New Section 338 Actions Against Canada And Section 301 Tariffs On 60 Trading Partners And Brazil: Key Considerations For US Importers

Last week, the Trump Administration announced several significant tariff actions under two different statutory regimes: new tariffs under Section 338 of the Tariff Act of 1930 targeting selected Canadian goods, which are set to take effect on August 19; new forced labor-related tariffs under Section 301 of the Trade Act of 1974 affecting nearly all imports from 60 trading partners starting July 24 (on top of a new 25% Section 301 tariff on Brazil that took effect July 22); and a potential new Section 301 investigation and tariff action targeting the European Union (EU) in response to EU regulatory fines on US technology companies.

Together, these developments underscore the rapidly changing tariff landscape and the need for importers to assess product coverage, country-of-origin exposure, available exclusions, and potential impacts on sourcing, pricing, customs compliance, and cross-border commercial planning. These actions are expected to increase costs for many US importers while heightening Customs and Border Protection (CBP) scrutiny of country-of-origin determinations, supply chain due diligence, customs valuation, and forced labor compliance. Importers should immediately assess their supply chains, quantify tariff exposure, and evaluate available strategies to mitigate increased duty liability.

I. Section 338 Tariffs on Canadian Goods Effective August 19

On July 20, 2026, President Trump issued three separate proclamations under Section 338 of the Tariff Act of 1930, imposing an additional 50% ad valorem duty on approximately $20 billion of Canadian imports. The measures target products that the Administration alleges are linked to discriminatory Canadian policies affecting US commerce in three sectors: motor vehicles, alcoholic beverages, and dairy products. The proclamations conclude that Canada's actions unfairly disadvantage US exporters relative to competitors from other countries, thereby satisfying the statutory requirements for presidential action under Section 338. All three measures impose a uniform 50% tariff, effective August 19, 2026, and apply to a broad range of products identified in accompanying annexes to the proclamations.

The cited justifications vary by sector. For dairy products, the Administration points to differences between Canada’s administration of cheese tariff-rate quotas under the US-Mexico-Canada Agreement (USMCA) and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). In the automotive sector, the United States cites Canada’s 2025 surtax regime on certain US-origin vehicles and associated tariff-rate quotas. In the alcoholic beverages sector, the proclamation focuses on actions taken by Canadian provincial liquor boards that restricted or suspended the purchase, distribution, and retail sale of US alcohol products beginning in March 2025. Canada’s actions on motor vehicles and alcohol were in apparent retaliation to tariffs that the United States imposed in 2025 under the International Emergency Economic Powers Act (IEEPA), which the Supreme Court later determined to be unlawful.

a. Covered Products

The product coverage extends well beyond the sectors that prompted the proclamations. Across the three annexes, more than 550 Harmonized Tariff Schedule (HTS) subheadings are subject to the additional 50% duty.

i. Motor Vehicle-Related Proclamation

Although issued in response to Canada’s automotive measures, the motor vehicles proclamation covers a broad range of products far beyond automobiles and automotive parts, including:

• Agricultural, plastic, rubber, wood, glass, and base metal products;
• Paints, ink, essential oils, and make-up preparations;
• Leather goods, handbags, and luggage;
• Apparel and textiles;
• Diamonds, silver, gold, and jewelry;
• A wide variety of industrial machinery, equipment, and electronic products;
• Motorcycles;
• Chairs, seats, furniture, and home furnishings;
• Toys, video games, ice skates, sporting goods, and swimming pools; and
• Fine art, antiques, and collectibles.

ii. Dairy-Related Proclamation

The dairy proclamation focuses primarily on dairy and dairy-derived products, including:

• Milk and cream;
• Whey products and whey protein concentrates; and
• Lactose and lactose syrups.

It also includes other products, such as molasses, syrups, nonalcoholic beer, and peppermint essential oil.

iii. Alcoholic Beverages Proclamation

The alcoholic beverages proclamation covers an extensive range of alcoholic beverage products, including:

• Beer;
• Sparkling and still wines;
• Cider, sake, and other fermented beverages;
• Beverage-grade ethyl alcohol;
• Whisky, bourbon, rum, gin, vodka, tequila, brandy, and other distilled spirits; and
• Various liqueurs and specialty alcoholic beverages.

