The Trump administration has turned to one of the least-used authorities in U.S. trade law.
On July 20, 2026, President Trump issued three separate presidential proclamations imposing an additional 50% ad valorem duty on certain Canadian products under Section 338 of the Tariff Act of 1930. The duties take effect at 12:01 a.m. EDT on August 19, 2026, the minimum 30-day notice period required by the statute.
The proclamations address three separate Canadian policies involving dairy, alcoholic beverages, and motor vehicles, but the tariffs extend beyond those industries. Each proclamation contains its own Annex II identifying the specific HTSUS provisions subject to the new duties.
According to International Trade Today, this is believed to be the first time Section 338 has been used to impose tariffs, reviving a trade remedy that has remained largely dormant for nearly a century.
A Different Tariff Authority
Unlike Section 301, which typically requires a USTR investigation and public comment process, Section 338 allows the President to impose duties of up to 50% ad valorem when a foreign country is found to discriminate against U.S. commerce or treat U.S. products less favorably than those of other nations.
The authority is also separate from the Section 232 national security tariffs currently affecting products such as steel, aluminum, copper, and certain automobiles.
One notable distinction is that Section 338 contains no statutory expiration date, meaning the duties remain in effect until modified or revoked.
Why the Administration Invoked Section 338
Each proclamation cites a different Canadian policy that the administration determined discriminates against U.S. commerce.
Dairy
The administration argues that Canada’s administration of dairy tariff-rate quotas favors European suppliers under the Comprehensive Economic and Trade Agreement (CETA) while restricting access for U.S. exporters under USMCA. Specifically, retailers may access certain CETA quota allocations but cannot access comparable USMCA allocations.
Alcoholic Beverages
The proclamation cites actions taken by Canadian provinces beginning in March 2025 that removed U.S. alcoholic beverages from provincial purchasing, distribution, and retail systems. Although Alberta and Saskatchewan later reversed those restrictions, the administration states that U.S. alcohol exports to Canada declined by approximately 81%, from roughly $718 million to $137 million, while imports from several other countries increased.
Motor Vehicles
The administration also points to Canada’s 25% tariffs on certain U.S. automobiles, including tariffs on vehicles that fail to qualify for USMCA preferences and duties on non-originating content in qualifying vehicles. According to the proclamation, U.S. vehicle exports to Canada fell by approximately 22%, while imports from other major vehicle-producing countries increased.
The Tariffs Reach Beyond the Headlines
Although the proclamations focus on dairy, alcohol, and motor vehicles, the actual tariffs apply to the HTSUS provisions listed in each proclamation’s Annex II.
Depending on the annex, covered products extend into a variety of categories, including items such as wine, cement, sporting goods, and other manufactured products. Importers should review the actual tariff schedules rather than relying solely on the sector names.
Important Compliance Considerations
Several implementation provisions deserve close attention.
- The additional duties apply regardless of whether a product qualifies for preferential treatment under USMCA.
- Certain products are excluded, including energy products, potash, products already subject to Section 232 duties, aircraft covered by the WTO Agreement on Trade in Civil Aircraft, certain fish products, and specified critical minerals.
- Covered merchandise admitted into a U.S. foreign trade zone on or after August 19 generally must be admitted in privileged foreign status, which may affect FTZ duty planning.
- Merchandise withdrawn from bonded warehouses for consumption on or after the effective date should also be reviewed carefully to determine whether the new duties apply.
What Importers Should Do Now
With the effective date less than a month away, importers should:
- Review each proclamation’s Annex II to determine whether imported products fall within the covered HTSUS provisions.
- Model the financial impact of the additional 50% duty on shipments expected to enter or be withdrawn for consumption on or after August 19.
- Remember that USMCA qualification does not exempt covered products.
- Review contracts, pricing, Incoterms, and tariff allocation clauses with suppliers and customers.
- Coordinate with customs brokers to evaluate classification, origin, FTZ, and bonded warehouse strategies before the duties take effect.
Contact the Alba team if you need help determining whether your Canadian imports are covered by the new Section 338 duties or assessing their potential impact on your supply chain. Contact our trade compliance team.
