New Section 338 action adds 50% ad valorem duties via HTS 9903.03.14 on a wide range of Canadian-origin goods effective Aug 19, 2026.

REGULATORY BRIEFING – SECTION 338 ADDITIONAL DUTIES ON CANADIAN-ORIGIN GOODS

1. What changed

• The President has issued a proclamation under Section 338 of the Tariff Act of 1930 (19 U.S.C. 1338) in response to Canadian discrimination against U.S. motor vehicle exports.
• The action imposes an additional ad valorem duty of 50% on certain products of Canada.
• Implementation is via a new HTSUS Chapter 99 provision, heading 9903.03.14, and amendments to U.S. note 51 to subchapter III of Chapter 99.
• These duties are in addition to all other applicable duties, taxes, and fees, except where specifically excluded.

2. Affected products and HTS structure

• New HTSUS heading:
• 9903.03.14: “Articles the product of Canada as provided in subdivision (b)(3) of U.S. note 51 to this subchapter – The duty provided in the applicable subheading + 50%.”
• U.S. note 51 to subchapter III of Chapter 99 is amended to:
• Replace references to 9903.03.13 with 9903.03.14 in subdivisions (a), (c), and (d).
• Add new subdivision (b)(3), which lists all underlying HTS provisions to which 9903.03.14 applies.
• The 50% additional duty applies to Canadian-origin goods classifiable in the HTSUS subheadings listed in Annex II / Annex I, including (non-exhaustive examples by sector):
• Agricultural/food and inputs: 0409.00.00 (natural honey), 1209.x (seeds), 1210.10.00 (hops), 1302.x (vegetable extracts), 1901.20.x (baking mixes), 2208.90.x (certain alcohols/bitters), 2501.00.00 (salt).
• Chemicals and intermediates: 2905.43.00 (mannitol), 2905.44.00 (sorbitol), 2905.45.00 (glycerol), 3823.x (fatty acids and alcohols), 3824.x (certain chemical mixtures, sorbitol), 3907.70.00 (PLA), 3907.99.50 (other saturated polyesters).
• Plastics and packaging: 3918.10.10 (vinyl tile flooring), 3919.x (self-adhesive plastics), 3920.20.00, 3921.x (plastic sheets/films), 3923.x (plastic packaging), 3924.x (plastic tableware/household), 3926.x (various plastic articles).
• Rubber and hides: 4016.x (gaskets, seals, closures), 4101.x and 4103.20.30 (raw and pretanned hides/skins).
• Wood, paper, and furniture: 4401–4421 series (fuel wood, charcoal, sawn wood, moldings, particleboard, MDF, plywood, veneered panels, doors, frames, ornaments, edge-glued lumber, other wood articles), 4702.00.00 (chemical woodpulp), 4802–4823 series (graphic papers, tissue stock, coated papers, packaging, labels, molded pulp articles), 4908.90.00 (decals), 4911.91.40 (certain printed pictures), 9401.x and 9403.x (seats, furniture, and parts).
• Textiles and apparel: 5002.00.00, 5003.00.90 (silk), 5101.11.60, 5103.20.00 (wool and waste), 5201–5202 (cotton and waste), 5407.52.20, 5511.10.00, 5512.19.00 (polyester yarns/fabrics), 5603.x (nonwovens), 5703.39.20 (tufted carpets), 5806.32.20 (narrow fabrics), 5903.x, 5907.00.60, 5911.90.00 (coated/technical textiles), 6006.x (knit fabrics), 6104.x, 6109.10.00, 6110.x, 6116.93.88 (knit garments and gloves), 6201–6211 series (woven outerwear, dresses, suits, jackets, track suits), 6303.92.20, 6305.33.00, 6306.x, 6307.90.98 (curtains, sacks, tarpaulins, flags and other made-up articles).
• Footwear and headgear: 6403.91.90 (certain leather footwear), 6505.00.60 (knit man-made fiber hats), 6506.10.60 (safety headgear).
• Jewelry, precious metals, and coins: 7102.39.00 (worked nonindustrial diamonds), 7106.92.10 (certain silver semimanufactures), 7113.11.50, 7113.19.29, 7113.19.50 (silver and gold jewelry), 7117.19.90 (imitation jewelry), 7118.10.00 (non-legal-tender coin).
• Metals and tools: 7203.10.00 (DRI), 7801.10.00 (refined lead), 8113.00.00 (cermets), 8201–8206, 8209, 8212.10.00 (hand tools, saw blades, tool sets, cermet tips, razors).
• Machinery and industrial equipment: 8410.11.00 (small hydraulic turbines), 8414.80.05 (turbo/supercharger compressors), 8418.x (refrigeration equipment), 8419.x (distilling and thermal processing machinery), 8421.99.01 (filter parts), 8422.x (filling, packing, wrapping machinery and parts), 8424.30.x (sand/steam blasting), 8426.41.00 (self-propelled cranes), 8433.60.00 (produce cleaning/sorting), 8438.40.00 (brewery machinery), 8440.10.00 (bookbinding), 8442.50.10 (printing plates), 8443.91.30 (printing machinery parts), 8479.82.00 (mixing/grinding machinery).
• Electrical and electronics/ICT: 8508.19.00 (certain vacuum cleaners), 8517.13.00 (smartphones), 8517.61.00 (base stations), 8517.62.00 (network equipment), 8517.79.00 (other parts of 8517), 8521.90.00 (video recorders), 8523.49.40, 8523.49.50, 8523.51.00, 8523.52.00 (optical and semiconductor media), 8525.x (transmission apparatus, cameras), 8526.x (radar, radio navigation, remote control), 8528.x (monitors and projectors), 8529.x (antennas, printed circuit assemblies, parts), 8534.00.00 (printed circuits), 8537.10.91 (control panels), 8543.70.98 (other electrical machines), 8544.49.30, 8544.70.00 (cables and optical fiber).
• Vehicles and marine: 8711.50.00 (motorcycles >800 cc), 8905.90.10 (floating docks), 8906.90.00 (other vessels), 8907.90.00 (other floating structures).
• Measuring instruments: 9031.49.90 (other optical measuring/checking instruments).
• Lighting: 9405.11.60, 9405.11.80, 9405.42.60, 9405.42.84, 9405.99.40 (LED lighting fixtures and parts).
• Toys, games, sports: 9503.00.00 (toys), 9504.30.00, 9504.50.00, 9504.90.40 (games and video game consoles), 9505.x (festive articles), 9506.x (sports equipment, pools), 9507.10.00 (fishing rods).
• Art, collectibles, antiques: 9701–9706 series (paintings, sculptures, stamps, collections, antiques).

