Your Steel Derivative Can Be 70% American and Still Pay 25% on Half Its Value — Here's the Rule That Decides It

Picture a steel derivative crossing from Mexico under USMCA preference, 70 percent of its value built from U.S.-produced parts. The intuition is that most of it should clear free of the new Section 232 duty. The rule says otherwise. Under the June 1, 2026 proclamation now in force, the credit for U.S. content is capped at 40 percent of the article's value. Everything above that line — the remaining U.S. content plus all non-U.S. content — carries a 25 percent additional duty. A product that is 70 percent American pays the full Section 232 rate on roughly half its declared value.

That cap is the decision this change forces. Not "do I qualify for USMCA" — most operations crossing the corridor already know whether they do. The operative question is narrower and more expensive: how do you document and structure U.S. content when only 40 points of it count, and the rest is taxed as if it were foreign? The operations that answer it before their next entry clears will pay the rate they actually owe. The ones that meet it at the line will overpay, or worse, file it wrong and inherit a correction.

Here is how the cost actually lands, what changed on June 8, and the sequence a supply chain team should run this week.

The three cost paths

For a steel derivative product of Canada or Mexico eligible for USMCA preferential treatment, the duty is no longer a single rate applied to the whole value. It splits along three lines, and which line your value lands on is a documentation question as much as a sourcing one.

Path one — the U.S. content you can credit. Under HTSUS 9903.82.21, the U.S. content of the derivative — the value attributable to parts produced in the United States — carries a 0 percent additional rate. But the credit stops at 40 percent of the article's total value. You cannot report more than 40 percent of the entered value on this line, no matter how American the product actually is.

Path two — everything above the cap. Under HTSUS 9903.82.20, the non-U.S. content plus any U.S. content that exceeds the 40 percent ceiling carries the 25 percent additional duty. This is where the surprise lives. The portion of genuine U.S. content sitting above 40 percent is treated, for duty purposes, exactly like foreign content.

Path three — no documentation, no credit. If the two-line split is not filed correctly, there is no partial credit to fall back on. The benefit of 9903.82.21 exists only when the U.S. content is substantiated and reported on its own line. An operation that declares value as a single undifferentiated figure forfeits the 40-point credit entirely and exposes the full value to the 25 percent rate.

Three paths, one variable that moves between them: how rigorously the U.S. content is calculated, substantiated, and filed. The sourcing is what it is by the time the cargo moves. The duty outcome is still partly in the importer's hands at the moment of entry — and only then.

What changed on June 8 — and what didn't

The June 1, 2026 proclamation (Proclamation 11032, published at 91 FR 34085) amends the April 2 action (Proclamation 11021, 91 FR 18201) that first applied Section 232 duties to the full customs value of steel, aluminum, and copper articles and their derivatives. CBP's implementing guidance, CSMS 68855869, carries the operational detail. The changes took effect for goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern time on June 8, 2026.

Two changes matter most for a corridor operation.

First, the USMCA two-line mechanism for steel derivatives. The 40 percent U.S.-content credit (9903.82.21) and the 25 percent rate on everything above it (9903.82.20) are the structure described above. They apply to derivative steel articles that are the product of Canada or Mexico and eligible for USMCA preference. As of now this two-line treatment is specified for steel derivatives — aluminum and copper derivatives are handled under separate provisions, and CBP has said filing instructions for headings 9903.82.18 and 9903.82.19 will follow. A supply chain team that runs both steel and aluminum derivatives should not assume the steel mechanism maps onto its aluminum entries.

Second, the "entirely American" threshold dropped. The bar for a product's metal content to qualify as made "entirely" from American aluminum, steel, or copper moved from 95 percent to 85 percent, effective the same June 8 date. For an operation already sourcing heavily from U.S. mills, that 10-point relaxation is the difference between qualifying for the lowest available treatment and falling back to a higher rate — and it is worth re-checking against current bills of material now that the threshold has moved.

What did not change is as important as what did. The anti-stacking rule still holds — a good containing more than one covered metal is dutied once, at the highest applicable rate, not stacked per metal. Country-of-origin reporting continues: melt-and-pour for steel, smelt-and-cast for aluminum. And the proclamation expanded coverage rather than narrowing it — agricultural equipment and certain residential HVAC systems moved into the temporarily reduced 15 percent band, while items like aluminum lithographic plates and steel racks were pulled into coverage for the first time. This is not a rollback. It is a sharpening.

