The Maple Leaf Strikes Back: Canada Announces Retaliatory Tariffs on US Products

On May 31, 2018, the United States announced that it is imposing tariffs on the import of certain steel and aluminum products from Canada, at rates of 25% and 10% respectively, under section 232 of the Trade Expansion Act of 1962. Using the power granted by this section, the Trump Administration is basing its tariff action on a finding  that Canadian imports of steel and aluminum are threatening to impair the national security of the United States. 

The move threatens to ignite a trade war between the United States and Canada (as well as the European Union, Mexico and others who have also been targeted). As noted by Canada’s Prime Minister Justin Trudeau, this is a “turning point in the Canada-US relationship”. More broadly, the questionable reliance on national security threatens the integrity of the world trading order as governed by the agreements of the World Trade Organization, NAFTA and other trade deals. These implications are addressed in our earlier client alert U.S. Announcement of Massive Tariffs on Steel and Aluminum.

As with most trade wars, importers and exporters will be caught in the cross-fire. Upon receiving the news from the United States, Canada immediately announced that it will be imposing proportionate retaliatory tariffs on imports of certain US products. 

Targeted Products

The retaliatory tariffs are designed to be so-called “dollar for dollar” tariffs – that is, they are intended to levy a similar amount of duty on US products to balance the duties imposed on Canadian steel and aluminum. Given the extensive steel and aluminum trade between the countries, and given that Canada is the largest supplier of steel and aluminum to the United States, these retaliatory measures will be amongst the highest ever imposed – totaling approximately $16.6 billion.

The current proposed plan is to levy the retaliatory tariffs on two groups of goods identified by their Harmonized System tariff classification.  The first is primarily comprised of steel products set out in Table 1 below. These products will be subject to 25% duties.  The second group of goods, found in Table 2 below, contains a potpourri of mostly consumer and retail products ranging from yogourt to dishwasher detergent to motorboats. These Table 2 goods are subject to 10% duties. The list has reportedly been designed by Canadian officials to exert the maximum amount of pressure on the Trump Administration by targeting products from swing states in the upcoming US midterm elections and key Republican congressional districts.

There are several important points to bear in mind when considering the proposed retaliatory tariffs:

  1. They will apply on goods that originate in the United States. Canada will assess this on the basis of the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations. If the goods are eligible to marked as US origin, the duty will apply.
  2. They will take effect July 1, 2018. However, the retaliatory tariffs will only apply to goods shipped on or after that date – goods that are in transit on July 1, 2018 will not be subject to the Retaliatory Tariffs.
  3. They will remain in force until the United States eliminates its illegal tariffs on Canadian steel and aluminum.

Importer and Exporter Submissions on Proposed Retaliation

Companies should now be closely reviewing their existing supply chains and distribution channels to determine the impact of the US measures and Canada’s  proposed retaliation. They should be considering competitive impacts and strategies for  alternative sourcing or markets for their products.

It should also be noted that retaliatory tariffs on these products are proposed and not final. The Department of Finance is accepting written submissions up until June 15, 2018. This provides companies  doing business on either side of the border with an important opportunity to have input on the proposed retaliatory tariffs, either to revise, remove or  add products proposed for retaliation. The International Trade and Investment Law Group at McCarthy Tétrault has extensive experience working the Ministry of Finance with regards to these matters and can assist to ensure any submissions have maximum impact. We can also assist in restructuring supply chains and helping companies cope with the new measures as they come into force.

***

Table 1

Tariff heading, subheading or item*

Description**

72.06

Iron and non-alloy steel in ingots or other primary forms (excluding iron of heading 72.03)

72.07

Semi-finished products of iron or non-alloy steel

72.08

Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, hot-rolled, not clad, plated or coated

72.09

Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, cold-rolled (cold-reduced), not clad, plated or coated

72.10

Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, clad, plated or coated

72.11

Flat-rolled products of iron or non-alloy steel, of a width of less than 600 mm, not clad, plated or coated

72.12

Flat-rolled products of iron or non-alloy steel, of a width of less than 600 mm, clad, plated or coated

72.13

Bars and rods, hot-rolled, in irregularly wound coils, of iron or non-alloy steel

72.14

Bars and rods of iron or non-alloy steel, not further worked than forged, hot-rolled, hot-drawn or hot-extruded, but including those twisted after rolling.

