Last updated: August 22, 2026
The United States has imposed an additional 50% ad valorem tariff on certain products of Canada under Section 338 of the Tariff Act of 1930.
The measures do not apply to every Canadian product entering the United States. Coverage depends on the product’s classification under the Harmonized Tariff Schedule of the United States (HTSUS), together with the exclusions and implementation provisions contained in three separate presidential proclamations.
For Canadian exporters and U.S. importers, determining exposure requires more than asking whether a product is made in Canada. Businesses should review the product’s HTSUS classification, country of origin, applicable Section 338 tariff provision, Section 232 status, customs value and other applicable tariff treatment.
This guide explains how Section 338 works, provides direct access to the official U.S. government documents and outlines what businesses should review to understand their exposure.
Section 338 at a Glance
Additional tariff: 50% ad valorem
Country affected: Canada
Effective date: August 22, 2026 at 12:01 a.m. Eastern Time
USMCA/CUSMA exemption: No. Covered goods may be subject to Section 338 even if they qualify as originating under the USMCA.
All Canadian goods affected: No. The measures apply to specified HTSUS classifications.
Section 232 goods: The Section 338 proclamations provide that the additional duties do not apply to articles subject to Section 232 duties.
Three separate Section 338 actions: Alcoholic Beverages, Dairy and Motor Vehicles.
What Is Section 338?
Section 338 of the Tariff Act of 1930, codified at 19 U.S.C. § 1338, gives the President authority to respond when a foreign country discriminates against U.S. commerce or imposes unreasonable or unequal restrictions that disadvantage U.S. commerce.
Among its authorities, Section 338 permits additional duties of up to 50% ad valorem.
On July 20, 2026, three separate presidential proclamations invoked Section 338 in response to U.S. findings concerning Canada’s treatment of:
- U.S. alcoholic beverages
- U.S. dairy products
- U.S. motor vehicles and automotive trade
Although those three disputes triggered the actions, the Canadian products selected for additional tariffs extend well beyond alcohol, dairy and automobiles.
When Did the Section 338 Tariffs Take Effect?
The original July 20 proclamations established an effective date of August 19, 2026.
On August 18, 2026, the President issued a subsequent proclamation temporarily suspending the additional duties for three days while negotiations with Canada continued.
The subsequent proclamation amended the effective date contained in Annex II of all three original actions.
The revised effective date is:
12:01 a.m. Eastern Time on August 22, 2026.
Official source: White House — August 18 Temporary Suspension and Effective-Date Amendment
Businesses reviewing the original July documents should keep this amendment in mind because the original Annex II documents state the earlier August 19 effective date.
How Much Is the Section 338 Tariff?
Covered Canadian products are subject to an additional 50% ad valorem duty.
For example:
Customs value: US$100,000
Section 338 rate: 50%
Potential additional Section 338 duty: US$50,000
Other ordinary customs duties, fees or applicable trade remedies may also need to be considered, subject to the exclusions and interaction rules established in the proclamations.
Does USMCA/CUSMA Exempt Canadian Goods?
No.
USMCA/CUSMA qualification does not, by itself, exempt a covered Canadian product from Section 338.
The White House has stated that the Section 338 tariffs apply to covered goods regardless of whether the goods qualify as originating under the USMCA.
That means a product can be:
Canadian origin + USMCA qualifying + subject to Section 338.
USMCA eligibility and Section 338 applicability therefore need to be reviewed separately.
Official source: White House — Fact Sheet: Section 338 Tariffs on Canada
Which Canadian Products Are Affected?
Section 338 is not a blanket 50% tariff on every Canadian product.
The three actions establish separate Chapter 99 provisions:
Alcoholic Beverages action — HTSUS 9903.03.12
Dairy action — HTSUS 9903.03.13
Motor Vehicles action — HTSUS 9903.03.14
The underlying product coverage spans numerous industries and extends well beyond the industries named in the three proclamations.
Affected classifications include products across areas such as food and beverages, wood and paper, plastics, building materials, textiles and apparel, sporting goods, consumer products and industrial merchandise.
The HTSUS classification is critical.
Businesses should not determine Section 338 exposure based only on the name or general description of a product.
The actual HTSUS classification and the legal provisions contained in Annex II should be reviewed.
Official Section 338 Proclamations & Annexes
There are three separate Section 338 actions. Because the product lists extend beyond the industry named in each proclamation, businesses evaluating exposure should not assume that only one action is relevant to them.
1. Alcoholic Beverages — Proclamation 11046
This action was issued in response to U.S. findings regarding Canadian restrictions on the purchase, distribution and retail sale of U.S. alcoholic beverages.
Official White House documents:
Read Proclamation 11046 — Alcoholic Beverages
View Annex I — Product Descriptions
View Annex II — HTSUS Modifications & Tariff Provisions
Chapter 99 provision: 9903.03.12
The product coverage associated with this action extends beyond alcoholic beverages themselves.