The annex also encompasses several products associated with the alcoholic beverage supply chain, including certain essential oils, densified wood products, and wooden tableware and kitchenware, plus certain paper and paperboard products and hockey equipment.

b. Exclusions and Interaction With Other Duties

The Section 338 tariffs operate as additional duties and generally apply on top of any otherwise applicable tariffs, including normal trade relations rates and Section 301 tariffs such as the 10% forced labor-related tariff on imports from Canada that took effect on July 24 (discussed further below).

Notably, USMCA eligibility does not exempt a product from the tariffs. The Administration has expressly stated that the additional duties apply regardless of whether a good qualifies for preferential treatment under USMCA. As a result, products that would otherwise enter the US duty-free under the agreement would still be subject to the additional 50% Section 338 tariff if they are listed in the applicable annex.

The proclamations provide two express exclusions from the additional 50% duties:

• Articles already subject to duties imposed under Section 232 of the Trade Expansion Act of 1962; and
• Articles covered by the World Trade Organization (WTO) Agreement on Trade in Civil Aircraft, other than unmanned aircraft.

c. Significance of Section 338 of The Tariff Act of 1930

This would apparently be the first time that Section 338 has ever been used to impose tariffs and the first invocation of the statute since the 1940s. After the Supreme Court determined that IEEPA does not authorize the President to impose tariffs, Section 338 is potentially the most powerful unilateral tariff authority that the President has left. Section 338 authorizes the President to impose additional duties of up to 50% on imports from a foreign country when the President determines that the country has engaged in discriminatory treatment of US commerce through tariffs, regulations, restrictions, or other trade measures.

Legal challenges to the tariffs are expected. Many scholars believe that Section 338 was superseded by subsequent laws, including Section 301, even though it remains on the books. In addition, Section 338’s reference to the International Trade Commission (ITC) may contemplate that an ITC investigation is a predicate to imposing tariffs, which has not happened here.

In announcing the measures, the Administration emphasized that the tariffs were intended to respond to what it characterized as Canada's continuing discrimination against US exports. US Trade Representative (USTR) Ambassador Jamieson Greer stated that, unlike other US trading partners, Canada “continues to retaliate against the United States for its efforts to rebalance trade and protect US industry in national-security sensitive sectors.” According to Ambassador Greer, Canada’s actions include removing US alcoholic beverages from provincial distribution channels, providing more favorable dairy market access to European Union producers than to US exporters, and limiting certain US vehicle exports through Canada’s automotive tariff-rate quota regime. The Administration characterized the President’s action as a necessary step to “hold Canada accountable for its retaliation and discrimination” and to promote fair treatment for American workers, farmers, and businesses.

d. Canadian Government Response

Following the US announcement, Canadian Prime Minister Mark Carney criticized the proposed tariffs, characterizing them as the latest in a series of unilateral US trade actions that Canada believes are inconsistent with the USMCA.

He reaffirmed Canada’s commitment to resolving the dispute through negotiations and noted that Canada has presented proposals to modernize USMCA and address outstanding trade issues. While emphasizing Canada's support for free and fair trade, Carney stated that the government remains prepared to take necessary measures to protect Canadian workers, farmers, businesses, and families while continuing to pursue a negotiated solution with the US.

II. Section 301 Tariffs Effective July 24

a. Additional Section 301 Tariffs on Imports from 60 Trading Partners

On July 23, 2026, the USTR announced new tariffs on nearly all imports from 60 trading partners pursuant to Section 301 of the Trade Act of 1974, which took effect the very next day, July 24, 2026. The tariffs are intended to address concerns regarding inadequate forced labor protections in certain foreign jurisdictions. The Administration concluded that all 60 trading partners failed to adequately prohibit the importation of goods produced with forced labor.

