Two Georgetown scholars who helped dismantle the IEEPA tariffs published a detailed roadmap this week for challenging Trump’s Section 338 duties on Canada, arguing the measures fail the statute’s own offset requirement by a factor of nearly two
WASHINGTON, Aug. 5, 2026 – The legal case against the tariffs that hit Canadian exporters on Aug. 19 was laid out in public this week, and it was written by the people who won the last one.
In a guest analysis published Aug. 3 on the Volokh Conspiracy at Reason, Georgetown legal scholars Peter E. Harrell and Jennifer Hillman argued that President Donald Trump’s three Section 338 proclamations against Canada misapply the statute in at least three distinct ways and are likely to be narrowed by the courts even if they are not struck down entirely. Harrell is a visiting scholar at Georgetown’s Institute for International Economic Law and a practising attorney. Hillman is a professor of practice at Georgetown University Law Center and co-director of its Center for Inclusive Trade and Development. Both, as the post’s host Ilya Somin noted, played a significant role in developing the arguments that led the Supreme Court to invalidate the tariffs imposed under the International Emergency Economic Powers Act in February.
That provenance is the reason the analysis matters commercially rather than merely academically. The IEEPA tariffs were widely regarded as durable until they were not. On Feb. 20, 2026, the Supreme Court held that the duties imposed under IEEPA in March 2025 against Canada and Mexico, and in April 2025 against global imports, were invalid and unconstitutional. The administration responded within days with an executive order ending those tariff actions and, on Feb. 24, a temporary 10 per cent global surcharge under Section 122 of the Trade Act of 1974, a fallback authority limited to 150 days absent congressional approval.
Section 338 is the next improvisation, and Canada is the test case.
What Trump did
On July 20, Trump signed three proclamations under Section 338 of the Tariff Act of 1930, codified at 19 U.S.C. section 1338 and better known as part of the Smoot-Hawley Tariff Act. According to analysis published by White & Case on July 24, it was the first time any American president has invoked the authority to impose a tariff. The duties take effect for goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern time on Aug. 19, 2026.
Together the three proclamations impose an additional 50 per cent duty covering approximately US$20 billion of American imports from Canada in both 2024 and 2025, roughly 5 per cent of the total value of goods the United States imports from Canada, across 554 tariff lines. They are structurally identical and are implemented through a single set of amendments to the Harmonized Tariff Schedule of the United States, consolidated within US Note 51, Subchapter III, Chapter 99.
Each rests on a separate finding of alleged Canadian discrimination against American commerce in favour of other trading partners.
The dairy proclamation covers 52 HTSUS subheadings, representing US$97.2 million of 2024 imports, and alleges that the cheese tariff-rate quotas Canada granted the European Union under the Comprehensive Economic and Trade Agreement are more favourable than those the United States negotiated under CUSMA, specifically because the CETA quota allows retailers to obtain and use quota quantities while the CUSMA quota does not.
The motor vehicles proclamation is the largest by a wide margin, covering 439 HTSUS subheadings and US$19.3 billion of 2024 imports. It targets Canada’s United States Surtax Order (Motor Vehicles 2025), the 25 per cent counter-tariff Ottawa applied in April 2025 in response to American Section 232 auto duties, on the basis that it applies exclusively to American-origin vehicles. The proclamation notes American motor vehicle exports to Canada fell about 22 per cent after implementation, from roughly US$25.9 billion to roughly US$20.3 billion comparing April 2025 to March 2026 against the prior year, while imports from Mexico, Japan, South Korea and Germany rose.
The alcoholic beverages proclamation covers 63 subheadings and about US$1 billion of 2024 imports, targeting the provincial liquor boycotts launched in March 2025. It records that American alcohol exports to Canada fell roughly 81 per cent, while alcohol exports from other countries rose by about US$170 million.
Products already covered by Section 232 duties are exempt, along with certain civil aircraft and parts, and the administration has said energy, potash, fish and certain critical minerals are excluded. White & Case observed, however, that no products on any of the three lists appear to be covered by existing Section 232 actions, which makes the exemption largely notional. CUSMA origin qualification provides no exemption, and the duties stack on top of Section 122, Section 301 and other generally applicable tariffs and fees.
Argument one: the tariffs do not offset anything
Harrell and Hillman’s strongest contention is textual. Section 338 authorises the President to declare duties that “will offset such burden or disadvantage,” capped at 50 per cent ad valorem.
Offset is a term of art in trade law. Antidumping duties are calculated to match the dumping margin. Countervailing duties are calculated to match the subsidy. In both cases two conditions hold: the duty applies to the goods that benefited from the practice being remedied, and its magnitude approximates the harm.
The Section 338 proclamations, the authors argue, satisfy neither condition. The product coverage extends far beyond the scope of the alleged discrimination, reaching hockey sticks and cement rather than being tailored to cars, dairy and alcohol. Most strikingly, they note that the motor vehicle action covers no motor vehicle tariff lines at all. The proclamation named for automotive discrimination taxes 439 subheadings of other things.
