According to the regulation issued by the Department, the process links tariff reductions to compliance with the United States-Mexico-Canada Agreement (USMCA) and commitments to increase production capacity in the United States. The measure aims to ease cost pressures on manufacturers integrated into the North American automotive and heavy-duty vehicle supply chain.
The regulation, published in the U.S. Federal Register on April 23, 2026, allows certain steel and aluminum producers operating facilities in Mexico or Canada to apply for tariff relief under Presidential Proclamation 10984.
The regulation applies to companies that directly or indirectly supply U.S. automotive and medium- and heavy-duty vehicle manufacturers and that commit to establishing new production capacity in the United States.
Under the mechanism, the U.S. Department of Commerce may reduce steel and aluminum tariffs to as low as half of the standard rate; however, the final rate cannot be reduced below 25%. Eligible imports benefiting from the reduction must qualify for preferential treatment under USMCA and be products that are melted and processed in Mexico or Canada.
While the regulation offers potential relief particularly for Mexican and Canadian suppliers integrated into automotive, auto parts, and medium- to heavy-duty vehicle production chains, access to tariff reductions remains conditional. Companies are required to demonstrate that they will increase primary steel or aluminum production capacity in the United States.
The U.S. Department of Commerce stated that eligible companies must provide comprehensive information in their applications, including investment plans, production locations, capacity projections, supply chain details, and employment forecasts.
The regulation is a continuation of Presidential Proclamation 10984, issued in October 2025 under Section 232 of the Trade Expansion Act of 1962. The proclamation introduced additional tariffs on imports of medium- and heavy-duty vehicles and parts and granted the Secretary of Commerce authority to adjust tariffs on national security grounds.
With this new process, the United States aims to reshape the balance between cost and security in the supply chain by encouraging regional production integration and increasing domestic capacity.
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