Section 338 Tariffs on Canada: The 50% Duty Your USMCA Certificate Will Not Stop

Last updated: July 26, 2026

Section 338 tariffs on Canada take effect at 12:01 a.m. eastern time on August 19, 2026, imposing an additional 50 percent ad valorem duty on certain Canadian goods. The three proclamations behind them were signed on July 20, 2026, and they contain something no recent Canada tariff action has: no exemption for goods qualifying under the United States-Mexico-Canada Agreement.

If you have built your Canada sourcing around a valid USMCA certificate of origin, that certificate does nothing here. A good that enters duty free under USMCA today and appears on a covered annex pays 50 percent on August 19.

That is the part importers are most likely to get wrong, and it is worth understanding exactly why.

Key facts

What Section 338 is, and why it moved this fast

Section 338 of the Tariff Act of 1930, codified at 19 U.S.C. 1338, lets the President impose duties on the goods of a country that discriminates against U.S. commerce or applies treatment that burdens U.S. exporters relative to exporters from other countries. The statute caps the additional duty at 50 percent ad valorem and requires at least 30 days before the duty can take effect.

The speed is the story. Section 301 requires a USTR investigation, a comment period, and hearings. Section 232 requires a Commerce Department national security investigation. Section 338 requires none of that. The President makes findings of fact in the proclamation itself and the 30-day clock starts. Signed July 20, effective August 19.

It is also close to unused. According to Global Trade Alert, these proclamations are the statute's first invocation since the 1940s.

Each of the three proclamations cites a specific Canadian practice: provincial removal of U.S. alcohol from shelves, dairy quota rules that favor European suppliers over American ones, and Canada's surtax and tariff-rate quota system on U.S.-made vehicles. The motor vehicle proclamation cites a roughly 22 percent decline in Canadian imports of U.S. motor vehicles, from approximately $25.9 billion to approximately $20.3 billion, comparing April 2025 through March 2026 against the prior twelve months.

Does USMCA exempt Section 338 tariffs?

No. And that is a genuine break from precedent.

The Section 122 surcharge that ran from February to July 2026 exempted USMCA-qualifying goods. The Section 301 forced labor action that took effect July 24, 2026 exempts goods entered duty free under USMCA. Section 232 measures have carried preference-linked treatment for Canadian and Mexican content. Across nearly every major tariff action of the past eighteen months, a valid certificate of origin was worth something.

The Section 338 proclamations contain no such carve-out. Global Trade Alert estimates the action covers $17.7 billion in Canadian goods after the Section 232 exclusion, and raises Canada's average U.S. tariff by 1.89 percentage points to 6.27 percent overnight.

The precedent matters more than the rate. Canadian exporters spent 2025 driving USMCA certification utilization from roughly 38 percent to 86 percent of eligible trade, per Global Trade Alert's analysis. Section 338 renders all of that irrelevant for covered lines, on a presidential finding alone.

Preference programs live inside the tariff schedule. These authorities sit on top of it.

What products are covered

Three proclamations, three separate annexes. The categories in the proclamation titles describe the grievance, not the target list.

The White House fact sheet states plainly that coverage spans products ranging from wine to hockey sticks to cement. Reporting on the annexes describes lines including furniture, cement, apparel, seeds, wigs, fishing rods, and hockey equipment alongside the headline dairy, alcohol, and vehicle categories.

That means your exposure has almost nothing to do with whether you read a headline about auto tariffs. A Florida importer bringing in Canadian office furniture or building materials may be more exposed than an automotive supplier whose products are already covered by Section 232 and therefore excluded.

Check by HTS subheading against the annexes. Not by product category, not by industry, not by whether your commodity was in the news. In each proclamation, Annex I sets out exceptions and implementation details and Annex II identifies the covered HTSUS classifications and Chapter 99 modifications.

Section 338 exclusions: what is carved out

The exclusions are real and worth confirming before you assume exposure.

Goods already subject to Section 232. The proclamations do not apply to articles subject to duties under Section 232 of the Trade Expansion Act of 1962. In practice that removes a large share of Canadian industrial trade: steel, aluminum, and copper articles and their derivatives, passenger vehicles and light trucks and their parts, medium- and heavy-duty vehicles and their parts, wood products, semiconductor articles, and patented pharmaceutical articles are all covered by separate Section 232 actions.

Civil aircraft. Articles subject to the WTO Agreement on Trade in Civil Aircraft are excluded, with unmanned aircraft expressly carved back in.

Energy, potash, fish, and critical minerals. Per the White House fact sheet, these and certain other goods sit outside the action. Canada's largest resource exports to the United States are not the target.

Anything not listed. The duty applies only to products specified in the annexes. This is not a global surcharge on Canadian origin. If your HTS subheading does not appear, you are not covered.

Everything that is covered stacks. The proclamations state the duties are in addition to any other duties, taxes, fees, exactions, and charges applicable to the product, except as provided in the exception annex.

How Section 338 compares to the other 2026 tariff authorities

The two columns to sit with are the rate ceiling and the time limit. Section 122 died on July 24 because Congress never extended it past 150 days. Section 338 has no clock. These duties stay in force until the President modifies, suspends, or terminates them, and the statute also authorizes the President to supplement or amend the action, or to escalate to excluding articles of the country entirely if the discrimination continues.

Model this as a durable cost, not a temporary one.

The mechanics that will cost people money

The trigger is entry, not loading. The duty applies to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern time on August 19, 2026. Your purchase order date does not matter. Your load date does not matter. Your arrival date does not matter. What matters is when the entry is filed for consumption.

There is no in-transit grace period. This is a sharp contrast with the Section 301 forced labor action that took effect on July 24, which gave importers a short window to clear goods already loaded. The Section 338 proclamations provide no equivalent. Cargo moving on August 18 that enters on August 20 pays the duty.

