You did not start this, and most of what you will read about it is written for someone else. This is the plain version for an American business that buys from Canada, sells into Canada, or both.
Where things stand
Your side: 50% Section 338 duties on roughly $28 billion of Canadian goods have been in force since 22 August 2026. You pay them if you are the importer of record. A USMCA claim does not exempt captured goods.
Canada’s side: counter-tariffs on more than 700 US products, $27.6 billion of imports, at 15%, 25% and 50%, in force since 8 September 2026. Your Canadian customers pay them at the border.
Negotiations: broken down. Nobody credible is predicting a quick resolution.
We are a four-person software studio on Vancouver Island. We spent the last month working out what these measures actually do to Canadian businesses, and somewhere in there we noticed that most of the people reading our work were American. That makes sense. It is your law, and the questions are the same on both sides of the line.
So here is the same work, pointed the other way. No politics in it. Just what is captured, what is not, and what you can do about it.
Two ways this reaches you
You buy from Canada
Your own government’s measure raised the cost of captured Canadian inputs by 50%, and you are the one who writes the cheque at the border. Plywood, paper and packaging, machinery, chemicals, plastics, textiles, furniture, hockey equipment — and a lot of things nobody would guess.
You sell into Canada
Canada’s counter-tariffs land on your Canadian customer’s invoice, not yours. They will absorb it, pass it on, or quietly switch to a supplier who is not American. The third one is the one that costs you, and you will not get a phone call about it.
If you buy from Canada: what the 50% actually covers
Section 338 of the Tariff Act of 1930 was invoked through three proclamations — Motor Vehicles, Dairy and Alcohol. The names describe the trade dispute being answered. They do not describe the goods being taxed, and that trips up nearly everyone.
| Proclamation | Canadian goods it actually captures at 50% |
|---|---|
| Motor Vehicles | Electronics, machinery, wood and paper products, chemicals, textiles, plastics, rubber, furniture, leather goods |
| Dairy | Milk powders, dairy concentrates, bakery mixes, non-alcoholic beer, peppermint oils |
| Alcohol | Beer, wine, spirits, hockey equipment, citrus oil, wooden kitchenware, specialty papers |
The detail that matters most: the measure covers 554 specific tariff subheadings, not categories. Customs advisers put it bluntly — screen by code, not category. A product one line away from a listed code is completely untouched. Confirmed on the list: honey, cut flowers, cement, plywood, textiles and clothing, glassware, candles, hand tools, jewellery, printing ink, essential oils, works of art, hockey sticks.
Which means two kinds of American business are getting this wrong right now. Some are paying 50% on Canadian goods that were never captured, because their broker classified by category. Others are certain they are fine and have never checked the code.
What is not captured
Energy, potash, fish and critical minerals are carved out. And goods already under Section 232 steel and aluminum measures are excluded from Section 338 — they stay under their existing treatment rather than stacking the new 50% on top. If you buy Canadian steel, you are not paying twice.
The USMCA trap
Unlike the 2025 tariffs, these apply to goods that would otherwise qualify for preferential treatment under USMCA. A valid certificate of origin does not zero out the 50%. If your landed-cost model assumes USMCA-origin Canadian goods enter free, it has been under-costing every order since 22 August.
The parcel change nobody warned you about
The $800 de minimis exemption ended on 29 August 2025. Every parcel from Canada now clears customs formally and carries a merchandise processing fee — about US$7.85 on a manual entry — on top of any duty. One documented case had a US$37 item land at US$60.17. If you buy small orders from Canadian suppliers, or your customers do, that fee is often doing more damage than the tariff.
If you sell into Canada: what your customers are now paying
Canada’s list is long — 700-plus products — and some of the rates are steep. From Finance Canada’s published schedule:
| US goods entering Canada | Surtax |
|---|---|
| Corrugated cartons, boxes and cases; plastic bags, sacks and tableware | 50% |
| Milk, cream, whey, honey, molasses, bakery mixes | 50% |
| Clothing, textiles and protective garments | 50% |
| Beauty and personal care — perfumes, makeup, hair products | 50% |
| Plywood and laminated wood; plaster board; glass containers; steel | 50% |
| Cheese | 25% |
| Sawn softwood; toilet paper and facial tissue; carpets | 25% |
Goods already in transit on 8 September were not caught. Seafood does not appear on Canada’s list at all.
The honest part about relief. Canada has opened a remission process for these surtaxes, but it is available to Canada-registered companies only. Your Canadian customer could apply if your product genuinely cannot be sourced from a Canadian or non-US supplier — and that is a high bar. It is not a door you can walk through yourself.
On the US side, we are not aware of a published exclusion process for Section 338. If one exists or appears, a licensed US customs broker or trade counsel will know before we do. We would rather say that plainly than guess.
What it looks like in practice
Worked example · a custom millwork shop in Bellingham, Washington
Eleven people, two CNC routers, about $2.4 million a year. Buys Canadian plywood and hardware because Vancouver is closer than Seattle. Sells roughly 30% of its output to contractors across the line in BC. Here is what we found.
The plywood is confirmed. That is the real one. Plywood is on the 554-line list, so every sheet from the Canadian mill carries 50% at the border, and the shop is the importer of record. On its biggest material input, that is not a rounding error.
Its BC customers are the quiet loss. Finished millwork going north is furniture on Canada’s list, and plywood at 50% is on it too. Nobody has cancelled. Three contractors have simply stopped asking for quotes, which is how this actually shows up.