72.15

Other bars and rods of iron or non-alloy steel

72.17

Wire of iron or non-alloy steel

72.18

Stainless steel in ingots or other primary forms; semi-finished products of stainless steel

72.19

Flat-rolled products of stainless steel, of a width of 600 mm or more

72.20

Flat-rolled products of stainless steel, of a width of less than 600 mm

72.21

Bars and rods, hot-rolled, in irregularly wound coils, of stainless steel

72.22

Other bars and rods of stainless steel; angles, shapes and sections of stainless steel

72.23

Wire of stainless steel

72.24

Other alloy steel in ingots or other primary forms; semi-finished products of other alloy steel

72.25

Flat-rolled products of other alloy steel, of a width of 600 mm or more

72.26

Flat-rolled products of other alloy steel, of a width of less than 600 mm

72.27

Bars and rods, hot-rolled, in irregularly wound coils, of other alloy steel

72.28

Other bars and rods of other alloy steel; angles, shapes and sections, of other alloy steel; hollow drill bars and rods, of alloy or non-alloy steel

72.29

Wire of other alloy steel.

7216.10

U, I or H sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or extruded, of a height of less than 80 mm

7216.21

L sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or extruded, of a height of less than 80 mm

7216.22

T sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or extruded, of a height of less than 80 mm

7216.50

Other angles, shapes and sections, of iron or non-alloy steel, not further worked than hot-rolled, hot-drawn or extruded

7216.99

Other angles, shapes and sections, of iron or non-alloy steel

73.05

Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross-sections, the external diameter of which exceeds 406.4 mm, of iron or steel

73.06

Other tubes, pipes and hollow profiles (for example, open seam or welded, riveted or similarly closed), of iron or steel

7301.10

Sheet piling of iron or steel, whether or not drilled, punched or made from assembled elements

7302.40

Railway or tramway track construction material of iron or steel: Fish-plates and sole plates

7302.90

Other railway or tramway track construction material of iron or steel

7304.11

Line pipe of a kind used for oil or gas pipelines: Of stainless steel

7304.19

Line pipe of a kind used for oil or gas pipelines: Other

7304.24

Casing or tubing, of a kind used in drilling for oil or gas: Of stainless steel

7304.29

Other casing or tubing, of a kind used in drilling for oil or gas

7304.31

Tubes and pipes, of circular cross-section, of iron or non-alloy steel: Cold-drawn or cold-rolled (cold-reduced)

7304.39

Other tubes and pipes, of circular cross-section, of iron or non-alloy steel

7304.41

Tubes and pipes, of circular cross-section, of stainless steel: Cold-drawn or cold-rolled (cold-reduced)

7304.49

Other tubes and pipes, of circular cross-section, of stainless steel

7304.51

Tubes and pipes, of circular cross-section, of other alloy steel: Cold-drawn or cold-rolled (cold-reduced)

7304.59

Other tubes and pipes, of circular cross-section, of other alloy steel

7304.90

Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel.

*Where listed at the heading or subheading level, coverage includes all tariff items under that heading or subheading. **Descriptions are included for illustrative purposes and do not necessarily reflect Harmonized System nomenclature.

Table 2

Tariff heading, subheading or item*

Description**

0403.10

Yogourt

0901.21

Coffee, roasted: Not decaffeinated

1602.32.11

Prepared meals: Of spent fowl; Specially defined mixtures

1602.32.92

Other: Specially defined mixtures, other than in cans or glass jars; Spent fowl other than in cans or glass jars

1602.50.10

Prepared meals, of bovine

1602.50.99

Other prepared or preserved meat of bovine, other than in cans or glass jars

1702.20

Maple sugar and maple syrup

1704.90.20

Liquorice candy; Toffee

1704.90.90

Other sugar confectionery (including white chocolate), not containing cocoa.

1806.31

Other chocolate, in blocks, slabs or bars: Filled

1806.32

Other chocolate, in blocks, slabs or bars: Not filled

1905.90.51

Pizza and quiche

2001.10

Cucumbers and gherkins

2007.99.10

Strawberry jam

2007.99.90

Nut purées and nut pastes, berry purées, other fruit purées other than banana purée, other jams, jellies

2009.12

Orange juice: Not frozen, of a Brix value not exceeding 20

2103.10

Soya sauce

2103.20

Tomato ketchup and other tomato sauces

2103.30.20

Prepared mustard

2103.90

Mayonnaise, salad dressing, mixed condiments and mixed seasonings, other sauces

2104.10

Soups and broths and preparations therefor

2202.10

Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured

2208.30

Whiskies

3304.30

Manicure or pedicure preparations

3305.30

Hair lacquers

3307.10

Pre-shave, shaving or after-shave preparations

3307.49

Preparations for perfuming or deodorizing rooms, including odoriferous preparations used during religious rites, nes

3401.30

Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap

3402.20.10

Automatic dishwasher detergents

3406.00.90

Other candles and tapers and the like not including those for birthdays, Christmas or other festive occasions

3506.10

Products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1 kg

3808.91.10

Insecticides: In packages of a gross weight not exceeding 1.36 kg each

3808.92.10

Fungicides: In packages of a gross weight not exceeding 1.36 kg each

3808.93.10

Herbicides, anti-sprouting products and plant-growth regulators: In packages of a gross weight not exceeding 1.36 kg each

