The US Tariff on Canadian Goods Now Stacks on Section 232

On September 8, the White House issued five proclamations under Section 338 of the Tariff Act of 1930. Two of them rewrote the sentence that decides what a Canadian manufacturer pays at the US border.

In July, Proclamation 11048 said its 50 percent duty "shall not apply to articles subject to duties pursuant to section 232." From September 15, Proclamation 11065 says the same duty, as modified, "shall apply in addition to duties imposed pursuant to section 232." The other three exclude certain Canadian alcoholic beverages, dairy products and motorcycles from the US market altogether as of September 29.

If you make aluminum profiles, seating, furniture, lamps, paper or metal fittings in Canada and sell them into the United States, your duty changed two weeks ago. USMCA qualification does not reduce it. The country of origin of the good does.

What changed in the Section 338 tariffs on September 15

The duty itself has applied since August 22, when a three-day suspension lapsed. CBP's implementing message for the September change adds 122 tariff classifications and removes ten.

Eighty-two of the additions sit on the motor-vehicle list, heading 9903.03.14, which carries the goods Washington chose in response to Canada's auto tariffs. They cover uncoated paper, aluminum bars, rods, profiles and tubes, steel structures, base-metal closures, fittings and signs, welding electrodes, certain switchgear, seats, furniture, mattresses and lamps, along with golf carts, all-terrain vehicles and a few other lines.

The other forty sit on the alcohol list, 9903.03.12, and cover cheeses, certain whiskies, hides and leather, furskins and motorboats. Salt, Portland cement, refined lead, tissue stock and chemically pure sugars came off, and whisky, liqueurs, paper articles, switchgear and fishing rods were narrowed to specific statistical lines. CBP's list marks every new line in bold.

The stacking reaches beyond the new lines. CBP's message keeps a 0 percent heading, 9903.03.15, for articles of aluminum, steel and copper, vehicles and parts, wood products, semiconductors and patented pharmaceuticals, then adds one sentence: "As of September 15, 2026, only goods subject to HTSUS 9903.03.13 are eligible to claim HTSUS 9903.03.15." Heading 9903.03.13 is the dairy list.

On the motor-vehicle and alcohol lists, a good that pays Section 232 now pays the 50 percent as well. Canadian aluminum bars, profiles and tubes already carry the Section 232 aluminum duty, and the 50 percent now sits on top of it. The June re-cut of the metals tariffs still sets the Section 232 side of that bill.

In August we noted that the Section 338 duty did not reach goods already under Section 232. That exclusion now survives only on the dairy list. Cars, light trucks and auto parts are still absent from the listed lines, so for them the Section 232 auto tariff remains the charge that counts.

The September 29 import bans on Canadian products

Proclamations 11061, 11062 and 11063 move certain products from the 50 percent duty to an outright exclusion, "effective with respect to goods imported on or after 12:01 a.m. eastern time on September 29, 2026." Goods imported before that time but not yet entered for consumption stay at the 50 percent rate.

Jacob Jensen of the American Action Forum, cited by CBS News, puts the banned goods at US$967 million of 2025 imports, 87 percent of it alcohol. The remainder includes whey and other dairy products, molasses and motorcycles over 800 cc.

Ottawa's reply came from a spokesperson for Canada-US Trade Minister Dominic LeBlanc: "We take note of the coming into force of the Administration's previously announced trade measures." On September 28, President Trump told reporters he expects Canada back at the table within weeks, saying "They're gonna come in and they're gonna say, 'Sir, we are sorry.'"

The White House fact sheet also announced a directive to the US Trade Representative and the GSA Administrator "to remove Canadian-origin products from GSA's Multiple Award Schedules which manage over $50 billion in federal procurement." A presidential memorandum of September 16 then told the OMB Director and the Trade Representative to identify Canadian origin items in the federal civil procurement system that "can, where warranted, be removed or made non-available for purchase." If you sell to US federal agencies, the origin of your product is now under review in that channel too.

Product of Canada: why origin now sets the bill

The same fact sheet states that the tariffs "apply to all covered goods regardless of whether a good originates under the U.S.-Mexico-Canada Agreement (USMCA) and apply in addition to tariffs imposed under Section 232." For a listed good, a USMCA certification of origin does not reduce the Section 338 duty.

