The automotive supply chain landscape is evolving rapidly, particularly when it comes to managing Section 232 tariffs and their impact on imported parts. If your company supplies imported automotive components to U.S. Original Equipment Manufacturers (OEMs), there’s an important development you need to understand: Import Adjustment Offsets (IAOs).
What Are Import Adjustment Offsets?
Import Adjustment Offsets represent a mechanism that allows companies to potentially recover some of the Section 232 tariffs paid upon import of automotive parts. This isn’t automatic relief – it requires active participation and proper documentation from both OEMs and their suppliers.
Currently, OEMs are actively submitting Import Adjustment Offset applications to manage their tariff burden. However, the process directly impacts suppliers, as your eligibility to participate in this offset program depends on your OEM customer designating you as a supplier within their IAO application to the U.S. Department of Commerce.
Supplier Eligibility Requirements
For suppliers to “decrement” or reduce their OEM’s Import Adjustment Offset amount, the relationship must be formally established within the application process. The good news is that OEMs can update supplier information after their initial submission, providing some flexibility as relationships and supply chains evolve.
Essential Information You’ll Need to Provide
When participating in the IAO process, suppliers should be prepared to provide several key pieces of information:
Core Documentation:
- Your Importer of Record (IOR) number
- U.S. import entry values
- Tariff amounts paid or expected to be paid
- Supporting documentation such as entry summaries and invoices (if requested by Customs or the Department of Commerce)
- Records of any previous tariff reimbursements received from OEM customers
Important Note on Cost Structure: Unlike some compliance processes, suppliers are not required to provide detailed cost structure or margin information unless specifically required by contract terms. However, it’s worth noting that OEMs will have some visibility into supplier margins based on purchase prices compared to import values.
What to Expect: The Five-Step Process
The IAO process typically follows a structured approach that suppliers should understand and prepare for:
1. Data Requests
Expect contact from your OEM customers’ procurement and supply chain teams. They’ll be seeking import entry summary information and related documentation to support their IAO applications.
2. Validation Process
Your submitted data will likely be cross-referenced against sample CBP Form 7501s to ensure accuracy. This validation step is crucial for maintaining compliance and supporting successful offset applications.
3. Price Increase Review
OEMs will assess whether suppliers have already implemented price adjustments to account for tariff costs. This review helps determine appropriate offset amounts and prevents double compensation.
4. Refund Process Management
Eligible suppliers will receive detailed information about refund processes and the controls that govern potential payments. This ensures transparency and proper financial management.
5. Ongoing Monitoring
The process doesn’t end with initial submissions. OEMs will establish procedures for tracking and managing ongoing adjustments as trade conditions and tariff situations evolve.
Taking Action: Proactive Steps for Success
The key to successfully navigating Import Adjustment Offsets lies in proactive communication and preparation. Here’s what you should do now:
Start the Conversation: If you haven’t already engaged with your OEM customers about these changes, initiate that discussion immediately. Understanding your specific role and their expectations is crucial for smooth implementation.
Organize Your Documentation: Begin gathering the essential information outlined above. Having organized, accurate records will streamline the process and demonstrate your commitment to compliance.
Establish Clear Communication Channels: Work with your OEM customers to establish clear lines of communication for ongoing IAO-related discussions and updates.
Monitor Developments: Stay informed about changes in tariff policies and IAO procedures, as these can affect your participation and potential benefits.
Looking Forward
Import Adjustment Offsets represent a significant development in how the automotive industry manages tariff-related costs. While the process may seem complex, it offers genuine opportunities for cost recovery and improved supply chain economics.
The success of your IAO participation will largely depend on preparation, clear communication with OEM partners, and maintaining accurate, comprehensive documentation. By taking a proactive approach now, you’ll be better positioned to navigate this process effectively and potentially recover significant tariff costs.
Remember, every supplier situation is unique, and the specific requirements and opportunities will vary based on your products, import volumes, and relationships with OEM customers. The key is to stay engaged, ask questions, and work collaboratively with your customers to ensure successful participation in the Import Adjustment Offset program.
As trade policies continue to evolve, programs like IAOs will likely become increasingly important tools for managing supply chain costs and maintaining competitive positioning in the global automotive market.
Step-by-Step Action Plan: What to Do Next
Taking advantage of Import Adjustment Offsets requires a systematic approach. Here’s your detailed roadmap for getting started:
Phase 1: Immediate Assessment (Week 1-2)
Step 1: Inventory Your OEM Relationships
- List all U.S. OEMs you currently supply with imported automotive parts
- Identify which customers are most likely to pursue IAO applications
- Prioritize based on volume and tariff impact
Step 2: Gather Essential Documentation
- Locate your Importer of Record (IOR) number
- Compile import entry records for the past 12-24 months
- Calculate total tariff amounts paid on Section 232 products
- Organize entry summaries, commercial invoices, and CBP Form 7501s
Step 3: Review Existing Contracts
- Check current supplier agreements for any cost structure disclosure requirements
- Identify any existing tariff reimbursement clauses or mechanisms
- Document any price adjustments already made to cover tariff costs
Phase 2: Outreach and Communication (Week 2-3)
Step 4: Initiate Customer Conversations
- Contact procurement teams at your key OEM customers
- Ask about their IAO application status and timeline
- Request information about their supplier designation process
- Establish primary points of contact for IAO-related communications
Step 5: Prepare Your Data Package
- Create a standardized data template with all required information
- Develop a system for tracking ongoing tariff payments
- Prepare documentation in formats that can be easily shared and validated
Phase 3: Implementation and Compliance (Week 3-4)
Step 6: Respond to Data Requests
- Provide requested information promptly and accurately
- Maintain detailed records of all submissions
- Follow up to confirm receipt and accuracy of your submissions
Step 7: Establish Validation Procedures
- Prepare for potential CBP Form 7501 cross-referencing
- Implement quality control measures for data accuracy
- Create backup documentation systems
Phase 4: Ongoing Management (Ongoing)
Step 8: Monitor the Process
- Track the status of your OEM customers’ IAO applications
- Stay informed about any changes to requirements or procedures
- Maintain regular communication with OEM supply chain teams
Step 9: Prepare for Refund Processing
- Understand each OEM’s specific refund procedures and controls
- Set up internal processes for managing potential reimbursements
- Ensure compliance with any audit or verification requirements
Step 10: Plan for Future Cycles
- Develop systems for ongoing IAO participation
- Consider how to integrate IAO processes into regular business operations
- Stay updated on policy changes and program modifications
Official Resources and Documentation
For the most current and detailed information about Import Adjustment Offsets, suppliers should reference the official Federal Register notice:
Federal Register Notice on Import Adjustment Offset (IAO): FR – June 13, 2025 (2025‑10740) Download Official PDF
This comprehensive document provides the legal framework, detailed procedures, and official requirements for the IAO program. It’s essential reading for understanding the full scope of the program and ensuring compliance with all federal requirements.
The Federal Register notice includes critical information about:
- Eligibility criteria for both OEMs and suppliers
- Application procedures and required documentation
- Timeline requirements and deadlines
- Appeal processes and dispute resolution
- Ongoing compliance and reporting requirements
By following this step-by-step approach and referencing the official documentation, suppliers can position themselves to effectively participate in the Import Adjustment Offset program and potentially recover significant tariff costs while maintaining compliance with all federal requirements.