3. Rate changes

• Additional duty rate:
• A flat 50% ad valorem additional duty is imposed on covered Canadian-origin goods.
• Application:
• For each listed HTS subheading, the new rate is: “the duty provided in the applicable subheading + 50%.”
• Example: If the normal Column 1 General rate for a given HTS is 5%, the effective rate for Canadian-origin goods under 9903.03.14 becomes 55%.
• Relationship to other measures:
• The 50% Section 338 duty is in addition to any other duties, taxes, fees, exactions, and charges, including ordinary MFN rates and any other trade remedies, except:
• It does NOT apply to articles subject to Section 232 duties under the Trade Expansion Act of 1962 (19 U.S.C. 1862).
• It does NOT apply to civil aircraft and aircraft parts that meet the criteria of General Note 6 to the HTSUS (WTO Civil Aircraft Agreement).

4. Effective dates and duration

• Effective date:
• 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.
• Duration:
• The modifications to the HTSUS “shall continue in effect, unless this action is expressly reduced, modified, or terminated.”
• The President retains authority under Section 338 to suspend, revoke, supplement, or amend the proclamation, including potential exclusions or expansions.

5. Foreign Trade Zone (FTZ) treatment

• Any product subject to the 50% duties that is admitted into a U.S. foreign trade zone on or after August 19, 2026 must be admitted in “privileged foreign status” (19 CFR 146.41), unless eligible for admission under “domestic status” (19 CFR 146.43).
• Upon entry for consumption from the FTZ, such goods will be subject to the applicable HTSUS classification and the additional 50% duty under 9903.03.14.

6. Required actions for importers, brokers, and compliance teams

Classification and HTS mapping

• Identify exposure:
• Review all imports of Canadian-origin goods and map them against the full list of HTS subheadings in Annex II / Annex I (see PDFs below).
• Pay particular attention to high-volume categories: wood and paper products, furniture, textiles/apparel, plastics, chemicals, ICT equipment (8517/8525–8529), tools and machinery, toys and sports equipment.
• Update classification databases:
• For each affected HTS, configure systems to require concurrent declaration of 9903.03.14 for Canadian-origin entries.
• Ensure origin determination logic is robust; the 50% duty applies only to products of Canada.

