As the Electric Vehicle Industry Continues To Grow, Potential Tariff Classification Issues Will Rise

The components and products that are used in the assembly of EVs are critical to the deployment and functionality of EVs and their global supply chain. In particular, the proper Harmonized Tariff Schedule of the United States (HTSUS) classifications of the final goods and inputs used by the EV industry may not have been fully developed yet, presenting potential tariff classification issues for the electric mobility supply chain.

On

Background

  • Although internal combustion engine (ICE) vehicles and EVs share common components, the EV lacks many of the parts found in an ICE vehicle and contains numerous components not found in an ICE vehicle.
    • For example, some ICE components not found in an EV include an exhaust system, radiator, fans, fuel pumps, fuel tank, oxygen sensors.  
    • In contrast, the major components found in EVs, but not in ICE vehicles, include the battery modules, power inverters, battery management systems, electric power control unit (EPCU), and the electric motor itself.  
  • Overall, EVs have fewer drivetrain components than ICE vehicles.  
    • The Tesla drivetrain has about 17 moving parts compared to about 200 for an ICE vehicle’s typical drivetrain.  
    • The Ford F150 Lightning Truck has two separate electric motors in the front and back but no driveshafts, U-joints, transfer cases, or traditional ICE-type transmission (but rather a single speed transmission assembly for each of the front and rear motors).  
  • Other components that are finding their way into EVs are solar panels and cells that are being integrated into some EVs, such as the Fisker EVs, to provide additional sources of power for the batteries.

 What to Know:

  • The importation of EV related components and parts presents key challenges for ascertaining customs related entry information because many of these articles are relatively new or not found in ICE vehicles. In particular:
    • On January 1, 2022, the World Customs Organization (WCO) created new classifications for electric heavy trucks under subheadings 8704.41 through 8704.60.  
    • Previously, electric heavy trucks were mainly classified under subheading 8704.90, and CBP is expected to implement these WCO changes to the HTSUS during the first few months of 2022.
  • Many of the EV components are electrical related parts and thus may not be classified as parts of a vehicle but are properly classified in other more specific headings that are not vehicle related.
  • Tariff classification of EV articles will be impacted by CBP’s evolving and developing customs rulings on the classification of EV related components and parts, including rulings on determining the classification and applying the rules of origin for FTA eligibility.

How can we help?

The importation of EV related components and parts presents key HTSUS classification challenges for ascertaining customs related entry information because many of these articles are relatively new or not found in ICE vehicles. The correct HTSUS classification becomes paramount for the global supply chain because it can impact the duty rate, the application of Section 301 duties, and FTA eligibility, as well as have implications on tax, government procurement, and US federal subsidies.

Drawing from decades of HTSUS classification experience and technical knowledge on automotive goods and electrical/electronic components, the Arent Fox customs team can leverage its expertise of the EV’s mechanical and electrical parts to advise on these emerging and very complex tariff classification issues that have broad implications for an EV company’s supply chain.

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