Steel and aluminum materials and components imported from Mexico and Canada make the United States more competitive, Caterpillar noted during USMCA consultations.

Consequently, the company asked the Trump administration to exempt products that meet USMCA requirements from Section 232 tariffs.

Steel and aluminum materials

Headquartered in Irving, Texas, Caterpillar has more than 65 key centers, more than 51,500 employees, and a dealer network with tens of thousands of employees in the United States. 

In the United States alone, Caterpillar purchases more than $10 billion annually from more than 2,400 suppliers, many of which are small businesses.

For this company, the USMCA has been instrumental to its success as a net exporter. 

Canada and Mexico are the primary export destinations for Caterpillar products manufactured in the United States (machinery and parts/components) that supply industries such as energy, mining, and construction. 

Therefore, maintaining free trade within North America is crucial to ensuring that Canada and Mexico remain the primary export destinations. 

“We therefore respectfully request that the Administration exempt products that meet USMCA requirements from Section 232 tariffs,” the company said. 

Productive complementarity

By offering this exemption for products that meet USMCA rules of origin, companies are encouraged to source materials and components within this long-standing trading bloc.

Caterpillar already sources most of its components and steel from the United States, but having additional production capacity in Canada and Mexico helps make the equipment the company manufactures in the United States more competitive globally. 

In addition, the USMCA’s duty drawback and tariff remission program has benefited companies that operate internationally, but it could be improved by eliminating the “lesser of two” rule. 

Article 2.5 of the USMCA limits the amount of duty drawback, or the amount of duties deferred under duty deferral programs, to the lesser of the following values: the duties paid upon admission into the first USMCA country or upon exportation and importation into the second USMCA country. 

According to Caterpillar, this discourages both the integration of supply chains within North America and exports to Canada and Mexico compared to other countries.