Updated August 27, 2026.
A rarely used trade law is now one of the most important border-cost issues of 2026. On July 20, the United States announced additional 50% tariffs under Section 338 of the Tariff Act of 1930 on a wide range of goods from Canada. After a three-day suspension, U.S. Customs and Border Protection began applying the duties to covered goods entered for consumption, or withdrawn from warehouse for consumption, at 12:01 a.m. Eastern time on August 22, 2026.
The measures were framed as responses to Canadian policies affecting U.S. alcoholic beverages, dairy products, motor vehicles, and auto parts. The tariff lists reach far beyond those sectors, however. Depending on classification, covered imports can include food, paper and packaging, furniture, apparel, tools, machinery, electronics, sporting goods, and other consumer or industrial products. Canada announced counter-tariffs on C$27.6 billion of U.S.-origin goods beginning September 8, 2026.
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Section 338 tariffs on Canada: status at a glance
| Question | Current answer as of August 27, 2026 |
|---|---|
| What is the U.S. rate? | An additional 50% ad valorem duty on covered goods that are products of Canada. |
| When did collection begin? | 12:01 a.m. Eastern time on August 22, 2026, after a temporary three-day suspension. |
| Does USMCA qualification prevent the tariff? | No. A covered good can receive ordinary USMCA preference and still owe the additional Section 338 duty. |
| Is every Canadian product covered? | No. Coverage is determined by the HTSUS codes listed under headings 9903.03.12 through 9903.03.14, together with the origin and exclusion rules. |
| Are Section 232 goods charged twice? | Products entered under specified Section 232 measures are excluded from the Section 338 duty through heading 9903.03.15, but the Section 232 treatment can still apply. |
| Who pays U.S. Customs? | The importer of record is responsible for declaring the goods and paying estimated duties, even when a contract shifts the commercial cost to another party. |
| What is Canada doing? | Canada plans tariffs of 15%, 25%, or 50% on C$27.6 billion of U.S.-origin goods beginning September 8, 2026. |
What is Section 338 of the Tariff Act of 1930?
Section 338 is codified at 19 U.S.C. §1338. It gives the President authority to respond when a foreign country places an unreasonable charge, restriction, regulation, limitation, discrimination, burden, or disadvantage on U.S. commerce and does not apply comparable treatment to other countries.
If the President determines that action serves the public interest, Section 338 permits additional duties of up to 50% ad valorem, or an equivalent amount. The statute also allows the President to suspend, revoke, supplement, or amend a proclamation when the public interest requires it. In more severe circumstances, the law can support excluding affected foreign goods from entry.
The 2026 measures matter because Section 338 has rarely been used in modern trade practice. It is separate from Section 232 national-security tariffs, Section 301 unfair-trade actions, safeguards under Section 201, and emergency authorities under the International Emergency Economic Powers Act.
For businesses, the legal label is less important than the entry consequences: a product on the covered list can face a 50% duty in addition to its normal rate, antidumping or countervailing duties, merchandise processing fees, and other applicable charges.
Why did the United States invoke Section 338 against Canada?
The White House issued three proclamations on July 20, 2026. Each identified a different form of alleged discrimination against U.S. commerce.
Alcoholic beverages
The U.S. proclamation focused on provincial and territorial restrictions on purchasing, distributing, or retailing U.S. alcoholic beverages. It stated that Canadian imports of U.S. alcoholic beverages fell from roughly $718 million to $137 million when March 2025 through February 2026 was compared with the preceding 12-month period.
Dairy products
The dairy proclamation focused on Canada’s administration of tariff-rate quota allocations for U.S. cheese. The U.S. position is that the treatment is more restrictive for American suppliers than for comparable suppliers operating under Canada’s trade agreement with the European Union.
Motor vehicles and auto parts
The motor-vehicle proclamation cited Canada’s 25% tariff structure for certain U.S. vehicles and the use of company-specific tariff-rate quotas. The White House said Canadian imports of U.S. motor vehicles declined by about 22%, or $5.6 billion, from April 2025 through March 2026 compared with the prior 12 months.
These are the U.S. government’s stated reasons for the measures. Canada rejects the U.S. tariffs as unjustified and has responded with planned countermeasures and business-support programs. Companies should distinguish each government’s policy position from the customs rules that apply at the border.
Why are unrelated products on the tariff lists?
