Section 338 Tariffs on Imports from Canada Challenged in Court

The first lawsuit challenging the use of Section 338 of the 1930 Tariff Act to impose import tariffs was filed Oct. 20 at the Court of International Trade.

President Trump imposed a Section 338 tariff of 50 percent against covered goods from Canada that are entered or withdrawn from warehouse for consumption on or after 12:01 a.m. EDT on Aug. 22, with no apparent termination date. Affected products represent about five percent of Canadian exports to the U.S. (valued at approximately $20 billion) and are set forth in the annexes of the three original proclamations (available here, here, and here). They include wine and other alcoholic beverages, cosmetics, ice skates, hockey sticks, fishing rods, cement, paper and wood items, honey, textiles and apparel, machinery, jewelry, furniture, and other items. Excluded products include energy, potash, products subject to Section 232 tariffs, articles subject to the World Trade Organization Agreement on Trade in Civil Aircraft (except drones), and certain other goods, such as fish or critical minerals. 

The Liberty Justice Center, which won a case at the Supreme Court against the global IEEPA tariffs and secured an initial victory at the CIT against the Section 122 tariffs that replaced them (and is also challenging the Section 301 tariffs imposed over forced labor concerns), said it filed the Section 338 case on behalf of a U.S. business “and a proposed class of importers.” The suit asks the CIT to declare the tariffs unlawful, block their collection and order refunds, and issue a preliminary injunction to stop collection of tariffs.

According to an LJC press release, the lawsuit argues that Section 338 “is aimed at specific foreign discrimination against U.S. commerce” and “is not an all-purpose authorization for the executive branch to impose sweeping tariffs or import restrictions whenever a trade dispute arises.” Specific assertions include:

– Congress superseded Section 338 with Section 301 of the Trade Act of 1974, which established procedures and safeguards for addressing unfair foreign trade practices;

– the “Canadian policies identified by the administration do not justify the sweeping tariffs imposed” because “two of the measures arose in response to [President Trump’s] own tariffs, while the third involves Canadian dairy policies governed by the U.S.-Mexico-Canada Agreement;”

– tariffs were imposed on products unrelated to the alleged discrimination; and

– the administration violated Section 338’s 30-day waiting period; e.g., by collecting tariffs seven days after adding certain cheeses to the tariff list.

The press release notes that this case raises concerns beyond Canada because “if Section 338 can be used as a broad tariff authority here, it could become a standing tool for presidents of either party to impose tariffs or import restrictions on other trading partners without meaningful congressional control.”