On magnitude, the arithmetic is theirs and it is unflattering. The administration’s own fact sheet on the Section 338 tariffs alleges that Canadian discrimination cost the American auto sector US$5.6 billion in lost sales. The corresponding proclamation imposes a 50 per cent duty on roughly US$19.3 billion of imports, which the authors calculate at approximately US$10 billion in annual duties, nearly twice the harm the administration itself claims. Even accepting an expansive reading of the statute’s product scope, they contend, the offset requirement should still discipline the amount.
For a court looking for a narrow, statutory basis on which to trim a tariff without reaching constitutional questions, the offset argument is the most tractable. It does not require holding that Section 338 is repealed or that the President cannot make his own findings. It requires only holding that a duty must bear some relationship to the injury it purports to remedy.
Argument two: this is not the discrimination the statute describes
The second line of attack goes to the nature of Canada’s conduct.
Section 338 reaches two things: unreasonable charges, exactions, regulations or limitations imposed on American products that are “not equally enforced upon the like articles of every foreign country,” and discrimination in fact against American commerce by law, regulation or practice in respect of customs, tonnage or port duties, fees, charges, classifications, conditions, restrictions or prohibitions.
Take dairy. Harrell and Hillman point out that the alleged discrimination concerns which Canadian entities may hold duty-free quota allocations. Canada does not permit retail purchasers, as distinct from wholesalers and distributors, to receive quota allocations for American cheese and other dairy products. But Canada applies the same restriction to every other trading partner except the European Union, which negotiated better terms under CETA. On the statute’s own language, that is not treatment differing from “every foreign country.” It is treatment identical to all but one.
The authors then extend the logic. If differential treatment arising from any third-party preferential agreement constitutes actionable discrimination, then given the more than 380 preferential trade agreements in force among American trading partners, the President could impose duties of up to 50 per cent on imports from essentially any country that has a trade agreement with someone other than the United States. That reading, they suggest, opens the door to tariffs on almost everything the United States imports, which is a strong signal that the reading is wrong.
There is a further irony they draw out. Section 338’s historical purpose, traceable through its predecessor Section 317 of the Tariff Act of 1922, was to give the President leverage to obtain most-favoured-nation treatment for American goods. Yet CUSMA already gives the United States better than most-favoured-nation treatment in the Canadian market. The tool designed to secure preferential access is being used against a country that has already granted it.
The dairy action carries an additional awkwardness. The quota levels and terms the proclamation calls discriminatory are the ones the United States itself negotiated in CUSMA and Congress approved. As the authors put it, it is incongruous for the United States to denounce as discriminatory the very terms it agreed to.
The alcohol action has its own defect. Provincial liquor boards made purchasing decisions as commercial buyers, not as customs authorities. Commercial procurement choices unrelated to import requirements sit uneasily within a provision aimed at customs, tonnage and port duties and comparable regulatory impositions.
Argument three: the ITC never looked
The third argument is procedural, and it has been flagged independently by the Congressional Research Service.
The text of Section 338 appears on its face to permit presidential fact-finding, providing for action “whenever the President shall find as a fact” that discrimination exists. But Congress placed Section 338 in the portion of the Smoot-Hawley Act governing the duties of the Tariff Commission, the predecessor of the International Trade Commission. Subsection (g) states that it shall be the duty of the commission to ascertain and at all times be informed whether discriminations against American commerce are practised by any country, and, when disclosed, to bring the matter to the President’s attention together with recommendations.
Harrell and Hillman note that from the 1920s through the 1940s both the executive branch and the Tariff Commission itself appear to have understood that the Commission would conduct initial fact-finding and recommend determinations to the President, citing work by Mona Paulsen and by John Veroneau and Catherine Gibson. There is no evidence the ITC investigated Canada before the July 20 proclamations.
If a court adopts the reading that ITC fact-finding is a precondition, the fast-moving proclamation process the administration used is procedurally defective, and the remedy would be remand rather than mere narrowing.
Argument four: the statute may already be dead
The most sweeping argument is implied repeal.
Historian and former State Department official Philip Zelikow has argued that Congress implicitly repealed Section 338 when it overhauled American trade statutes in the 1960s and 1970s, contending that Section 252 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, the latter now the basis for Trump’s global tariffs, cover the whole subject that Section 338(d) formerly addressed.
Harrell and Hillman are candid that implied repeal faces a high bar and that other scholars disagree. Yale Law professor Jed Rubenfeld has argued Section 338 remains fully in force. The authors leave the question to the courts.
Structural arguments run alongside. White & Case noted the provision has no implementing regulations in the Code of Federal Regulations and, because it has never been used, no judicial precedent to guide interpretation. Commentators have observed that a broad, undefined, never-used delegation invoked for sweeping economic measures is precisely the fact pattern that attracts major-questions scrutiny, the doctrinal frame that proved fatal to the IEEPA tariffs.