The decision framework — which path is yours

The number that decides your duty is not your tariff classification. It is your documented U.S. content, measured against a 40 percent ceiling. Working out which path applies comes down to three questions a supply chain team can answer from its own records.

First: is the derivative a product of Canada or Mexico, eligible for USMCA preference, and a steel derivative under the covered provisions? If yes, the two-line mechanism is available. If the article is aluminum or copper, the steel mechanism does not apply and the relevant heading governs instead — confirm which before filing.

Second: what is the genuine, substantiable U.S. content as a share of total article value? Not the figure you would like to claim — the figure you can defend. U.S. content is the value attributable to parts produced in the United States; non-U.S. content is the total value minus that. If your real U.S. content is at or below 40 percent, the cap does not bind and you credit all of it. If it sits above 40 percent, you credit 40 points and the rest pays 25 percent — and there is no benefit to overstating it, because CBP penalizes U.S.-content claims it determines to be fraudulent or deliberately misleading.

Third: can the U.S.-content figure survive a review? The credit is only as good as the substantiation behind it. A two-line entry claiming 40 percent U.S. content rests on supplier documentation, bills of material, and a valuation method that ties value to U.S.-produced parts. If that file does not exist before the entry, the credit is a claim waiting to be unwound.

Quick check: Pull your last several steel-derivative entries from Mexico or Canada. For each, can you state the U.S.-content value as a defensible share of total entered value, and is it filed on its own line under 9903.82.21 — capped at 40 percent — with the balance under 9903.82.20? If any entry declares a single undifferentiated value, that entry is paying 25 percent on content it could have credited.

The operational moves this week

The June 8 effective date is already behind us, which means the cost is live on every covered entry now clearing. The work is to make sure the duty you pay is the duty you actually owe — and that the file behind it holds.

→ Separate the value before the broker files. The two-line split is not something to improvise at entry. For each covered steel derivative, fix the U.S.-content value and the non-U.S.-content value from your own records, so the entry reports the U.S. content (up to 40 percent) under 9903.82.21 and the balance under 9903.82.20. Same Chapter 1–97 HTSUS and same country of origin on both lines, with SPI code "S."

→ Re-check the 40 percent ceiling against reality. If your documented U.S. content runs well above 40 percent, recognize that the duty math caps the benefit — and that the structural question (where parts are produced, how the article is built) is now a duty-planning input, not just a sourcing one.

→ Re-run the "entirely American" test at 85 percent. With the threshold down from 95 percent, BOMs that narrowly missed the old bar may now qualify for the lowest available treatment. This is a one-time re-check that can move real money on high-U.S.-content lines.

→ Confirm the Section 122 interaction. Imports filed under 9903.82.21 are not eligible for the Section 122 exemption (9903.03.06). If your duty planning assumed that exemption, the assumption no longer holds on the U.S.-content line.

→ Hold country-of-origin discipline. Melt-and-pour for steel continues to be required. A two-line USMCA claim with a weak origin record is an inconsistency an automated review will surface.

Each step is small. Together they are the difference between a clean entry and a 25 percent charge on value you could have credited.

Where this stops being a filing question and becomes a planning one

A 40 percent cap on U.S.-content credit does something subtle: it turns the structure of a product into a duty variable. Where parts are produced, how value is distributed across the bill of materials, how rigorously U.S. content can be substantiated — these stop being procurement details and become inputs to the landed cost of every covered entry. For a supply chain running steady volume across the corridor, the difference between a defensible two-line claim and a single-figure entry compounds shipment after shipment.

This is the layer that rewards an operation built to track value at the part level and reconstruct it on demand — the discipline our own platforms, JoffroyOS and TradeShield, are built to enforce, and the discipline that 122 years and more than 190,000 customs operations a year at 39+ ports have taught us decides outcomes at the moment an entry is finally tested. The teams that treat the 40 percent cap as a planning constraint will file entries that pay the rate they owe. The teams that meet it as a filing surprise will spend the summer overpaying or correcting, one entry at a time.

The rule is now in force. The only number worth checking this week is the one your records should already answer: on your last steel-derivative entry from the corridor, how much of your real U.S. content actually made it onto the credited line — and how much paid 25 percent because no one separated the value before it cleared?

For a corridor operation weighing its U.S.-content exposure under the new steel-derivative rule, a Joffroy expert can walk your team through a two-line readiness review against your recent entries.

TRADE. UNDER CONTROL.