2. Dairy — Proclamation 11047
This action was issued in response to U.S. findings regarding Canada’s tariff-rate quota allocation treatment for U.S. cheese under the USMCA compared with treatment provided to European Union cheese under CETA.
Official White House documents:
Read Proclamation 11047 — Dairy
View Annex I — Product Descriptions
View Annex II — HTSUS Modifications & Tariff Provisions
Chapter 99 provision: 9903.03.13
3. Motor Vehicles — Proclamation 11048
This action was issued in response to U.S. findings concerning Canada’s tariff treatment and tariff-rate quota system involving U.S. motor vehicles.
Official White House documents:
Read Proclamation 11048 — Motor Vehicles
View Annex I — Product Descriptions
View Annex II — HTSUS Modifications & Tariff Provisions
Chapter 99 provision: 9903.03.14
This action contains broad product coverage extending well beyond motor vehicles.
Annex I vs. Annex II: What’s the Difference?
Understanding the two documents is important when conducting a Section 338 review.
Annex I — Product Descriptions
Annex I provides a useful reference showing product descriptions associated with the HTSUS provisions covered by the action.
It is helpful for understanding the breadth of products involved.
However, the annex cautions that product descriptions are provided for informational purposes and do not limit the legal scope of the tariff provisions.
Practical takeaway:
Use Annex I to understand and navigate the product coverage, but do not rely on a plain-language description alone to determine whether Section 338 applies.
Annex II — HTSUS Implementation
Annex II contains the actual modifications to the Harmonized Tariff Schedule and establishes the applicable Chapter 99 provisions and related U.S. notes.
For a customs applicability review, Annex II is critical.
Businesses should compare their underlying HTSUS classifications against the provisions identified in Annex II and review the applicable Chapter 99 treatment.
Are There Section 338 Exclusions?
Yes.
The proclamations contain important exclusions and interaction rules.
Most notably, the additional Section 338 duties do not apply to articles subject to duties under Section 232 of the Trade Expansion Act of 1962.
The proclamations also provide an exclusion for qualifying articles covered by the WTO Agreement on Trade in Civil Aircraft, except unmanned aircraft as specified in the proclamations.
The White House fact sheet additionally identifies energy, potash and certain other products, including fish and critical minerals, as outside the Section 338 tariff actions.
Official source: White House — Section 338 Canada Fact Sheet
An exclusion should still be validated against the actual classification and applicable tariff treatment.
How Does Section 338 Interact With Section 232?
This is one of the most important parts of a Section 338 review.
The proclamations state that the additional Section 338 duties shall not apply to articles subject to duties under Section 232.
This can be relevant to merchandise involving:
- Steel
- Aluminum
- Automobiles and automobile parts
- Certain derivative products
- Other merchandise subject to Section 232 actions
Therefore, appearing within Section 338 product coverage does not automatically mean an additional 50% duty is payable.
The complete tariff treatment must be reviewed.
How to Determine Whether Your Product Is Affected
Businesses can use the following process as an initial Section 338 screening.
Step 1 — Confirm the HTSUS Classification
Identify the full HTSUS classification currently being declared to U.S. Customs and Border Protection.
Do not assume a classification is correct simply because it has historically been used by a broker, supplier or importer.
You can search the current tariff schedule through the U.S. International Trade Commission HTS Search.
Step 2 — Confirm Country of Origin
Determine whether the merchandise is legally considered a product of Canada for U.S. customs purposes.
Country of export and country of origin are not necessarily the same.
For products involving inputs or manufacturing operations in multiple countries, a more detailed origin analysis may be necessary.
Step 3 — Review All Three Section 338 Actions
Do not select an annex solely based on your industry.
A company that does not sell alcohol, dairy or automobiles may still have products covered by one of the actions.
Review the official product coverage associated with:
Then validate potential matches against the corresponding Annex II.
Step 4 — Review the Controlling HTSUS Provisions
For potential matches, review the applicable Annex II:
Alcoholic Beverages — Annex II
Remember that the August 18 proclamation subsequently changed the effective date stated in these original documents from August 19 to August 22, 2026.
Step 5 — Check Section 232 Applicability
Determine whether the article is subject to Section 232 duties.
If it is, the Section 338 exclusion contained in the proclamations may apply.
Step 6 — Review Other Exclusions
Determine whether the merchandise falls within another exclusion established by the applicable proclamation and HTSUS provisions.
Step 7 — Quantify the Financial Exposure
Once applicability has been established, calculate the potential additional duty against actual import values.
For example:
Annual customs value: US$2,000,000
Section 338 additional duty: 50%
Potential annual Section 338 exposure: US$1,000,000
At a 50% additional duty rate, classification and applicability errors can have a significant financial impact.
What Should Importers and Canadian Exporters Review Now?
A Section 338 impact assessment should consider:
- Current HTSUS classifications
- Country-of-origin determinations
- USMCA qualification
- Coverage under all three Section 338 actions
- Applicable Annex II provisions
- Section 232 applicability
- Other exclusions
- Customs valuation
- Historical and projected U.S. import volumes
- Current customs entry data
- Incoterms and contractual responsibility for duties
- Supply-chain alternatives
The goal is to answer three questions:
Are our products affected?