3923.21.90

Other sacks and bags (including cones) of polymers of ethylene

3923.29.90

Other sacks and bags (including cones) of other plastics, nes

3924.10

Tableware and kitchenware

3924.90

Household articles and hygienic or toilet articles, of plastics

4412.39

Plywood, consisting solely of sheets of wood (other than bamboo), each ply not exceeding 6 mm thickness: Other, with both outer plies of coniferous wood

4412.99.90

Other plywood, veneered panels and similar laminated wood

4802.56

Other paper and paperboard, not containing fibres obtained by a mechanical or chemi-mechanical process or of which not more than 10% by weight of the total fibre content consists of such fibres: Weighing 40 g/m² or more but not more than 150 g/m², in sheets with one side not exceeding 435 mm and the other side not exceeding 297 mm in the unfolded state

4811.59

Other paper and paperboard coated, impregnated or covered with plastics (excluding adhesives)

4818.10

Toilet paper

4818.20

Handkerchiefs, cleansing or facial tissues and towels

4818.30

Tablecloths and serviettes

4822.10

Bobbins, spools caps and similar supports of a kind used for winding textile yarn, of paper pulp, paper or paperboard (whether or not perforated or hardened)

4822.90

Other bobbins, spools caps and similar supports of paper pulp, paper or paperboard (whether or not perforated or hardened)

4909.00

Printed or illustrated postcards; printed cards bearing personal greetings, messages or announcements, whether or not illustrated, with or without envelopes or trimmings.

7310.10

Beer kegs, of iron or steel, of a capacity of 50 litres or more

7310.29

Beer kegs, of iron or steel, of a capacity of less than 50 litres

7321.90

Parts of iron or steel, of stoves, ranges, grates, cookers (including those with subsidiary boilers for central heating), barbeques, braziers, gas-rings, plate warmers and similar non-electric domestic appliances

76.04

Aluminum bars, rods and profiles

76.05

Aluminum wire

76.06

Aluminum plates, sheets and strip, of a thickness exceeding 0.2 mm

76.07

Aluminum foil (whether or not printed or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2 mm

76.08

Aluminum tubes and pipes

76.09

Aluminum tube or pipe fittings (for example, couplings, elbows, sleeves)

76.10

Aluminum structures (excluding prefabricated buildings of heading 94.06) and parts of structures (for example, bridges and bridge-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminum plates, rods, profiles, tubes and the like, prepared for use in structures

76.11

Aluminum reservoirs, tanks, vats and similar containers, for any material (other than compressed or liquefied gas), of a capacity exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment

76.12

Aluminum casks, drums, cans, boxes and similar containers (including rigid or collapsible tubular containers), for any material (other than compressed or liquefied gas), of a capacity not exceeding 300 litres, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment

76.13

Aluminum containers for compressed or liquefied gas

76.14

Stranded wire, cables, plaited bands and the like, of aluminum, not electrically insulated

76.15

Table, kitchen or other household articles and parts thereof, of aluminum; pot scourers and scouring or polishing pads, gloves and the like, of aluminum; sanitary ware and parts thereof, of aluminum

76.16

Other articles of aluminum

8418.10

Combined refrigerator-freezers, fitted with separate external doors

8419.19

Instantaneous or storage water heaters, non-electric: Other than instantaneous gas water heaters

8422.11.90

Other dish washing machines, other than of the household type

8433.11

Mowers for lawns, parks or sports-grounds: Powered, with the cutting device rotating in a horizontal plane

8450.11

Household or laundry-type washing machines, each of a dry linen capacity not exceeding 10 kg: Fully-automatic machines

8450.20

Household or laundry-type washing machines, each of a dry linen capacity exceeding 10 kg

85.37

Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 85.35 or 85.36, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of Chapter 90, and numerical control apparatus, other than switching apparatus of heading 85.17

8903.10

Inflatable boats

8903.91

Sailboats, with or without auxiliary motor

8903.92

Motorboats, other than outboard motorboats

8903.99.90

Outboard motorboats, other vessels for pleasure or sports, nes

90.32

Automatic regulating or controlling instruments and apparatus

9401.61

Other seats, with wooden frames: Upholstered

9404.21

Mattresses of cellular rubber or plastics, whether or not covered

9404.29

Mattresses of other materials

9404.30

Sleeping bags

9404.90

Other bedding and similar articles, nes

9504.40

Playing cards

9608.10

Ball point pens

9608.20

Felt tipped and other porous-tipped pens and markers

*Where listed at the heading or subheading level, coverage includes all tariff items under that heading or subheading. **Descriptions are included for illustrative purposes and do not necessarily reflect Harmonized System nomenclature.

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