These tariffs generally apply at rates of 10% or 12.5% ad valorem, as follows:

• The difference between 10% and the normal Harmonized Tariff Schedule of the United States (HTSUS) Column 1 duty rate for the EU and Taiwan because they have Agreements on Reciprocal Trade with the US that address forced labor;
• 10% for Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Jordan, Malaysia, Mexico, Pakistan, Sri Lanka, Trinidad and Tobago, and the United Kingdom;
• The difference between 12.5% and the normal HTSUS Column 1 duty rate for Japan, South Korea, and Switzerland, pursuant to provisions in their Agreements on Reciprocal Trade; and
• 5% for Algeria, Angola, Australia, The Bahamas, Bahrain, Brazil, Chile, China, Colombia, Costa Rica, Dominican Republic, Egypt, Guyana, Hong Kong, Iraq, Israel, Kazakhstan, Kuwait, Libya, Morocco, New Zealand, Nicaragua, Nigeria, Norway, Oman, Peru, The Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, Thailand, Türkiye, United Arab Emirates, Uruguay, Venezuela, and Vietnam.

The 12.5% tariff on Brazil stacks with a 25% Section 301 tariff on Brazil that took effect on July 22. This means that most goods from Brazil are now subject to Section 301 tariffs totaling 37.5%.

According to USTR, the measures cover approximately 99.4% of imports into the US.

The action also provides for tariff-rate quotas for certain cotton and textile imports from Bangladesh, Cambodia, Indonesia, and Malaysia. USTR indicated that these quotas are intended to encourage the use of US-origin textile inputs and reduce reliance on supply chains that may involve forced labor. Until the tariff-rate quotas are implemented, covered textile products from those countries will be subject to the 10% Section 301 tariff.

b. Exclusions and Transition Rules

USTR announced several important exclusions from the new tariffs. The duties generally do not apply to products already covered by Section 232 tariffs, USMCA-qualifying goods, or certain raw materials that are not readily available from domestic sources.

In addition, goods loaded onto a vessel prior to July 24, 2026, and entered for consumption or withdrawn from warehouse for consumption in the United States before July 28, 2026, are exempt from the additional duties.

c. Relationship to Prior Global Tariffs

The new Section 301 tariffs replaced the temporary global tariff previously imposed under Section 122 of the Trade Act of 1974. They took effect the minute that the Section 122 tariff expired. The Section 122 tariff was implemented days after the Supreme Court invalidated the IEEPA tariffs.

d. Litigation Challenging the New Section 301 Tariffs

Lawsuits (including a putative class action) challenging the new forced labor-related Section 301 tariffs were filed in the US Court of International Trade the same day that they took effect. The plaintiffs reportedly argue that the tariffs exceed the authorization provided in Section 301, which has historically been used to address targeted practices by a single specific country or specific industries, and the new action was an unlawful, pretextual, and preordained attempt to reimpose the IEEPA tariffs.

It is unclear whether those challenges might succeed. The courts have previously upheld tariffs imposed and expanded under Section 301. The Supreme Court declined to take a case challenging a significant expansion of the Section 301 tariffs on China from the first Trump Administration earlier this year, after the importers in the case specifically invoked and expressed concern regarding the forced labor Section 301 investigation and other ongoing Section 301 investigations.

III. Potential Additional Section 301 Tariffs Following Google Fine

Also on July 24, President Trump stated that the United States would launch a trade investigation into the EU in response to its approximately $1 billion fine against Google under the Digital Markets Act. The President criticized the fine and prior EU enforcement actions involving other US technology companies as discriminatory treatment of American businesses and stated that the United States anticipated imposing a “substantial” tariff on EU products if the penalties are not reversed.

The threatened action would reportedly proceed under Section 301 of the Trade Act of 1974, the same statutory authority used for the new forced labor-related tariff measures discussed above. The threatened EU action is significant because it could create an additional layer of tariffs on EU-origin goods beyond the current Section 301 duties and any applicable rates under the US-EU tariff framework. The issue remains developing, and importers of EU-origin products should monitor whether USTR initiates a formal investigation, publishes a notice requesting comments, or announces proposed tariff coverage and rates.