Section 338 is designed to offset a burden placed on U.S. commerce. It does not require the response to cover only the same product that gave rise to the dispute. That is why the annexes include products outside alcohol, dairy, and vehicles.
The official list includes hundreds of eight-digit HTSUS provisions. Examples span beer and spirits, milk powders, honey, plants and flowers, salt, cement, chemicals, plastics, paper goods, packaging, textiles, clothing, wood products, furniture, tools, machinery, phones and communications equipment, toys, sporting goods, fishing equipment, artwork, and collectibles.
Product descriptions are only a guide. The legal scope is controlled by the tariff classification and the applicable notes. A product that sounds similar to an item on a list may fall under a different code, while a product marketed under an unrelated name may still be classified in a covered provision.
How the five Chapter 99 headings work
CBP’s August 21 guidance directs importers and customs brokers to use headings 9903.03.12 through 9903.03.16. The Chapter 99 heading is reported with the ordinary Chapter 1 through 97 commodity code.
| HTSUS heading | Purpose | Section 338 rate |
|---|---|---|
| 9903.03.12 | Covered Canadian goods in subdivision (b)(1) of U.S. note 51, associated with the first proclamation list. | 50% |
| 9903.03.13 | Covered Canadian goods in subdivision (b)(2) of U.S. note 51, associated with the second proclamation list. | 50% |
| 9903.03.14 | Covered Canadian goods in subdivision (b)(3) of U.S. note 51, associated with the third proclamation list. | 50% |
| 9903.03.15 | Specified goods covered by enumerated Section 232 measures, including certain metals, vehicles and parts, wood products, semiconductors, and patented pharmaceuticals. | 0% under Section 338 |
| 9903.03.16 | Qualifying civil aircraft, engines, components, subassemblies, simulators, and related parts meeting the stated conditions. | 0% under Section 338 |
Use the six-page CBP Section 338 Canada HTS list rather than relying on a category summary. The list maps the ordinary tariff codes to the relevant Chapter 99 heading and describes the exclusions in detail.
Which Canadian products are excluded?
The July proclamations and CBP guidance provide important exclusions, but they are technical rather than blanket sector exemptions.
- Specified Section 232 products: Goods entered under the enumerated Section 232 headings receive a 0% Section 338 rate under 9903.03.15. This prevents the same goods from being charged the new Section 338 duty on top of the specified Section 232 adjustment. The underlying Section 232 duty may remain.
- Qualifying civil aircraft and parts: Goods satisfying the terms of 9903.03.16 and General Note 6 receive a 0% Section 338 rate. Unmanned aircraft are not part of this civil-aircraft exclusion.
- Products not on the covered HTS lists: Canadian origin alone is not enough. A product must fall within one of the listed tariff provisions and satisfy the scope rules.
- Certain Chapter 98 claims: CBP says the additional duties generally do not apply when entry is properly claimed under an eligible Chapter 98 provision, subject to specified exceptions and special value rules.
The White House fact sheet also highlights energy and potash among goods not targeted by the Section 338 lists. Businesses should still confirm the precise classification and entry treatment rather than using a high-level sector label.
Does USMCA protect Canadian goods from the 50% tariff?
No. The proclamations state that the Section 338 duties apply to covered goods even when they qualify for preferential treatment under the United States-Mexico-Canada Agreement.
USMCA status still matters. It can reduce the ordinary customs rate and remains important for origin documentation, but it does not erase the separate 50% Section 338 charge. A covered shipment may therefore have a 0% ordinary USMCA rate and a 50% Section 338 rate on the same entered value.
Country of shipment and country of origin are also different concepts. Routing a Canadian-origin product through a third country does not turn it into a product of that country. Origin depends on the applicable customs rules and any qualifying production or transformation, not the location of the last warehouse or port.
Do the tariffs stack with other duties?
In most cases, yes. CBP says products reported under 9903.03.12 through 9903.03.16 continue to be subject to antidumping duties, countervailing duties, taxes, fees, exactions, and other charges that apply. The proclamations likewise describe the Section 338 duty as additional to other applicable amounts, except where an exclusion applies.
Consider a simplified shipment with a customs value of $100,000, an ordinary duty rate of 5%, and no special exclusion:
| Charge | Simplified amount |
|---|---|
| Ordinary duty at 5% | $5,000 |
| Section 338 additional duty at 50% | $50,000 |
| Subtotal before fees or other trade remedies | $55,000 |
This example does not include brokerage, merchandise processing fees, harbor maintenance fees, antidumping or countervailing duties, storage, financing, or other costs. The 50% is assessed against customs value, not the importer’s profit margin.
