U.S. Customs and Border Protection has begun collecting additional 50% tariffs on selected products of Canada following a brief, three-day delay in implementation.
The duties apply to covered Canadian merchandise entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern on August 22, 2026.
The tariffs were imposed under Section 338 of the Tariff Act of 1930 in response to Canadian policies affecting U.S. alcoholic beverages, dairy products, and motor vehicles, including Canada’s tariff scheme on non-USMCA-qualifying U.S. autos and auto parts. Despite the “motor vehicles” label, that proclamation’s covered-goods list does not primarily reach passenger vehicles or auto parts, which are already subject to separate Section 232 tariffs and are largely excluded here. Instead, its annex covers a broad range of other Canadian goods, including cement, plywood, furniture, cosmetics, textiles, apparel, jewelry, and toys. Importers must review the applicable Harmonized Tariff Schedule classifications in each proclamation’s annex to determine whether individual products are covered, rather than relying on the proclamation names.
The Underlying Trade Dispute
Each proclamation cites its own Canadian practice as the basis for the 50% duty:
Dairy: Canada’s USMCA tariff-rate quota (TRQ) for cheeses of all types does not allow retailers to access quota quantities, while Canada’s separate CETA cheese TRQ for the European Union does grant retailer access. The proclamation cites this eligibility gap as discriminatory treatment of U.S. cheese exporters relative to their EU counterparts.
Alcoholic beverages: Beginning in March 2025, all Canadian provinces and territories halted the purchase, distribution, or retailing of U.S. alcoholic beverages (the Liquor Control Board of Ontario stopped purchasing U.S. products on March 4, 2025). Over the same period, Canadian imports of alcoholic beverages from Chile, Japan, Argentina, Ireland, New Zealand, and Australia rose by roughly 13% to 26%, and non-U.S. imports overall increased by more than $170 million, with the European Union accounting for over $100 million of that increase.
Motor vehicles: Since April 2025, Canada has applied a 25% tariff on U.S. motor vehicles that don’t qualify for USMCA preferential treatment, plus a 25% tariff on non-originating content in vehicles that do qualify, along with automaker-specific quotas the proclamation says Canada reduced for companies that shifted production out of Canada. U.S. motor vehicle exports to Canada fell roughly 22% over the year, while Canadian imports from Mexico rose about 23.6% and imports from Japan, Korea, and Germany rose between roughly 10.1% and 13.5%.
How Importers Must Report the Additional Duties
CBP instructed importers and customs brokers to use the following Chapter 99 headings for products subject to the additional 50% duty:
- HTSUS 9903.03.12 (alcoholic beverages)
- HTSUS 9903.03.13 (dairy)
- HTSUS 9903.03.14 (the broader goods list under the motor vehicles proclamation)
The correct heading depends on which of the three presidential actions covers the imported product. Importers must report the applicable Chapter 99 heading before the product’s regular Chapter 1 through 97 classification on the entry summary.
CBP also established two additional headings for specified products that receive a zero percent additional duty:
HTSUS 9903.03.15 covers designated metal articles, vehicles and vehicle parts, wood products, semiconductor articles, and patented pharmaceutical articles already subject to Section 232 tariffs.
HTSUS 9903.03.16 covers qualifying civil aircraft, engines, parts, components, subassemblies, ground-flight simulators, and related parts under the WTO Agreement on Trade in Civil Aircraft.
The zero percent headings do not automatically apply to every product within these general categories. Importers should confirm that the merchandise is included in the corresponding HTSUS provisions before claiming an exception.
The 50% duty also does not apply to several categories excluded outright under the proclamations, regardless of Chapter 99 heading:
- Energy products
- Potash
- Fish
- Critical minerals
Importers should confirm whether their merchandise falls into one of these excluded categories in addition to checking the Chapter 99 headings above.
The 50% Tariff May Stack With Other Duties
The Section 338 duty applies in addition to other duties, taxes, fees, and trade-remedy charges that may apply to the merchandise.
Covered Canadian products may therefore remain subject to:
- Normal Column 1 duty rates
- Section 232 tariffs
- Section 301 tariffs, when applicable
- Antidumping or countervailing duties
- Merchandise processing and harbor maintenance fees
- Other product-specific duties or charges
USMCA preferential treatment does not exempt covered goods from this duty. Importers should calculate the complete landed-cost impact rather than treating the new 50% tariff as a replacement for an existing duty.
Special Rules Apply to Foreign-Trade Zones and Chapter 98 Entries
Canadian products subject to the additional duties that are admitted into a U.S. foreign-trade zone generally must be admitted in privileged foreign status, unless the merchandise qualifies for domestic status.
The tariff treatment for Chapter 98 entries depends on the provision being claimed. Certain Chapter 98 entries may avoid the additional duty, while products entered after repairs, alterations, processing, or assembly abroad may remain subject to the tariff on a specified portion of their value. Importers should confirm the applicable treatment with CBP or a licensed customs broker for the specific Chapter 98 provision being claimed.
CBP has confirmed that the additional duties are eligible for drawback. Importers that subsequently export or destroy qualifying merchandise should evaluate whether they can recover some or all of the additional duty paid.
Steps Importers Should Take Now
Companies importing Canadian merchandise should:
- Review the HTSUS classifications listed in the three tariff actions and CBP’s accompanying tariff list, rather than relying on the proclamation names alone.
- Confirm country-of-origin determinations, particularly for goods that cross the U.S.-Canada border during manufacturing or distribution.
- Identify entries subject to the 50% tariff and verify the correct Chapter 99 sequence.
- Recalculate landed costs and review pricing, purchase orders, and Incoterms with suppliers.
- Determine whether an exclusion, Chapter 98 provision, foreign-trade zone strategy, or drawback opportunity applies.
- Monitor possible changes resulting from continued negotiations between the United States and Canada.
Because the tariffs took effect with limited implementation time, importers should review affected entries promptly and correct any filing issues before they create broader compliance or financial exposure.
References
- White House, Proclamation 11048, “Imposing Additional Duties to Offset Canadian Discrimination … With Respect to Motor Vehicles” (July 20, 2026): https://www.whitehouse.gov/presidential-actions/2026/07/imposing-additional-duties-to-offset-canadian-discrimination-against-the-commerce-of-the-united-states-with-respect-to-motor-vehicles/
- White House, “Temporary Suspension of Additional Duties to Offset Canadian Discrimination …” (August 18, 2026): https://www.whitehouse.gov/presidential-actions/2026/08/temporary-suspension-of-additional-duties-to-offset-canadian-discrimination-against-the-commerce-of-the-united-states-with-respect-to-alcoholic-beverages-dairy-and-motor-vehicles/
- Federal Register, same suspension notice (published August 24, 2026): https://www.federalregister.gov/documents/2026/08/24/2026-17294/temporary-suspension-of-additional-duties-to-offset-canadian-discrimination-against-the-commerce-of
- Federal Register, Proclamation 11048 (published July 23, 2026): https://www.federalregister.gov/documents/2026/07/23/2026-14997/imposing-additional-duties-to-offset-canadian-discrimination-against-the-commerce-of-the-united
- CBP, CSMS #69606660, “GUIDANCE: Section 338 Additional Duties on Certain Goods of Canada” (August 21, 2026): https://content.govdelivery.com/accounts/USDHSCBP/bulletins/4261d04
- CBP Cargo Systems Messaging Service index: https://www.cbp.gov/trade/automated/cargo-systems-messaging-service
Contact the Alba team for assistance reviewing affected classifications, calculating duty exposure, or evaluating available duty-management strategies: albawheelsup.com/contact-us/
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