Canada Tariff Reshuffle: 22 Products Out, 100 In Under the 50% Section 338 Duty

Key Points

• A presidential proclamation dated October 23, 2026, removes 22 Canadian product subheadings from, and adds 100 to, the 50% ad valorem duty imposed under Section 338 of the Tariff Act of 1930 for goods entered for consumption or withdrawn from warehouse for consumption on or after October 30, 2026. 
• The president may impose additional duties of up to 50% ad valorem on products of a country that discriminates against U.S. commerce, and may amend those duties whenever the public interest requires, under Section 338 of the Tariff Act of 1930. 
• Although the Section 338 duty responds to Canada’s motor vehicle tariffs, most of the Canadian goods newly covered as of October 30, 2026, including sweetened cocoa powder, paints, carpets, and window air conditioners, fall outside the auto sector. 
• The HTSUS subheading, not the product descriptions in the proclamation’s annexes, determines whether the Section 338 duty applies to a Canadian product, because those descriptions are for information only. 
• Section 338 duties apply in addition to duties under Section 232 of the Trade Expansion Act of 1962, so covered Canadian goods also bear ordinary duties and any Section 232 duties.

Starting October 30, 2026, 100 more categories of Canadian goods face a 50% U.S. tariff, and 22 others are freed from it. In 2026, President Donald Trump imposed an additional 50% ad valorem duty on certain products of Canada (the Section 338 duty) in response to Canada’s motor vehicle tariffs. A proclamation dated October 23, 2026, (the October Proclamation) changes the products subject to that duty for goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. ET on October 30, 2026 (the Effective Date). Most of the newly covered goods fall outside the auto sector, so importers across many industries should check their exposure now.

Section 338 of the Tariff Act of 1930 (Section 338) allows the president to impose additional duties of up to 50% ad valorem on products of a country that discriminates against U.S. commerce, and to amend those duties whenever the public interest requires. On July 20, 2026, Proclamation 11048 found that Canada’s motor vehicle tariff scheme discriminates against U.S. commerce and imposed the Section 338 duty, effective August 19, 2026. On August 18, Proclamation 11056 suspended the duty for three days after Canada committed to make changes. According to the October Proclamation, Canada was determined not to have followed through in a satisfactory way, and the duty took effect at 12:01 a.m. ET on August 22, 2026. Proclamation 11065 first changed the list of covered products on September 8, 2026. The October Proclamation makes the second change, which the administration states will continue to offset the burden on U.S. commerce while better serving the public interest.

What Changed

Products are identified by their eight-digit subheadings in the Harmonized Tariff Schedule of the United States (HTSUS). Annex I, Part A of the October Proclamation lists 22 subheadings that are no longer subject to the Section 338 duty as of the Effective Date. These consist largely of packaging and related equipment: seaweed for human consumption; plastic film, boxes, crates, and bags; seven categories of thin plywood sheets; plastic-coated paperboard, corrugated cartons, paper sacks, and molded pulp articles; and certain refrigerating, thermal-processing, container-filling and labeling, packing, and produce-sorting machinery.

Annex I, Part B lists 100 subheadings that become subject to the duty on the same date. They include 13 categories of sweetened cocoa powder; chemical and consumer products such as paints, mastics, shampoo, soap, surfactants, lubricants, waxes, laboratory reagents, waste residues, polyethylene terephthalate (PET), polyurethanes, and vinyl flooring; rubber mats; wood products such as medium-density fiberboard (MDF), other fiberboard, packing boxes, flooring panels, joinery, coffins, and wooden sticks; paper products and labels; 43 categories of carpets and textile floor coverings; and window and wall air conditioners, chest freezers, handheld electromechanical tools, hand-operated iron or steel valves, canoes, electrosurgical instruments, demonstration models, spectrometers, and archery equipment. Civil aircraft and aircraft parts that meet General Note 6 of the HTSUS are excluded from these additions.

Annex II implements both lists by amending U.S. note 51(b)(3) to subchapter III of chapter 99 of the HTSUS, which sets out the full list of covered products. Because the October Proclamation identifies only additions and removals, companies must read it together with that note, as amended by the earlier proclamations, to confirm current coverage. The product descriptions in the annexes are for information only; coverage turns on the HTSUS subheading.

The Section 338 duty applies in addition to any duties under Section 232 of the Trade Expansion Act of 1962 (Section 232), and U.S. Customs and Border Protection (CBP) may issue implementing guidance and correct the annexes by Federal Register notice.

Legal and Business Implications

Although the dispute concerns motor vehicles, its reach now extends to consumer goods, building materials, chemicals, food ingredients, and medical and laboratory equipment. Companies importing these goods from Canada should not assume they are unaffected because they do not deal in vehicles or parts.

For those companies, the cost impact is immediate: newly covered goods carry the Section 338 duty on top of ordinary duties and any Section 232 duties, while removed goods become cheaper to import. Because coverage depends on the exact subheading, small technical differences, such as plywood thickness, paper weight, or the sugar content of cocoa powder, can decide whether the duty applies. Timing matters as well, since the date that counts is entry or warehouse withdrawal rather than shipment, which gives companies holding goods in bonded warehouses some flexibility.

Further change is likely. The October Proclamation is the second change to the product list in about seven weeks, and Section 338 permits amendment at any time. Who ultimately bears these costs will depend on Incoterms, tariff pass-through and change-in-law clauses, and price adjustment terms in existing supply agreements.

Pending Court Challenge

On October 20, 2026, a U.S. importer filed the first lawsuit challenging the Section 338 duty in the U.S. Court of International Trade, seeking to represent a class of affected importers. The complaint argues that Section 338 targets specific foreign discrimination and is not a general tariff power, and that Congress displaced it with Section 301 of the Trade Act of 1974, which has its own procedures and safeguards. It also argues that the Canadian measures cited do not justify the duty, because some responded to U.S. tariffs and the dairy policies fall under the U.S.-Mexico-Canada Agreement, that the duty reaches products unrelated to the alleged discrimination, and that the government collected duties on products added by Proclamation 11065 before the 30-day waiting period had run. The plaintiff seeks a declaration that the duty is unlawful, a preliminary injunction, an order halting collection, and refunds with interest. A three-judge panel is hearing the case, with the government’s response brief due in December 11, the reply brief due and oral arguments set for January 2027. Section 338 duties remain in effect in the meantime, and it is unclear whether the challenge will reach the October Proclamation changes. Because a ruling could affect later product-list changes, companies should not assume the duty will be set aside, but they should keep entry records for covered goods and track liquidation and protest deadlines to preserve potential refund rights.

Next Steps

Given this exposure, companies should first compare their Canadian-origin import data against both parts of Annex I to identify products that have gained or lost coverage. For products at or near a listed subheading, they should confirm classification and country of origin and, where the answer is unclear, consider requesting a binding ruling from CBP. They should then update broker instructions and entry filings so that, from the Effective Date, newly covered goods are declared correctly and removed goods are no longer charged the duty.

Once exposure is confirmed, companies should recalculate landed costs and adjust pricing where needed, review supply contracts for tariff allocation provisions and give any required notices to counterparties, and, where newly covered goods represent significant volume, consider alternative sourcing or the timing of warehouse withdrawals. Finally, because the list may change again, they should monitor CBP guidance and the Federal Register for implementing instructions and corrections.

For questions about the October Proclamation or Section 338 compliance, contact Ryan Last, Daniel N. Anziska, or any member of Troutman Pepper Locke’s Tariff + Trade Task Force.