Leadership Insights: Finding Efficiency in the Automotive Aftermarket Cross-Border Customs Process

Amidst Tariff Uncertainty, North American Auto Aftermarket Businesses can find Cross-Border Success

No one knows precisely how it’s going to end, but the “great North American trade war of 2025” has left plenty of businesses on edge, wondering what, if anything, the coming months will bring. This includes the highly integrated auto aftermarket industry, which relies on steady access to parts and supplies that move between the United States, Canada, and Mexico.

If, as threatened, U.S. President Donald Trump follows through with a 25% tariff on all goods coming from Canada and Mexico, the effect would reverberate throughout the automotive industry. Canadian Automotive Parts Manufacturer’s Association head Flavio Volpe used the word “existential” to describe the impact a double-digit tariff increase would have on the North American auto industry. “The best tariff level for Canadian and American auto parts suppliers is zero,” he added, according to CNBC.

Similarly, analysis by the U.S. Auto Care Association (ACA) explained that any tariff increase would ultimately be passed down to consumers, placing “a financial burden on families trying to access affordable parts to repair and maintain their vehicles.” A 25% tariff increase on a badly needed auto part, the ACA noted, would result in a 25% increase in the cost charged to the consumer. A likely result would be increased incidences of delayed vehicle maintenance at a time when 25% of consumers already admit to putting off upkeep of their vehicles, mainly due to cost considerations.

Despite tariff uncertainty, customs compliance will still be mandatory

Regardless of how the current trade situation is resolved, aftermarket parts that cross the border will still need to meet all customs and regulatory requirements. And businesses will still need to meet strict delivery demands, including expectations for consistent, guaranteed service.

This means an aftermarket business would do well to take stock of its current cross-border strategy, especially with regard to customs and regulatory efficiency. While all products must comply with customs and regulatory requirements, there can be flexibility in how those mandates are met that can help reduce costs.

• Are your shipments eligible for express entry for example, which would reduce customs paperwork requirements?
• Are you confident that your shipments have been assigned the correct tariff classification, and been valued properly?
• Would your shipments benefit from a consolidation strategy, which provides a streamlined customs process and reduced processing fees?

Any of these aspects of the compliance process could affect your bottom line.

Understanding customs requirements

Most businesses look at the compliance process as an unavoidable and inflexible part of cross-border business. While the process is certainly unavoidable, flexibility can be found by delving into the details. Here are a few examples.

1. Start with the Basics – Ensure Proper Tariff Classification and Valuation

It may seem obvious, but an essential first step is to ensure that all information listed on a customs form is accurate and thorough. This is especially true with regard to determining the proper tariff classification code, and assigning a correct product valuation.

Tariff Classification: Every product crossing an international border must be assigned a tariff classification code. Classification codes identify products as they move between international markets, determine tariff rates. But selecting the correct code can be quite difficult. That’s because, with thousands of codes from which to choose, and subtle differences from one code to the next, the process can be challenging and confusing. So challenging, that a Canada Border Services Agency (CBSA) audit found that 20% of shipments arriving at the Canadian border had the wrong code assigned. This resulted in improper duty assessments, with businesses sometimes under-charged, and sometimes charged more than was actually owed.

It’s important then, for an aftermarket business to take the time to get it right. Several online tools are available to help, including Purolator’s Trade Assistant, the U.S. government’s FTA Tariff Tool, and Canada’s Tariff Finder.

Another option is for a business – or a trade professional acting on its behalf – to request an “advance ruling” from either U.S., Canadian, or Mexican customs authorities. This provides a business with certainty about its product’s tariff classification.

Product valuation. Since duties and taxes are applied on a percentage basis, a business must ensure the product value listed on customs documentation is accurate. An over-valued product may result in an increased duty assessment. For example, let’s say a catalytic converter valued at $300 is subject to an 8% rate of tariff. That would amount to $24. If the rate of tariff is increased to 25%, the assessment would shoot up to $75. But what if the catalytic converter was assigned an incorrect valuation, and the correct value is actually $250? In that case, the 25% tariff assessment would be $62.50, a significant difference.