Foreign trade zones do not defer it. Covered goods admitted into a U.S. foreign trade zone on or after the effective date must be admitted in privileged foreign status under 19 CFR 146.41, unless they qualify for domestic status under 19 CFR 146.43. Privileged foreign status fixes tariff treatment at admission. Parking cargo in a zone does not defer this duty. If you run FTZ inventory and want pre-August-19 treatment, the admission has to happen before the effective date.

What 50 percent actually looks like

Take a $200,000 shipment of Canadian furniture that qualifies under USMCA and enters duty free today.

Today: $0 in duty.

On or after August 19, if the HTS subheading appears in a covered annex: $100,000 in duty, on top of the entered value, with no change to your certificate of origin, your supplier, your routing, or your product.

That is the whole exposure in one line. It is also why the three weeks between now and the effective date are worth more than the three months after it.

Run your own numbers by HTS code on the Gateway Lines tariff simulator, which models stacked measures by classification, origin, and shipment value.

What to do before August 19

1. Pull your Canada spend and classify it against the annexes by HTS subheading. Line by line. Do not screen by product category.

2. Re-run landed cost on everything covered. A 50 percent additional duty changes sourcing math, contract pricing, and working capital at the same time.

3. Move entries forward where you legitimately can. Goods entered for consumption before August 19 are not subject to the duty. That is a lawful lever for the next three weeks and it closes permanently after that.

4. Fix your FTZ admissions now. Privileged foreign status before the effective date, or accept the duty on withdrawal.

5. Read your contracts. Tariff pass-through language, price adjustment clauses, change-in-law provisions, and Incoterms allocation decide who absorbs this. Find out before the invoice arrives.

6. Watch for CBP guidance and Federal Register corrections. The proclamations direct CBP to issue implementing instructions and to make technical corrections to the annexes by Federal Register notice. The covered list has not finished settling.

One item to track without leaning on it: H.R. 2464, the Repealing Outdated and Unilateral Tariff Authorities Act, would repeal Section 338 entirely. It has not advanced out of committee. Commentators have also questioned whether Section 338 survives later trade legislation. Plan for the duty to apply on August 19 and treat any legal or legislative relief as upside, not as a strategy.

On the Canadian side, Prime Minister Mark Carney has said Canada has merely matched an earlier U.S. auto tariff and stopped short of announcing immediate retaliation, saying Canada remains ready to engage with Washington. If that changes, U.S. exporters into Canada face a separate problem on the export side.

Frequently asked questions

What is Section 338 of the Tariff Act of 1930? Section 338, codified at 19 U.S.C. 1338, authorizes the President to impose additional duties of up to 50 percent ad valorem on goods from a country found to discriminate against U.S. commerce. It requires no agency investigation and no comment period, and duties cannot take effect earlier than 30 days after the proclamation.

When do the Section 338 tariffs on Canada take effect? 12:01 a.m. eastern time on August 19, 2026, for goods entered for consumption or withdrawn from warehouse for consumption on or after that time.

What is the Section 338 tariff rate on Canadian goods? An additional 50 percent ad valorem, which is the statutory maximum, applied on top of all other applicable duties, taxes, and fees.

Does USMCA exempt goods from the Section 338 tariffs? No. The proclamations contain no USMCA carve-out. Covered goods pay the duty even with a valid certificate of origin, which differs from the Section 122 surcharge and the Section 301 forced labor action, both of which provided USMCA relief.

Is there an in-transit exemption for the Section 338 tariffs? No. The proclamations provide no in-transit grace period. The duty attaches based on entry for consumption, so goods that enter on or after August 19, 2026 are subject to it regardless of when they shipped.

Which Canadian goods are excluded from the Section 338 tariffs? Articles already subject to Section 232 duties, articles covered by the WTO Agreement on Trade in Civil Aircraft other than unmanned aircraft, and per the White House fact sheet, energy, potash, fish, and critical minerals. Products not listed in the proclamation annexes are not covered at all.

Do the Section 338 tariffs expire? No. Unlike the Section 122 surcharge, which expired by statute after 150 days on July 24, 2026, Section 338 carries no expiration. The duties remain in force until the President modifies, suspends, or terminates them.

Can a foreign trade zone defer the Section 338 duty? No. Covered goods admitted to a U.S. foreign trade zone on or after the effective date must be admitted in privileged foreign status under 19 CFR 146.41 unless eligible for domestic status under 19 CFR 146.43, which fixes tariff treatment at admission.

Get ahead of it

Model your exposure by HTS code on the tariff simulator. Track every active trade action with its authority, effective date, and current status on our policy log, updated against primary sources. Related reading: our breakdown of the Section 122 surcharge expiration and the Section 301 forced labor tariffs that took effect July 24.

If you are moving containers out of Canada, rerouting sourcing, or pulling entries forward before August 19, we can quote the lane and handle the customs coordination alongside it. Request a quote.

Sources

Primary: Presidential Proclamations of July 20, 2026, "Imposing Additional Duties to Offset Canadian Discrimination Against the Commerce of the United States" with respect to Motor Vehicles, Alcoholic Beverages, and Dairy, including Annexes I and II to each. White House Fact Sheet, "President Donald J. Trump Imposes Additional Tariffs on Canada," July 20, 2026. Statement of Ambassador Greer, Office of the United States Trade Representative, July 20, 2026. Section 338 of the Tariff Act of 1930 (19 U.S.C. 1338). 19 CFR 146.41 and 146.43. H.R. 2464, 119th Congress.

Trade data and coverage estimates: Global Trade Alert.

This article is general information about a published trade action and is not legal advice or a customs ruling. Confirm classification and duty treatment for your specific products with a licensed customs broker or trade counsel.