Estimate your Section 338 tariff exposure
Use the calculator below to screen an eight-digit HTSUS code and estimate the additional Section 338 duty, total border charges, landed cost, and per-unit effect. The result is a planning estimate, not a customs determination.
Screened against 554 HTSUS provisions from CBP’s August 21, 2026 list.
Code appears on the CBP Section 338 list
9403.60.80 · 9903.03.14Estimated landed cost
$32,200.00
- Customs value
- $20,000.00
- Ordinary duty
- $1,000.00
- Section 338 duty
- $10,000.00
- Other duties
- $0.00
- Freight & fees
- $1,200.00
- Total estimated duty
- $11,000.00
A code match is a screening result, not a classification or customs ruling. Confirm origin, classification, valuation, exclusions, and filing treatment with a licensed customs professional.
What the tool checks
Exact eight-digit code matches, Canadian origin, the August 22 effective date, user-confirmed exclusions, and user-entered rates.
What it calculates
Ordinary duty + Section 338 duty + other entered duties, then adds freight and fees to estimate landed cost and per-unit impact.
What it cannot decide
Your correct classification, legal origin, customs value, Section 232 status, Chapter 98 eligibility, or civil-aircraft qualification.
What entry date controls the U.S. tariff?
The duty applies to covered goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern time on August 22, 2026. The shipping date, purchase-order date, invoice date, or date the goods reached the border may not control.
This distinction is especially important for goods already in transit, merchandise held in a bonded warehouse, and inventory in a foreign-trade zone. The August 18 proclamation postponed the original August 19 effective date for three days; it did not cancel the tariffs.
Who pays the tariff?
U.S. Customs collects duties from the importer of record. A Canadian seller may absorb the cost, reimburse the buyer, or change its price under a commercial agreement, but those arrangements do not remove the importer’s legal filing obligations.
Incoterms deserve immediate attention. Under delivered-duty-paid terms, the seller may be responsible for import clearance and duties. Under other terms, the U.S. buyer may carry the cost. Existing contracts may include tariff-change clauses, price-adjustment formulas, force majeure language, or renegotiation rights. Have counsel review disputed allocations; do not assume an Incoterm answers every tax, customs, or contract question.
Do low-value shipments escape Section 338?
Do not build a compliance plan around the former $800 de minimis threshold. The Section 338 proclamations and CBP implementation message do not establish a special low-value exemption for these goods, and U.S. low-value import treatment has changed sharply. Entry method, carrier process, product type, and current CBP rules can all affect the result.
Ecommerce sellers should ask their carrier or customs broker how covered Canadian-origin parcels are being entered and how duties will be collected from the merchant or customer. A parcel’s low retail price does not by itself establish that the additional duty is unavailable.
June, July, and August 2026 timeline
| Date | Development |
|---|---|
| June 1 | The United States announced changes to Section 232 tariff regimes for aluminum, steel, and copper. These measures are separate from Section 338 but matter because specified Section 232 treatment can exclude a product from the new Section 338 charge. |
| July 1 | Canada, the United States, and Mexico held the first joint review required by USMCA/CUSMA. Canada said it sought discussions on sectoral tariffs involving steel, aluminum, autos, and lumber. |
| July 20 | The White House issued three Section 338 proclamations covering Canadian goods and set a 50% additional duty with an original August 19 effective date. |
| August 18 | A new presidential proclamation suspended the Section 338 duties for three days while negotiations continued. |
| August 21 | CBP issued filing guidance and its six-page mapping of covered HTSUS provisions. |
| August 22 | The 50% U.S. duties took effect for covered entries at 12:01 a.m. Eastern time. |
| August 25–26 | Canada announced dollar-for-dollar countermeasures, business support, and a detailed product list. |
| September 8 | Canada’s planned 15%, 25%, and 50% counter-tariffs are scheduled to begin at 12:01 a.m. |
What counter-tariffs has Canada announced?
Canada says it will match the U.S. Section 338 tariffs dollar for dollar. Beginning September 8, 2026, it plans surtaxes of 15%, 25%, or 50% on listed U.S.-origin products. The rate for each tariff item is intended to match the corresponding U.S. treatment under Section 338 or Section 232.