Customs valuation is an important piece of required information. But similar to tariff classification, determining the correct value can be complicated. Shippers can use various methods, depending on their shipment’s unique circumstances. But given the potential for reducing costs, a business may want to invest the time to ensure its products are valued accurately.

2. USMCA – Duties, Taxes and Express Shipping

The United States-Mexico-Canada Agreement (USMCA) eliminates duties/tariffs on qualified goods moving between the U.S., Mexico, and Canada. Whether or not that status changes, is at the heart of the current trade dispute. But beyond tariffs, the USMCA includes other provisions that can benefit aftermarket businesses.

De Minimis Exemptions. Before the trade dispute, shipments arriving at the border via an express carrier (i.e. Purolator), may be eligible for duty and/or tax savings through something known as the de minimis value exemption. The de minimis value refers to the threshold, set by each country, at which point duties and/or taxes are collected. Any product valued below the de minimis threshold is exempt, while products valued above the threshold are liable for applicable duties and/or taxes. As the trade dispute unfolds, it’s not clear how/if this will be impacted.

The USMCA addresses de minimis thresholds as follows:

• Canada-bound shipments valued at less than CAD$40 are exempt from duties and taxes. Shipments valued at less than CAD$150 are not subject to duties. Qualified shipments can also avoid “formal entry” procedures, which means a faster and less onerous clearance process.
• Mexico maintains a de minimis threshold for duty-free eligibility at US$117. For tax-free eligibility, the de minis value is US$50.
• The United States maintains a de minimis threshold of $800, which is the highest in the world. This allows goods valued at $800 or less to enter the U.S. duty-free.

BUT, as a reminder, these allowances were under the previous trade alignment and it’s unclear how these may/may not change as the trade dispute unfolds over the coming weeks and months.

3. Courier Low Value Shipment Program

Canada-bound shipments may benefit from that country’s Courier Low Value Shipment (CLVS) program, which allows informal entry for all commercial shipments valued up to CAD$3,300. To be eligible, a shipment must be transported by a company that participates in the CLVS program, and the goods must not be “regulated, controlled, or prohibited.”

 4. Consolidation

Another option for improving customs efficiency is through a consolidated shipping strategy. People tend to think of consolidation as a way to improve shipping efficiency, but it can also be very effective at managing the border clearance process.

Through consolidation, smaller shipments are combined into one larger shipment and move as a single unit. Purolator International offers a solution that allows all Canada-bound shipments – courier and freight – to travel as a single unit directly to the border, often arriving in Canada on the same day as a U.S. pickup. Once at the border, the consolidated shipment clears customs as a single entry. This avoids the need to (a) file separate paperwork for each unit and (b) pay separate customs fees.

For a business that ships large volumes of small shipments, consolidation can be an effective way of managing the border process.

5. In-Bond Transit for Mexico-Canada Shipments

Many Canadian aftermarket businesses have established relationships with Mexico-based suppliers. During 2023, an estimated 13% of Canadian parts imports came from Mexican suppliers, with Mexican businesses purchasing 7% of Canadian exports. While these figures are dwarfed by sales activity with the United States, which accounts for 90% of Canadian exports and 87% of Mexican parts exports, non-U.S. suppliers may be a viable option should higher tariffs become a reality.

Canadian businesses that purchase goods from Mexican suppliers may be eligible to move through the U.S. as “in-bond” shipments. This allows shipments to move uninterrupted through the U.S. without having to pay customs duties or file formal entry paperwork. In-bond shipping is offered by the U.S. Customs and Border Protection, but shipments are restricted to authorized carriers, including Purolator.

The North American trade community has entered 2025 in a state of limbo, waiting to see how escalating trade tensions are resolved. As that situation is considered by elected officials in Washington, Ottawa, and Mexico City, businesses can take advantage of opportunities to find efficiencies in the customs compliance process.

If you’d like to learn more, download our white paper, “Customs and Regulatory Considerations for Cross-Border Auto Aftermarket Shippers”.