IV. Key Considerations

a. Potential Business Impact

Importers should anticipate:

• Increased landed costs on imported merchandise;
• Higher customs duty deposits and cash flow requirements;
• Greater customs compliance obligations;
• Increased CBP audits, Requests for Information (CF-28), Notices of Action (CF-29), and post-entry reviews; and
• Enhanced scrutiny of forced labor compliance and supply chain documentation.

b. Immediate Steps Importers Should Consider

1. Quantify Tariff Exposure

• Identify imported products sourced from affected countries,
• Calculate projected annual duty increases, and
• Update pricing and landed cost models.

2. Review Country of Origin Determinations

• Confirm that country-of-origin analyses remain accurate, particularly where manufacturing or assembly occurs in multiple countries.

3. Audit HTSUS Classifications

• Review tariff classifications to ensure accuracy and determine whether alternative legally supportable classifications may affect duty liability.

4. Evaluate Customs Valuation Opportunities

• Consider whether customs valuation strategies, including the First Sale Rule where applicable, may lawfully reduce duty exposure.

5. Review Foreign Trade Zone (FTZ) Opportunities

• Evaluate whether FTZ utilization may provide duty deferral, weekly entry savings, or manufacturing benefits.

6. Evaluate Duty Drawback

• Determine whether imported merchandise subsequently exported or incorporated into exported products may qualify for duty drawback refunds.

7. Assess Customs Bond Sufficiency

• Higher duty liability frequently requires increased Continuous Customs Bond coverage.

8. Strengthen Supply Chain Due Diligence

Ensure suppliers can provide:

• Material traceability,
• Supplier certifications,
• Forced labor compliance documentation,
• Supply chain mapping, and
• Third-party audit reports.

9. Review Commercial Contracts

Evaluate:

• Tariff allocation provisions,
• Price adjustment clauses,
• Incoterms,
• Supplier reimbursement obligations, and
• Force majeure provisions.

10. Consider Supply Chain Diversification

• Where commercially feasible, evaluate alternative sourcing locations to reduce future tariff exposure while ensuring compliance with US country-of-origin rules.

c. Customs Compliance Will Become Increasingly Important

CBP is expected to closely monitor importer compliance in areas including:

• Country of origin,
• Valuation,
• HTSUS classification,
• Forced labor due diligence,
• Recordkeeping, and
• Reasonable care obligations.

Importers should ensure documentation supporting customs declarations is complete and readily available in the event of an audit or post-entry review.

d. Recommended Action Timeline

Within 30 Days

• Identify affected imports.
• Estimate increased tariff costs.
• Review customs bond sufficiency.
• Update financial forecasts.

Within 60–90 Days

• Audit HTS classifications.
• Review origin determinations.
• Evaluate FTZ, First Sale, and duty drawback opportunities.
• Strengthen supplier compliance documentation.

Ongoing

• Monitor future USTR and CBP guidance.
• Track additional Section 301 developments.
• Reassess sourcing strategies.
• Maintain robust customs compliance programs.

V. Conclusion

Taken together, the new Section 301 tariffs on 60 trading partners plus Brazil and the potential new tariffs on Canada and the EU reflect a broader shift toward overlapping tariff measures that vary significantly by country, product classification, statutory authority, effective date, policy rationale, and litigation risk. Importers should carefully review the annexes and implementation guidance for the actions, including product coverage, country-of-origin exposure, available exclusions, transition rules, and interactions with other duties such as Section 232 tariffs and preferential treatment under trade agreements. Companies with EU-origin supply chains should also monitor any new Section 301 investigation or tariff action arising from EU regulatory enforcement involving US technology companies. More broadly, companies should assess the potential impact of these developments on sourcing strategies, supply chains, pricing, customs compliance, and contractual obligations in light of the rapidly evolving US tariff landscape.

Butzel’s International Trade, Tariffs, and Customs Specialty Team has extensive experience helping clients with navigating this tariff landscape, closely monitoring trade developments, and providing strategic guidance on customs and tariff compliance and the implications of changing trade policies. We assist clients with:

• Tariff assessments,
• Country-of-origin analyses,
• HTSUS classification reviews,
• Customs valuation strategies,
• Forced labor compliance programs,
• Supply chain risk assessments,
• Duty drawback and Foreign Trade Zone planning,
• CBP audits and enforcement matters, and
• Supplier contract reviews and tariff allocation provisions.