The measures cover C$27.6 billion of U.S. imports and focus on sectors including steel, dairy, appliances, agricultural equipment, pulp and paper, electronics, furniture, apparel, fish and seafood, and tools. Existing Canadian counter-tariffs, including measures on autos, remain in place.
Canada’s origin rule is important: the new surtaxes apply to goods that qualify to be marked as goods of the United States under the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations. Canada also announced an in-transit exception for U.S. goods already moving to Canada when the measures take effect.
Importers should consult the Department of Finance Canada’s tariff-item list alongside Canada’s Customs Tariff and forthcoming Canada Border Services Agency instructions.
What Canadian business support is available?
On August 25, Canada announced targeted countermeasures and support intended to help affected workers and businesses preserve liquidity, diversify markets, and invest in resilience. The package includes the Canada Strong Diversification Fund, administered through the Strategic Response Fund, along with other federal support channels.
Canada’s tariff remission framework also remains available for exceptional relief requests. Remission is not automatic. Businesses should document shortages, contractual commitments, economic harm, attempts to source alternatives, and any public-interest considerations before seeking relief.
Programs and eligibility rules can change quickly. Start with Canada’s official countermeasures and business-support announcement, then confirm details with the administering department.
What Canadian exporters should do now
- Map every U.S.-bound SKU to its current HTSUS code. Do not classify only at the four- or six-digit level when the official list uses eight-digit provisions.
- Confirm origin. Separate Canadian-origin products from merchandise merely stored or shipped from Canada. Keep bills of material and production records for goods with inputs from several countries.
- Check the Section 338 list and exclusions. Review 9903.03.12 through 9903.03.16 with a licensed customs broker or trade counsel.
- Model landed cost by SKU and customer. Include ordinary duties, the 50% additional duty, brokerage, transport, financing, and possible antidumping or countervailing duties.
- Review Incoterms and importer-of-record arrangements. Decide who will advance duty and how the cost will be reflected in pricing.
- Update ecommerce checkout and customer messaging. Prevent surprise charges on delivery and be clear about whether prices include U.S. import duty.
- Preserve records. Keep classifications, rulings, origin support, entry data, invoices, and broker instructions in one auditable file.
What U.S. importers should do now
- Obtain a list of all Canadian-origin items, not only vendors with Canadian billing addresses.
- Ask brokers to identify entries using 9903.03.12, 9903.03.13, 9903.03.14, 9903.03.15, or 9903.03.16 and explain the supporting logic.
- Increase customs-bond capacity and cash forecasts if duty exposure has risen.
- Recalculate inventory value, gross margin, reorder points, and customer pricing using the new landed cost.
- Review purchase contracts for tariff allocation, change-in-law clauses, and supplier reimbursement terms.
- Monitor liquidation and protest deadlines. Correct mistakes through the appropriate customs process rather than waiting for an audit.
What U.S. exporters to Canada should do before September 8
- Match Canadian-bound SKUs against Canada’s new tariff-item list.
- Confirm Canadian origin-for-marking treatment; a shipment from the United States is not automatically U.S.-origin.
- Identify goods already in transit and retain transport documents supporting the announced exception.
- Review delivered pricing, importer-of-record terms, and Canadian tax treatment with the Canadian customer or broker.
- Check whether existing Canadian surtaxes, including auto measures, already apply in addition to the new list.
- Evaluate remission only after confirming the formal eligibility criteria and required evidence.
Lawful ways to reduce tariff exposure
There is no universal workaround, and changing paperwork without changing the underlying facts can create serious customs liability. The following options can be legitimate when their legal requirements are met.
Recheck classification
Classification errors become far more expensive when a 50% rate is at stake. Review product composition, principal use, dimensions, technical literature, and prior rulings. Seek a binding CBP ruling when uncertainty is material and timing permits.
Verify country of origin
A legitimate production change may alter origin when it produces the required substantial transformation or satisfies a specific rule. Simple repacking, relabeling, transshipment, or minor processing generally does not support an origin change.
Use bonded facilities or foreign-trade zones carefully
Deferring entry may help cash flow or preserve options, but it does not guarantee a lower rate. Covered merchandise admitted to a U.S. foreign-trade zone on or after the effective date generally must be admitted in privileged foreign status unless it qualifies for domestic status. The tariff treatment is then preserved for entry for consumption.