Entry filing and duty calculation

• CBP entry requirements:
• For covered Canadian-origin goods, brokers must:
• Report the underlying HTS subheading as usual.
• Add HTS 9903.03.14 on the same line (or as instructed by CBP) to trigger the additional 50% duty.
• Confirm that Section 232 exclusions or Civil Aircraft Agreement coverage apply where relevant; if so, 9903.03.14 should not be used.
• Systems and billing:
• Update ERP, trade compliance, and broker systems to calculate the additional 50% ad valorem duty on the customs value.
• Adjust landed cost models, pricing, and customer contracts to reflect the significantly higher duty burden.

Supply chain and sourcing

• Evaluate alternatives:
• Assess feasibility of shifting sourcing from Canada to non-Canadian suppliers for affected HTS lines, where commercially and operationally viable.
• Consider restructuring production to change country of origin where compliant with CBP’s substantial transformation rules.
• Contract management:
• Review supplier contracts with Canadian vendors for duty-sharing, price adjustment, or termination clauses.
• Communicate with customers about potential price increases or surcharges driven by the new 50% duty.

FTZ and bonded strategies

• FTZ operations:
• For affected Canadian-origin goods entering FTZs on or after August 19, 2026, ensure admission as privileged foreign status, unless they qualify as domestic status.
• Reassess the value of FTZ usage for these products, as privileged foreign status locks in the higher duty rate upon entry for consumption.
• Bonded warehouses and in-transit:
• For goods already in bonded warehouses or in transit, confirm entry timing; entries on or after August 19, 2026 will incur the additional 50% duty.

Internal controls and documentation

• Compliance procedures:
• Update internal SOPs to reflect the new Section 338 measure and HTS 9903.03.14 usage.
• Train customs and logistics staff, as well as external brokers, on:
• Correct identification of Canadian-origin goods.
• Correct application of 9903.03.14 and exclusions (Section 232, GN 6 civil aircraft).
• Recordkeeping:
• Maintain documentation supporting country of origin determinations, classification, and any claims of exclusion.
• Monitor CBP guidance and Federal Register notices for any technical corrections, scope clarifications, or exclusion processes.

7. CBP and regulatory follow-up

• CBP implementation:
• The Commissioner of CBP, in consultation with Treasury, Commerce, and USTR, is authorized to issue rules, regulations, guidance, instructions, and determinations necessary to implement the proclamation.
• The Commissioner, in consultation with other agencies, may make additional HTSUS modifications via Federal Register notice, including technical corrections to the annexes.
• Oversight and approvals:
• For any CBP rules or regulations implementing this action, CBP must obtain approval of the President or the U.S. Trade Representative, with USTR delegated the President’s approval authority under 19 U.S.C. 1338(h).

8. Key exclusions and limitations

• Section 232 measures:
• Articles already subject to duties under Section 232 of the Trade Expansion Act of 1962 are excluded from the additional 50% Section 338 duty.
• Civil aircraft:
• Articles of civil aircraft and aircraft parts that meet the criteria of General Note 6 to the HTSUS (WTO Civil Aircraft Agreement) are excluded.
• Scope of product descriptions:
• Annex I product descriptions are for information only and do not limit the legal scope of the HTS provisions.
• Any scope questions must be referred to U.S. Customs and Border Protection.

9. References and source documents

• Proclamation text (White House):
• Main proclamation: “Imposing Additional Duties to Offset Canadian Discrimination Against the Commerce of the United States with Respect to Motor Vehicles” (July 20, 2026) – available on whitehouse.gov.
• Annexes (HTS and product lists):
• Annex II (HTSUS modifications and list of affected HTS codes):
• https://www.whitehouse.gov/wp-content/uploads/2026/07/Annex-II-2.pdf
• Annex I (product descriptions corresponding to affected HTS codes):
• https://www.whitehouse.gov/wp-content/uploads/2026/07/ANNEX-I-3.pdf

10. Immediate next steps for compliance teams

• Within 1–2 weeks:
• Extract and load the full HTS list from Annex II into internal classification and screening tools.
• Run a 12–24 month import history report for Canadian-origin goods and quantify duty impact under +50%.
• Engage brokers to confirm readiness to file 9903.03.14 as of August 19, 2026.
• Before August 19, 2026:
• Finalize sourcing and pricing decisions for high-impact SKUs.
• Update SOPs, train staff, and communicate with suppliers and customers.
• Review FTZ and bonded strategies for Canadian-origin goods.
• Ongoing:
• Monitor Federal Register and CBP/USTR communications for any amendments, exclusions, or technical corrections to the HTSUS and annexes.