Summary
The United States will impose a new 50% Section 338 tariff on specified Canadian-origin goods beginning August 19, 2026.
The action consists of three separate tariff programs—covering products associated with disputes involving motor vehicles, dairy and alcoholic beverages. Despite those program names, the affected HTSUS lists extend well beyond those industries and include many consumer products commonly sold through ecommerce.
The 50% tariff is calculated on the product’s customs value and generally applies in addition to regular duties, fees and other applicable tariffs. Goods that qualify for preferential treatment under the United States-Mexico-Canada Agreement are not exempt from the Section 338 tariff.
Why It Matters
The three Section 338 programs cover hundreds of tariff classifications, including products frequently sold by cross-border merchants.
If a product is subject to both the new 50% Section 338 tariff and the existing 10% forced-labor Section 301 tariff on Canadian-origin goods, the combined additional tariff rate will be 60%. Regular Most-Favored-Nation duties and applicable fees may increase the total duty outlay further.
For example, a covered product with a customs value of $100 could incur:
- $50 in Section 338 tariffs
- $10 in Section 301 tariffs, if applicable
- Regular MFN duties and other applicable fees
This means merchants may need to reassess landed costs, margins and customer pricing before the tariffs take effect.
Products subject to Section 232 tariffs are exempt from the new Section 338 tariff. The proclamations also exempt qualifying civil aircraft and aircraft parts, excluding unmanned aircraft.
Who It Affects
The tariffs affect businesses importing covered Canadian-origin goods into the United States. The three programs contain separate product lists based on HTSUS classification.
Motor Vehicles program
The largest program covers 439 identified tariff classifications, including certain:
- Clothing, textiles, apparel and hats
- Handbags, suitcases and vanity cases
- Jewelry
- Honey
- Essential oils, perfumes and cosmetics
- Candles
- Office and school supplies
- Tableware and glassware
- Toiletries, gloves and belts
- Paper products, labels, envelopes, sacks and diaries
- Tools and electronics
- Furniture
- Sporting and recreational equipment
- Lamps and lighting
- Art and artworks
Dairy program
This program covers 52 identified tariff classifications, including certain:
- Milk and dairy products
- Blended syrups
- Baker’s mixes
- Essential oils
Alcoholic Beverages program
This program covers 63 identified tariff classifications, including certain:
- Essential oils
- Wood tableware and drinkware
- Baskets and related goods
- Sporting goods
The program names describe the underlying trade disputes—not the complete range of products subject to the tariffs. Merchants must review the actual HTSUS lists to determine whether a product is covered.
When It Hits
The tariffs take effect at 12:01 a.m. Eastern Time on August 19, 2026.
They apply to covered goods entered for consumption—or withdrawn from a warehouse for consumption—on or after that time. The proclamations do not provide a general in-transit exception.
The measures will remain in effect unless they are expressly reduced, modified or terminated.
What You Should Do Now
- Review the HTSUS classifications of all Canadian-origin products shipped to the United States.
- Compare those classifications against the annexes for all three Section 338 programs.
- Do not rely on the program names when assessing exposure; the tariff lists include products outside the automotive, dairy and alcohol industries.
- Identify goods also subject to the 10% forced-labor Section 301 tariff.
- Recalculate landed costs using the 50% Section 338 rate, applicable Section 301 tariffs, regular duties and fees.
- Confirm whether any products are already subject to Section 232 tariffs and therefore exempt from Section 338.
- Do not assume USMCA qualification exempts a covered product.
- Review pricing, margins, sourcing and inventory plans before August 19.
FlavorCloud’s landed-cost technology is being updated to account for the applicable Section 338 classifications and tariff-stacking rules, helping merchants calculate duties and display accurate total costs for U.S.-bound shipments.