What is our financial exposure?
What compliant mitigation opportunities are available?
Potential Section 338 Tariff Mitigation Strategies
There is no single mitigation strategy that works for every importer. The appropriate approach depends on the product, classification, manufacturing process, origin, valuation structure and supply chain.
Classification Review
Confirm that the HTSUS classification being used is legally correct.
An incorrect classification could cause a business to pay Section 338 duties unnecessarily—or fail to pay duties that are legally required.
Any classification change must be supported by the characteristics, composition and function of the merchandise.
Section 232 Interaction Review
Determine whether the product is subject to Section 232 treatment and therefore excluded from the additional Section 338 tariff under the proclamations.
For businesses dealing with metals, automotive products or derivatives, this should be an important part of the review.
Country-of-Origin Review
For products involving materials or processing in multiple countries, confirm the correct U.S. country-of-origin determination.
Origin cannot simply be changed to avoid tariffs. Any determination must be supported by the actual manufacturing operations and applicable U.S. customs rules.
Customs Valuation Review
Because Section 338 is an ad valorem tariff, customs value directly affects the amount of additional duty.
Businesses should confirm that the value declared to CBP is correct and determine whether any lawful valuation strategies are available within their transaction structure.
Duty Drawback and Refund Review
Businesses that import merchandise into the United States and subsequently export qualifying merchandise should determine whether duty drawback or another refund mechanism may be available.
Eligibility is fact-specific. Businesses should not assume Section 338 duties are recoverable without reviewing the applicable customs rules.
Supply-Chain Review
Where Section 338 creates significant long-term exposure, businesses may need to evaluate sourcing, manufacturing or distribution alternatives.
Any restructuring should be reviewed against U.S. requirements governing country of origin, substantial transformation, classification, customs valuation and transshipment.
Tariff mitigation must be both commercially practical and legally supportable.
Foreign Trade Zone Treatment
The proclamations also establish specific treatment for covered merchandise admitted into a U.S. Foreign Trade Zone.
Subject merchandise admitted into an FTZ on or after the applicable effective date generally must be admitted in privileged foreign status, except where otherwise provided.
Companies using FTZs should therefore include Section 338 in their customs review rather than assuming FTZ admission eliminates the additional tariff.
Don’t Review Section 338 in Isolation
Section 338 is only one component of landed cost.
Depending on the merchandise, businesses may need to consider:
Base HTSUS duty + Section 338 + other applicable trade remedies + fees and charges
Just as importantly, the programs can interact.
The fact that a product appears within Section 338 coverage does not, by itself, establish the final duty treatment.
Why HTS Classification Matters More Than Ever
Section 338 demonstrates why tariff classification is much more than an administrative field on a customs entry.
Classification can determine:
- Whether the additional 50% tariff applies
- Which Section 338 action applies
- Which Chapter 99 provision is required
- Whether an exclusion is available
- Whether Section 232 changes the result
- Whether preferential treatment remains relevant
- Whether duties may have been overpaid
Businesses that have not recently validated their classifications should consider doing so before calculating their Section 338 exposure.
Official Section 338 Resources
For convenience, the key official U.S. government resources are collected below.
Alcoholic Beverages — 9903.03.12
Annex I — Product Descriptions
Annex II — HTSUS Modifications
Dairy — 9903.03.13
Annex I — Product Descriptions
Annex II — HTSUS Modifications
Motor Vehicles — 9903.03.14
Annex I — Product Descriptions
Annex II — HTSUS Modifications
Subsequent Section 338 Action
August 18, 2026 — Temporary Suspension and Effective-Date Amendment
Additional Official Resources
White House — Fact Sheet: President Trump Imposes Additional Tariffs on Canada
U.S. International Trade Commission — HTS Search
Because Section 338 allows the President to suspend, revoke, supplement or amend an action, businesses should confirm they are reviewing the current HTSUS and most recent presidential or CBP actions before making entry decisions.
Need Help Determining Whether Section 338 Applies to Your Products?
Peacock Tariff Consulting provides Section 338 Impact Reviews for Canadian exporters and U.S. importers.
A Section 338 Impact Review can include:
- Screening product data against the Section 338 tariff provisions
- Validation of potentially affected HTSUS classifications
- Quantification of potential additional duty exposure
- Section 232 interaction review
- Country-of-origin analysis
- Customs valuation considerations
- Identification of potential mitigation opportunities
- Recommended next steps
Concerned Section 338 may affect your imports?
Contact info@peacocktariffconsulting.com or visit peacocktariffconsulting.com to discuss a Section 338 Impact Review.
This guide is provided for general informational purposes only and does not constitute legal advice. Tariff measures, HTSUS provisions and customs requirements may change. Importers remain responsible for the accuracy of information declared to U.S. Customs and Border Protection and should verify the current presidential proclamations, HTSUS and applicable CBP guidance for their specific transactions.