The duty attaches to the product. The CBP headings read "Articles the product of Canada," and the proclamations do not say how that is determined. US customs applies substantial transformation in general and, for marking goods of CUSMA countries, the tariff-shift rules in 19 CFR Part 102. Which test CBP applies for Section 338 is not in the text.

If you are weighing a Mexican production step, that is the question to settle first. A finished Canadian good shipped through a Mexican warehouse remains a product of Canada, and so does one given light processing that leaves its origin unchanged. A binding ruling from CBP on your part number, requested before capital moves, tells you where the good lands.

Canada's side is written down. The United States Surtax Order (2026), in force since September 8 at 15, 25 and 50 percent on C$27.6 billion of US goods, says goods originate in the United States "if they are eligible to be marked as goods of the United States in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations." A good that marks as Mexican under those regulations pays no surtax.

If you distribute finished US goods in Canada from the surtax schedules, switching to goods that mark as Mexican removes the surtax. If you import inputs for Canadian manufacturing, the order extends the existing remission order to the new surtax, so the saving depends on whether your inputs already qualify for relief.

Mexico's Section 232 talks move to October

No Section 338 action names Mexico. Mexican goods face Section 232 on autos, steel and aluminum, and Mexico has spent the year negotiating those rates, in the posture we described in April.

On September 23, Undersecretary of Foreign Trade Luis Rosendo Gutiérrez Romano said at the American Society of Mexico's Fifth Binational Convention, as El Universal reported, that the fourth bilateral round of the USMCA review, expected in September, had moved to October: "está la visita del presidente Xi (Jinping) de China a los Estados Unidos y se prefirió postergar un poquito esto."

Mexico's priorities are lower tariffs on steel, aluminum and autos, and respect for "las decisiones del panel que ganamos en la metodología de las reglas de origen del sector automotriz mexicano." The US list began at about 54 items, which he said "se van desdoblando," and President Sheinbaum has put the count at 90.

On September 29, as Economy Secretary Marcelo Ebrard left for a week of meetings in the United States, President Sheinbaum said: "Vamos bien, todavía no cerramos un acuerdo mayor. Nuestro objetivo obviamente es disminuir aranceles de acero y vehículos, y que no haya más aranceles."

A day later, Agencia Reforma reported, citing Mexican officials, that the two sides are working out the details of a deal that "reduciría los aranceles estadounidenses a los vehículos ligeros del 25% actual al 15%," an effective 10 to 12 percent because the full rate applies only to non-US content. No proposed rate for steel was reported, and no text has been published.

January 1, 2027 and the numbers to run this quarter

On August 24, President Trump posted that "On Jan. 1, 2027, Tariffs on all Cars, Trucks, both large and small, Automotive Parts, and Steel, will be increased to 50%." The statement was aimed at Canada, and we have found no proclamation implementing it. Today the Section 232 auto tariff is 25 percent, and for a qualifying vehicle with an approved US content determination it applies only to the non-US content. CUSMA-qualifying auto parts pay no Section 232 duty until Commerce publishes a process for taxing their non-US content, and Canadian steel already faces 50 percent.

If you serve US customers from Canada, three numbers belong in your 2027 budget:

• The landed cost of each US-bound part number today, with its HTS code checked against CBP's September 15 list and Section 232 added where it applies.
• The same figure if the January 1 rate is proclaimed, for autos, auto parts and steel.
• The figure for the same good made in Mexico, under Section 232 as it stands and under the terms Mexico is negotiating.

If the third number wins, the work that follows runs on its own calendar. An origin ruling, a structure that can hold the production step, and a site with power and incentives in place take months, and the September proclamations took one to three weeks to reach the border.

Whether that step runs in your own entity or under a shelter depends on your volume and time horizon. The origin analysis applies either way.

The bottom line

Since September 15, the US duty on a listed Canadian good turns on two lists, one clause and the good's country of origin. USMCA qualification is not among the inputs.

A product of Mexico sits outside Section 338 and outside Canada's surtax, and Mexico is negotiating its Section 232 rates in a round that resumes in October. A CBP ruling on your part numbers tells you, before capital moves, whether your process makes the good Mexican.

Plans built on the rules in force today, with the January 1 rate run as a scenario, hold whichever way the October round and the threat resolve, and the origin file you build now serves under either outcome.

Calder & Vale advises Canadian and US companies entering and operating in Mexico on entity structure, on site and incentives through direct relationships with the state economic development ministries, and on origin, customs and IMMEX exposure.