History and context
Section 338 has been dormant so long that most trade lawyers were unaware of it before Trump’s second term. Neither it nor its 1922 predecessor was ever used to impose tariffs, though State Department records show the government contemplated it several times. In 1932 the department indicated it was seriously considering action against Spain. The last apparent consideration came in 1949, regarding potential trade issues with Communist China, and even then officials noted that any use would need to rest on evidence of discrimination or unfair treatment rather than on a partner’s failure to comply with a trade agreement. Ninety-six years after enactment, no administration had moved from contemplation to imposition.
Harrell and Hillman situate the Canada action within a broader pattern: the first-ever use of Section 122 as a fallback after the Supreme Court ruling in February, an unprecedented application of Section 301 to countries accounting for roughly 99 per cent of American trade, and seventeen Section 232 national security investigations, more self-initiated cases than all previous presidents combined. Their conclusion is that if the courts uphold Section 338 against Canada, it will become another frequently used tariff statute, and that the durable solution is a comprehensive congressional overhaul of trade law consistent with the Constitution’s assignment to Congress of the power to lay and collect duties and imposts.
White & Case reached a related point from a different direction, suggesting the administration may be using Canada as a trial of the untested statute because, if Section 338 survives challenge, it could provide a faster route to reconstituting the reciprocal tariff programme than Section 301 has offered.
The negotiating context
The legal analysis landed in the middle of an active negotiation, which is part of its significance.
Harrell and Hillman acknowledge directly that Trump and Prime Minister Mark Carney may reach a détente before Aug. 19, folding the Section 338 duties into the broader CUSMA talks. They also identify the strategic backdrop plainly: the administration’s frustration that CUSMA negotiations have gone better with Mexico than with Canada, and its desire to increase pressure on Ottawa.
That pressure has produced movement. Intergovernmental Affairs Minister Dominic LeBlanc and chief negotiator Janice Charette were in Washington on Tuesday for the second time in two weeks, with a revived American proposal for a tariff-rate quota on Canadian steel reportedly back under discussion, potentially cutting the in-quota rate to between 10 and 15 per cent from the current 50 per cent. Carney has kept retaliation formally available while declining to specify countermeasures or to deploy them before the deadline, arguing that pre-announcement would be counterproductive.
A contested legal foundation cuts both ways in that dynamic. It weakens the threat’s credibility, since Ottawa can reasonably discount a tariff that may not survive. It also creates urgency for the administration to convert leverage into a deal before a court has the chance to remove it.
What this means for Canadian exporters and American importers
Litigation risk is not a compliance strategy. The duties attach on Aug. 19 regardless of what any court eventually holds, and importers of record are liable at entry.
Preserve the ability to claim refunds. The IEEPA experience is instructive. When the Supreme Court invalidated those tariffs, refund litigation followed, and the parties best positioned were those whose entries were properly documented and whose protests were timely. Importers should be treating every Section 338 entry as a potential refund claim from day one: retain entry summaries, document the duty paid under the specific Chapter 99 subheadings, calendar protest deadlines, and take advice on whether to file protective claims or seek suspension of liquidation.
Classify precisely. Because all three proclamations operate through a single set of subdivisions in US Note 51, Subchapter III, Chapter 99, the research is concentrated, but the product coverage is counterintuitive. A Canadian exporter of furniture, plywood, doors, cement, apparel, footwear, luggage, toys, sporting goods, cosmetics, cut flowers or seeds may be on the motor vehicles list. Sector intuition is unreliable here.
Model stacking honestly. The duties are additive to Section 122, Section 301 and ordinary duties and fees. Section 232 coverage is the only meaningful exclusion, and it does not appear to reach the listed goods. CUSMA origin does not help.
Manage entry timing. The duties apply to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. Eastern on Aug. 19. Inventory in transit, bonded warehouse positions and foreign trade zone treatment all change the arithmetic, and those decisions have to be made before the date, not after.
Fix contractual duty allocation. Agreements drafted before 2025 rarely allocate a stacked, retroactively refundable duty of this kind. If a court later orders refunds, the question of who receives them, the importer who paid or the exporter who discounted, will be answered by contract language or by litigation.
Do not assume narrowing means relief. Harrell and Hillman’s own prediction is that challenges will likely narrow the tariffs’ scope rather than eliminate them. A narrowed Section 338 action might survive against dairy, autos and alcohol lines while falling away for hockey sticks and cement. Exporters in the tailored core of the alleged discrimination have the weakest legal expectation of relief and the strongest reason to negotiate commercially.
What to watch
The immediate markers are the Aug. 19 effective date, whether a negotiated outcome in Washington moots the question, and the filing of the first complaint in the United States Court of International Trade, which trade counsel widely expect. Beyond that, the questions the courts will have to reach are whether Section 301 superseded Section 338, whether ITC fact-finding is a precondition to presidential action, and whether a 50 per cent duty on US$19.3 billion of goods can be an offset for US$5.6 billion of alleged harm.
For Canadian exporters, the least comfortable feature of the situation is that all three plausible outcomes require the same preparation. If the duties are negotiated away, the classification work is wasted effort. If they take effect and stand, it is essential. If they take effect and are later struck down, the documentation built in August determines who gets the money back.