Executive Summary
Commerce opened Engine Offset Process applications on July 29, 2026, for domestic manufacturers assembling automobile or medium- and heavy-duty vehicle engines in the United States.
An approved manufacturer may receive an offset equal to 3.75 percent of the aggregate value of qualifying U.S.-assembled engines, subject to U.S.-originating core-component requirements.
Approved importers can apply the offset only against specified parts tariff liability under clauses 1, 7, or 12 of Proclamation 10984 or under Proclamation 10908. The offset cannot be transferred or exceed the manufacturer’s covered tariff liability.
The notice sets annual production periods and application documentation requirements, but does not provide annual application deadlines or a Commerce review timetable.
The Engine Offset Process opened for applications on July 29, 2026. The International Trade Administration notice allows domestic manufacturers assembling automobile engines or medium- and heavy-duty vehicle (MHDV) engines in the United States to seek offsets for specified parts tariffs.
An approved manufacturer’s offset is 3.75 percent of the aggregate value of qualifying engines assembled in the United States. The amount is determined annually by Commerce and can be used only by approved importers associated with the manufacturer, subject to the notice’s eligibility, documentation, and use restrictions.
Who Qualifies for the Engine Offset Process?
The process covers domestic manufacturers of automobile engines and MHDV engines assembled in the United States. It is a separate process from the automobile and MHDV vehicle offset process because Commerce treats engines as a distinct product category. The notice allows offsets for covered parts imports, not a general credit against all customs duties.
For the first two program years, an engine model must be produced using at least two U.S.-originating core engine components. Beginning in year three, it must use at least four. Core components are turbochargers, including superchargers, and the specified heads, blocks, crankshafts, pistons, and rods identified in the USMCA product-specific rules.
A core component generally qualifies as U.S.-originating if it is substantially transformed in the United States. Engine heads and blocks can also qualify if all or substantially all machining occurs in the United States. The application must describe the machining and where it occurred for components claimed on that basis.
How Is the Engine Offset Amount Calculated?
Commerce determines the annual offset as 3.75 percent of the aggregate value of all qualifying engines assembled in the United States by the manufacturer. A manufacturer must document its production forecast by model and plant, U.S. manufacturing activity, qualifying engine value, projected covered tariff liability, requested amount, and authorized importers of record with their allocated amounts.
For manufacturers producing their own engines, the aggregate value must use a methodology consistent with the USMCA net-cost method. Engine makers selling engines to vehicle manufacturers may use that method or the forecast sales price. Aftertreatment-system value is excluded unless the system is included in engine assembly at an engine manufacturing facility, and it cannot be counted again if included in a vehicle offset submission.
The offset may reduce tariff liability on MHDV parts under Proclamation 10984 or automobile parts under Proclamation 10908, as amended. It may be carried forward indefinitely until exhausted, but cannot exceed the manufacturer’s total covered parts tariff liability. It cannot be traded, sold, or transferred.
How Do Engine Makers Apply and Use an Offset?
Applications must be submitted electronically to Commerce. A separate documentation set is required for each reporting period for which an offset is sought. Commerce reviews applications for completeness and may request supplemental documentation or clarification. It notifies approved manufacturers in writing of the approval and amount, then transmits relevant offset data, including importer numbers and amounts, to CBP.
The application must include a completed, signed, and dated certification that the submission is accurate and complete to the signer’s knowledge. The certification warns that claims and supporting documentation may be audited by Commerce or CBP, and that knowingly and willfully making material false statements to the U.S. Government may bring criminal sanctions.
Only importers associated with an approved manufacturer may decrement against its amount. CBP administers offsets at entry summary filing and may request documents to validate entries. Commerce or CBP may audit claims; unsupported claims or refusal to permit an audit may result in denial or adjustment of an offset, and inaccurate, incomplete, or false information may result in penalties.
What Are the Engine Offset Reporting Periods?
The notice starts applications on July 29, 2026, but assigns different annual periods to automobile and MHDV engines. These are the production periods for which manufacturers must submit documentation:
- Applications open: July 29, 2026. Domestic automobile and MHDV engine manufacturers can begin submitting applications.
- MHDV engine Year 1: November 1, 2025 to October 31, 2026. Year 2 runs November 1, 2026 to October 31, 2027; Year 3 runs November 1, 2027 to October 31, 2028; Year 4 runs November 1, 2028 to October 31, 2029; and Year 5 runs November 1, 2029 to October 31, 2030.
- Automobile engine Year 1: May 1, 2026 to April 30, 2027. Year 2 runs May 1, 2027 to April 30, 2028; Year 3 runs May 1, 2028 to April 30, 2029; and Year 4 runs May 1, 2029 to April 30, 2030.
- Automobile engine exclusion: April 5, 2025 to May 1, 2026. Commerce excludes engines assembled in this period because their value was included in automobile offset calculations, which could otherwise duplicate offsets.
What Should Engine Manufacturers Prepare Now?
Map eligible production by year. Identify engine models and plant locations, then document U.S. manufacturing activity and whether each model meets the two-component or four-component threshold for its program year.
Substantiate U.S. origin. Gather records supporting substantial transformation of claimed components. For heads and blocks, document the machining performed, its location, and the basis for treating all or substantially all machining as U.S. work.
Reconcile engine values. Apply the appropriate valuation method, remove excluded aftertreatment value, and check that engine value is not duplicated in a vehicle offset claim. Prior-year recipients must also report actual completed engine counts, values, and production details using the prior application’s eligibility and valuation methods.
Coordinate importer allocations. List each authorized importer of record, its number, and the offset amount allotted. Keep support for each claim available for a Commerce or CBP audit.
What Does the Engine Offset Notice Leave Open?
The notice does not set annual application submission deadlines or a review timetable. It also does not specify how long supplemental-documentation requests will take to resolve. Manufacturers should distinguish the July 29, 2026 application opening from any filing deadline, which the notice does not state.
Sources
This publication is for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. Reading it does not create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act on this information without seeking advice from qualified counsel. The views expressed are those of this site and its owner as of the date of publication. Although we try to keep this content complete, accurate and up to date, we assume no responsibility for its completeness, accuracy or timeliness.