Section 338 Breaks Its 96-Year Silence: Canadian Imports Hit with a 50% Tariff

Executive Summary 

On July 20, President Trump used Section 338 of the Tariff Act of 1930, a law untouched for 96 years, to put an extra 50% duty on about $20 billion in Canadian goods over autos, alcohol, and dairy. It starts August 19, 2026, stacks on top of every other duty you already pay, and USMCA qualification won’t stop it. You’ve got about three weeks to figure out what your number is.

Intro

In 100 years of clearing freight, we’d never filed a single entry under Section 338. Neither had anyone else. Congress wrote it in 1930, FDR’s people came close to aiming it at Germany, and then it sat untouched while every president since found other tools.

Then July 20 happened. Three proclamations, an extra 50% duty on roughly $20 billion in Canadian goods, live on August 19. That’s about 5% of everything the U.S. buys from Canada, and our phones started ringing within the hour.

Most of those calls open the same way: we’re USMCA-qualified, so we’re fine, right? 

The short answer is no, you’re not, and that misunderstanding is going to cost somebody serious money in September. Stay with us for five minutes, and it won’t be you. We’ll also keep our trade and tariff coverage current as the talks move.

What Section 338 Does

The law is straightforward. 

If a country discriminates against U.S. commerce, meaning it restricts American products in ways it spares everyone else or just treats our trade worse than other countries’, Section 338 lets the president hit back with duties up to 50%.

Compare the paperwork. Section 301 takes a full USTR investigation. Section 232 takes a national-security review. But in contrast, Section 338 takes a signature and a 30-day wait. What’s more, if the president wants to escalate later, the statute lets him block a country’s imports entirely. 

It’s a blunt old tool, which is probably why nobody reached for it until now.

Our theory on the timing: it had never once been used for a tariff, so there’s no court precedent against it, and after watching the Section 122 surcharge spend this year in front of the Federal Circuit, an administration might reasonably want a statute nobody’s ever sued over.

The Fight Is Over Cars, Alcohol, and Dairy

A statute this blunt still needs a grievance behind it, and the proclamations name three. Each targets a Canadian policy the administration calls discriminatory.

• Cars and Auto Parts: Canada’s counter-tariffs and quotas hit U.S. vehicles, and nobody else’s. The White House says the quota design nudges automakers toward building in Ontario instead of Ohio.
• Beer, Wine, and Spirits: All but two provinces and territories pulled American alcohol off their shelves. At the same time, bottles from everywhere else stayed put.
• Cheese and Dairy: Canada’s tariff-rate quotas give EU exporters better access to Canadian buyers than Americans get under USMCA. This deal was supposed to settle this.

The hopeful part is the calendar. Prime Minister Mark Carney has promised intensified negotiations, Canada hasn’t announced countermeasures, and the statute’s own 30-day delay exists for exactly this moment. 

We’d love to publish a follow-up saying the whole thing got shelved. But until then, anyone moving freight across that border should plan like it’s happening.

The Annexes Go Well Past Cars and Cheese

The headlines may focus on a few politically sensitive industries, but the annexes reach much further. The additional 50% tariff covers products across agriculture, construction, manufacturing, retail, and recreation, with coverage determined by the specific HTSUS classifications listed in the annexes.

