-DR | U.S. + 6 Central American countries | Limited use for steel, but some parts qualify |
| KORUS | U.S. and South Korea | Covers industrial parts, including steel |
| Australia FTA 4 | U.S. and Australia | Low impact but provides for certain categories |
| Singapore FTA 5 | U.S. and Singapore | Beneficial if manufacturing is done locally |
These agreements aim to encourage trade between member countries by eliminating or reducing tariffs on goods that originate within the FTA regions.
How do rules of origin affect FTA eligibility for steel parts?
Rules of Origin (RoO) determine whether custom steel parts qualify for tariff-free or reduced-duty treatment under FTAs. Generally, steel parts must either be wholly obtained in the FTA country or undergo substantial transformation within it.
For steel, RoO often include strict conditions like the “melted and poured 6” rule. This means the steel must be both produced (melted) and solidified (poured) in a member country. Simply assembling components or minimal processing may not be enough to qualify.
Key Considerations for RoO in Steel Products
- Wholly Obtained or Produced: The entire product must be made in the FTA country.
- Substantial Transformation: A significant change in the product’s character or use must occur in the FTA country.
- Regional Value Content (RVC): Some agreements require a percentage of the part’s value to come from within the FTA region.
| Rule Type | Description | Applicability to Steel |
|---|---|---|
| Wholly Obtained | All inputs from FTA region | Rare for complex parts |
| Substantial Transformation | Product must change classification (HTS shift) | Common route for compliance |
| Melted and Poured | Steel origin must be from FTA country | Required under USMCA |
| RVC Threshold | Minimum regional content by value (%) | Often required under KORUS |
If steel parts are made using materials from multiple countries, it’s essential to evaluate whether processing in the FTA country is enough to meet these origin rules.
Are there specific documentation requirements to claim FTA benefits?
Yes, importers must present specific documents to U.S. Customs and Border Protection (CBP) to claim FTA benefits. The most common requirement is a valid Certificate of Origin or a qualifying origin declaration.
The documentation requirements vary by agreement. Some allow self-certification, while others require documentation from an approved authority. Regardless, the documentation must clearly prove that the goods meet the agreement’s RoO.
Types of Acceptable FTA Documents
- USMCA: Allows importers, exporters, or producers to self-certify origin. A formal certificate is not required, but specific data elements must be included in a written declaration.
- KORUS: Requires a formal Certificate of Origin or supporting statement. The certificate must contain all relevant information proving the product qualifies under RoO.
- CAFTA-DR: Requires a certification from the exporter or producer, with traceable origin proof.
Mandatory Elements in Origin Declarations
| Element | Required Detail |
|---|---|
| Exporter/Producer Info | Company name, address, contact info |
| HS Code | 6-digit classification |
| Product Description | Matches invoice and tariff schedule |
| Origin Criteria | Wholly obtained, substantial transformation |
| Certification Statement | Statement of truth and compliance |
U.S. Customs may audit these documents post-entry. Errors, missing info, or misclassifications can result in denial of FTA benefits and retroactive duties.
Can sourcing from FTA countries like Mexico or Canada lower import costs?
Yes, sourcing custom steel parts from FTA countries like Mexico or Canada can significantly reduce import costs, provided the parts meet the agreement’s Rules of Origin. Under USMCA, steel products that are “melted and poured” in North America and meet the RVC threshold can be imported duty-free.
However, even with USMCA eligibility, Section 232 tariffs 7 (25%) on steel still apply. This means that although the base HTS duty may be 0%, you’ll still have to pay Section 232 unless an exclusion is granted, which is currently not available.
Example Comparison: With and Without USMCA
| Country of Origin | Base HTS Duty | USMCA Tariff | Section 232 Tariff | Total Duty |
|---|---|---|---|---|
| China | 0%–5% | Not applicable | 25% + 301 | 30%–35% |
| Mexico (USMCA) | 0% | 0% | 25% | 25% |
| Canada (USMCA) | 0% | 0% | 25% | 25% |
These cost savings make Mexico and Canada attractive sourcing options for custom steel parts—especially when companies are trying to avoid the higher costs from non-FTA countries like China or Vietnam.
When Sourcing from FTA Partners Works Best
- Manufacturing happens fully in the FTA country
- Material sourcing aligns with RoO thresholds
- Product undergoes substantial transformation
- Correct documentation is available and accurate
Conclusion
Importing custom steel parts under Free Trade Agreements can reduce or eliminate standard tariffs, but only when origin rules are strictly followed and documentation is accurate. Agreements like USMCA offer strong benefits, especially for sourcing from Mexico or Canada. However, other duties like Section 232 and AD/CVD still apply. To maximize savings and avoid compliance risks, use the HTS system properly, meet RoO, and consult experts when needed.
Footnotes
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Details on USMCA benefits and origin criteria for North American trade. ↩
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Learn how CAFTA-DR offers tariff relief for eligible Central American steel parts. ↩
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Explore KORUS and how it supports steel part imports from South Korea. ↩
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Review how the Australia FTA affects duties on industrial goods. ↩
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Information on Singapore FTA provisions for manufacturing and parts trade. ↩
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USMCA guidance on "melted and poured" requirements for steel origin qualification. ↩
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Understand the Section 232 steel tariffs and their impact on FTA-imported goods. ↩