Review Chapter 98
CBP says eligible Chapter 98 claims can avoid the additional duty, subject to exceptions. Goods returned after repair, alteration, processing, or assembly can have special valuation rules. The facts and documentation must fit the provision.
Consider duty drawback
CBP states that the Section 338 additional duty is eligible for drawback. A business that later exports or destroys qualifying merchandise may be able to recover duties under the drawback rules. Traceability, substitution rules, filing deadlines, and recordkeeping determine whether the opportunity is usable.
Separate tariff mitigation from tariff evasion
False origin declarations, undervaluation, split invoices, inaccurate descriptions, and routing designed to conceal origin can lead to penalties, seizures, and criminal exposure. A sound mitigation plan changes the supply chain or applies a legal program; it does not disguise the transaction.
Does the Supreme Court’s IEEPA decision invalidate Section 338 tariffs?
No. In Learning Resources, Inc. v. Trump, decided February 20, 2026, the U.S. Supreme Court held that IEEPA does not authorize the President to impose tariffs. The Canada measures discussed here rely on Section 338, which expressly refers to additional duties and contains its own conditions and limits.
The Court’s opinion repeatedly distinguished statutes that expressly grant tariff authority, including Section 338. That does not make every use of Section 338 immune from challenge. Future litigation could focus on statutory findings, scope, procedure, delegation, constitutional questions, or the application of a tariff to a specific entry. Unless a court issues relief or the executive branch changes the proclamations, importers should follow the current CBP instructions.
How could the tariffs be changed or removed?
Section 338 gives the President authority to suspend, revoke, supplement, or amend a proclamation when the public interest requires it. The August 18 three-day suspension shows that this power can be used quickly during negotiations.
The tariffs could therefore change through a U.S.-Canada agreement, a new presidential action, technical modifications to the HTSUS, legislation, or litigation. None should be treated as certain. Businesses need a current compliance process and a separate contingency plan for possible changes.
Learn more
Are all imports from Canada subject to a 50% tariff?
No. The additional duty applies only to products of Canada classified under covered HTSUS provisions, subject to the applicable notes and exclusions.
Are Canadian-made goods exempt when they qualify under USMCA?
No. USMCA qualification can reduce the ordinary duty, but it does not remove the 50% Section 338 duty from a covered product.
Does a Canadian seller pay the U.S. government?
The importer of record pays CBP. Commercial terms can shift the economic burden between seller and buyer.
What if the goods left Canada before August 22?
The U.S. rules focus on the date of entry for consumption or withdrawal from warehouse, not only the export date. Confirm the entry status with the customs broker.
Can a product owe both Section 338 and antidumping duties?
Yes. CBP says other applicable duties and charges continue. Specified Section 232 goods receive a Section 338 exclusion, but that does not remove the underlying Section 232 treatment.
Will Canada’s counter-tariffs affect goods already in transit?
Canada announced that its September 8 countermeasures will not apply to U.S. goods already in transit when the measures take effect. Importers should retain dated shipping and transport records and follow the final CBSA administration guidance.
How Speed Commerce can help
Tariffs change more than the customs line on an entry. They affect inventory placement, replenishment timing, checkout pricing, returns, customer communication, and the economics of serving each market.
Speed Commerce helps ecommerce brands build fulfillment and customer-care operations around the full cost and service promise of an order. If cross-border changes are forcing you to rethink U.S. inventory, warehousing, or direct-to-consumer fulfillment, talk with a Speed Commerce fulfillment expert.
Primary sources
- Tariff Act of 1930, including Section 338
- White House fact sheet on the three Section 338 proclamations, July 20, 2026
- Alcoholic beverages proclamation
- Dairy proclamation
- Motor vehicles proclamation
- Three-day suspension proclamation, August 18, 2026
- CBP CSMS #69606660 implementation guidance, August 21, 2026
- CBP Section 338 Canada HTS list
- Canada’s statement following the July 1 USMCA/CUSMA joint review
- Canada’s September 8 counter-tariff product list
- Learning Resources, Inc. v. Trump, U.S. Supreme Court, February 20, 2026
Disclaimer
This guide is for general information and is not legal, tax, customs, or accounting advice. Tariff classification, origin, valuation, exclusions, and contractual responsibility depend on the facts of each transaction. Rules and government guidance can change without notice. Consult a licensed customs broker, trade lawyer, or the relevant customs authority before making filing, sourcing, or pricing decisions.