• Wine and Other Alcoholic Beverages: The lists include wine and other alcoholic drinks, so beverage importers need to review the classification used for each product rather than assume the tariff is limited to one category.
• Cosmetics and Fragrances: Beauty and personal-care imports are part of the fight too. Fragrances and cosmetics can fall under different tariff lines depending on the product.
• Honey and Certain Agricultural Products: Honey appears alongside other selected agricultural goods. Importers should check the annexes before treating food or agricultural products as broadly included or excluded.
• Seeds, Plants, Flowers, and Other Agricultural Products: The lists also cover seeds, live plants, flowers, and additional agricultural goods. Similar products can carry different classifications, so review the code attached to each item you import.
• Cement and Certain Building Materials: Construction-related imports are not outside the tariff’s reach. Cement and selected building materials appear in the annexes and could carry a substantially higher landed cost beginning August 19.
• Paper, Packaging, and Certain Wood Products: The tariff extends into materials used throughout manufacturing, distribution, and retail. Importers of paper, packaging, and covered wood products should check both their finished goods and the materials supporting them.
• Textiles and Apparel: Clothing and textile products are included across a range of tariff lines. An apparel importer cannot treat an entire collection the same way because coverage depends on the classification assigned to each product.
• Machinery, Tools, and Industrial Equipment: Manufacturers should review the equipment, tools, and machinery they source from Canada. The lists are not limited to finished consumer goods and can affect the assets and components used to keep a facility running.
• Jewelry and Precious Metal Articles: Covered jewelry and precious-metal products also face the additional tariff. Importers should verify the exact classification of each article because material and product type can affect where it falls in the tariff schedule.
• Furniture and Home Furnishings: Furniture and related household products appear in the annexes as well. Retailers and suppliers should review individual product classifications before pricing upcoming orders or replenishment inventory.
• Toys, Games, and Recreational Products: The lists reach into toys, games, and other recreational goods. Businesses importing seasonal or holiday merchandise should review exposure early, while there is still time to adjust purchasing and pricing plans.
• Sporting Goods and Recreational Products: Ice skates, hockey sticks, fishing rods, and other sporting goods identified in the annexes are covered. The tariff is therefore relevant well beyond Canada’s largest export industries.
• Other Consumer and Industrial Products: The annexes contain additional consumer and industrial goods that don’t fit neatly into the major categories above. 

If a product isn’t mentioned in the examples, that doesn’t settle the issue; its eight-digit HTSUS code still needs to be checked against the full lists.

USMCA eligibility doesn’t exempt a covered product either, and the additional 50% tariff stacks on top of other applicable duties. Pull the codes used on your entries, compare them with every annex, and recalculate your landed costs before the tariff takes effect on August 19.

Your USMCA Certificate Won’t Help You Here

Now the part we promised to explain. 

Every recent Canada tariff came with the same escape hatch: qualify under USMCA, keep your certificate of origin on file, skip the duty. Section 338 has no such hatch. Covered goods pay the extra 50% wherever they originate, paperwork or not.

It stacks too, and we mean all of it: base duties, antidumping and countervailing where they apply, taxes, fees, then this 50% on top. There’s no expiration date. The proclamations can change whenever the White House decides, in either direction, which is either comforting or terrifying depending on the week.

And mind the clock. Duties attach to goods entered for consumption, or withdrawn from bonded warehouse, starting 12:01 a.m. ET on August 19, which means an entry date can now swing your cost by 50%. Get a licensed customs broker into your filings this week, not the week of the 18th.

7 Things to Do Before August 19

This is the working list we’re running with clients right now, in the order we’d do it.

1. Run every Canadian-origin HTS code you import against all three annexes.
2. Flag shipments that’ll enter or leave the warehouse on or after August 19.
3. Rerun landed costs with the 50% stacked on top.
4. Quit leaning on USMCA. It won’t hold this weight.
5. Price alternative sourcing where the exposure justifies the hassle.
6. Reread contracts and Incoterms to settle who eats the increase.
7. Track the talks daily, since the scope could still shift.

Nobody’s pretending you have spare hours for this. Our trade management and compliance group does the classification and cost modeling, our warehousing team helps with entry timing, and if the daily Federal Register check sounds miserable, subscribe to our trade alerts, and we’ll do it for you.

New Law, Same Old Homework

A 96-year-old statute makes for good headlines, but your actual homework is boring and narrow: learn which of your codes made the lists, learn what the extra duty does to landed cost, and control your entry timing. That’s the whole assignment. The companies that do it in the next two weeks will be fine.

We’ve been through versions of this before, just under different section numbers. Mallory Alexander has been moving freight since 1925, five years before Congress even wrote this law, and our brokers have spent the past week walking clients in retail, manufacturing, textiles, and food through their annex exposure, line by line.

So take the deadline seriously and then take it calmly. With a classification review, honest landed-cost numbers, and shipment-level visibility in myMALLORY, August 19 becomes a date on the calendar instead of a hole in your margin.

The cheapest version of this problem is the one you price today. Talk to our M-Pact team or call 1-800-257-8464 and we’ll run your Section 338 exposure review: codes against the annexes, true landed cost, and a plan built around how you actually ship.

Get ahead of August 19.