The steel hardware is not hit twice — and the finish is a question. Goods under Section 232 are excluded from Section 338, so the Canadian steel slides did not move 50%. The Canadian-made finishes and adhesives sit in “chemicals” on the schedule, but whether each product’s code is actually listed is something to confirm with the supplier, not assume.
Then the other half. The shop’s problem is not really the tariff. It is that half its supply and a third of its demand run through one border that just got expensive in both directions. The useful question is what else could feed it, and who else could buy from it.
What we would build:
- A bill-of-materials screen that tags every input by origin and tariff code, so the owner knows what is captured before the broker’s invoice arrives.
- A quoting tool that prices the duty into every job automatically, in both directions, so a BC quote and a Washington quote come out of the same system correct.
- Consolidated cross-border ordering, so hardware comes in as one entry a month instead of thirty parcels each carrying a processing fee.
- A search presence aimed at the Oregon and Idaho contractors it has never bothered to reach, because the market it is losing in BC exists twice over south of it.
None of that is exotic. It is a few weeks of work, and it is the difference between a shop that eats a bad year and one that comes out of it less dependent on a border it does not control.
What you can actually do this month
- Screen your Canadian inputs by code, not category. Get the 8-digit HTS classification for each and check it against the 554 listed subheadings. You may be paying on things that were never captured. You may be exposed on things you assumed were safe. Either way, guessing is the expensive option.
- Ask your Canadian suppliers for origin and classification in writing. A supplier who cannot tell you is a supplier whose invoices you cannot check.
- Talk to your Canadian customers before they go quiet. The ones who switch suppliers rarely say so. Ask directly what the surtax is doing to them and whether you can restructure the deal — ship from a different origin, adjust terms, split the cost. A conversation now beats a lost account in December.
- Consolidate small cross-border shipments. Thirty parcels carry thirty processing fees. One consolidated entry carries one.
- Ask for price protection. If you are stocking up ahead of further increases, get a clause that credits you if the supplier’s price falls within a set window. If these measures end abruptly — and their legal footing is untested — a warehouse full of stock bought at tariffed cost is the thing that hurts.
- Keep every customs record. If duties are ever refunded, the businesses that get the money are the ones who can prove what they paid.
Where this might end
Section 338 had never been used in more than ninety years, and it has never been tested in court. The Supreme Court struck down the same administration’s earlier tariffs in February 2026 under a different statute. As of late August no case had been filed against these measures, though trade lawyers expected one. The statute also permits modification, so the list can be narrowed, widened or retargeted without any court involved.
Plan on the measures lasting. Prepare for them not to. Those are not contradictory — they are the two halves of not being caught out either way. What happens if the tariffs are lifted →
Whatever your politics, this is now a line item in your business. Your representatives will be asked about it before November. It is worth knowing where yours stand.
Where we fit
We are a software studio, not a customs brokerage or a law firm, and we are Canadian, which means we have no dog in your politics and no interest in pretending otherwise. What we do is the part that comes first and that most businesses cannot do quickly: work out which of your inputs and products are actually captured, at what rate, under which classification — and then map who else in the world could supply you or buy from you.
That is the New Markets Review. It works identically for a business in Bellingham as for one in Nanaimo, because the questions are the same. You get a written review, a private AI knowledge base trained on your own business, a deck, an infographic, and a video and audio overview — then a scoped plan of what to build, with real hour estimates, useful whether or not you ever hire us.
See a complete worked example first → — we built one for a fictional business and published every artifact, so you can see exactly what arrives.
Questions American businesses ask us
I buy from Canada. Who actually pays the Section 338 tariff?
The US importer of record — usually you. It is collected by US Customs at entry. Your Canadian supplier does not pay it unless you have negotiated that they will.
Does a USMCA certificate of origin exempt my Canadian goods?
No. Section 338 duties apply to goods that would otherwise qualify for USMCA preference. This is the single most misunderstood point on both sides of the border.
I sell into Canada. Can I apply for remission of Canada’s surtax?
Not directly. Canada’s remission process is open to Canada-registered companies only. Your Canadian customer could apply if your product genuinely cannot be sourced elsewhere, but the bar is high and most applications will not clear it.
Is there a US exclusion process for Section 338?
We are not aware of a published one. If that changes, a licensed US customs broker or trade counsel will know first. We would rather tell you we do not know than invent a form number.
How do I find out if my specific product is captured?
By its 8-digit HTS classification, checked against the 554 listed subheadings — not by its category. Ask your broker for the code and screen it. If you do not have a broker, this is the moment to get one.
Will these tariffs be struck down?
It is genuinely uncertain. The statute has never been litigated, and no case had been filed as of late August 2026. The same administration’s earlier tariffs were struck down in February 2026 under a different law. Treat it as open rather than likely either way.
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Related
- The tariffs, explained in plain English
- What happens if the tariffs are lifted
- Where else in the world would buy this?
- The main hub, written for Canadian businesses
InfiniteUp is a four-person software studio in Nanaimo, BC. 40+ apps shipped, 60,000+ installs, 117 countries. See our work.
The Bellingham millwork shop is an illustration, not a client; every tariff fact in it is real. Rates are summarized from the US proclamations and Finance Canada’s published list; confirm the classification and duty treatment of your specific goods with a licensed customs broker or trade counsel. Operational guidance from a software studio, not legal, customs, or tax advice. Both measures rest on instruments that can change quickly. Last reviewed 20 September 2026.