Canada: The U.S.-Canada Trade War Begins: Trump Imposes Steel & Aluminum Tariffs & Canada Releases Retaliation List

Last Updated: June 1 2018
Article by Cyndee Todgham Cherniak

On May 31, 2108, President Trump issued two Presidential Proclamations, which impose steel and aluminum tariffs on Canada. All exports of covered steel will be subject to a 25% import tariff (Canadian steel into the United States) and all exports of covered aluminum products will be subject to a 10% tariff (Canadian aluminum into the United States). This is a sad day for Canada-US trade relations. The two Presidential Proclamations are:

  1. Presidential Proclamation Adjusting Imports of Steel into the United States; and
  2. Presidential Proclamation Adjusting Imports of Aluminum into the United States.

These measures are Presidential Proclamations and are decisions made by President Trump personally.  These are not anti-dumping and countervailing measures that result from complaints by domestic industry participants. These are not safeguard measures. These are unilateral measures taken pursuant to section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. 1862).  President Trump has taken the position that Canada poses a national security threat to the United States.  If Canada agrees to all of President Trump's NAFTA renegotiation demands, then and only then will Canada be viewed as not a threat to the national security of the United States.

Covered Steel Under Trump Steel Tariffs

The Trump Steel Tariffs cover a wide range of steel products, classified under the Harmonized Tariff Schedule (HTS) 6 digit levels 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90.  See Presidential Proclamation on Adjusting Steel Imports Into the United States (March 8, 2018).

Covered Aluminum Under Trump Aluminum Tariffs

The Trump Aluminum Tariffs cover products falling under HTS headings for (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods, and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plate, sheet, strip, and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70). The Trump Aluminum Tariffs do not cover bauxite or alumina feedstock, aluminum waste and scrap, and/or aluminum powders or flakes. See Presidential Proclamation on Adjusting Aluminum Tariffs Into the United States (March 22, 2018).

Canada Announced Retaliation List

Canada has indicated it will retaliate against the Trump Steel Tariffs and the Trump Aluminum Tariffs by imposing countermeasures on certain U.S.-origin goods. These countermeasures will only apply to goods originating from the U.S., which shall be considered as those goods eligible to be marked as a good of the U.S. in accordance with the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations.
Canada's Department of Finance has posted a list of proposed retaliatory tariffs that incldues steel produts, aluminum products and a range of other strategic products.  Canada will impose tariffs on U.S. goods totaling $16.6B (which is the calculated value of Canadian steel and aluminum exports to the U.S. affected by the Trump Steel Tariffs and Trump Aluminum Tariffs).

Canada will impose tariffs on U.S. steel (see table 1) at a rate of 25%, and aluminum and various items at a rate of 10% (see table 2). The other retaliatory tariff items include plywood, veneer, boats, playing cards, beer kegs, whisky/bourbon, coffee, orange juice, strawberry jam, tomato ketchup, mustard, mayonnaise,  maple syrup, licorice candy, soup, gherkins and cucumbers, toilet paper, dishwasher detergent, candles, hair lacquers, combined refrigerators/freezers, laundry-type washing machines, dishwashers, water heaters, mattresses, sleeping bags, lawn mowers, ballpoint and felt-tip pens, etc.

The duties will not be imposed until after a consultation period has ended on June 15th.  It is expected/planned that the Canadian retaliatory tariffs will start on July 1, 2018.  The countermeasures will remain in place until the United States ends the Trump Steel Tariffs and Trump Aluminum Tariffs.

Canadian Importers Should Start Planning Alternative Sources of Supply

Canadian importers and manufacturers should undertake the following steps to if they could be caught by Canada's countermeasures:

  1. review imports/inputs and identify whether any goods imported by your company are on Canada's countermeasures list;
  2. review H.S. classifications and ruling letters when imported goods have a similar H.S. Code to the items on Canada's countermeasures list;
  3. review certificates of origin for NAFTA goods and goods manufactured or purchased from the United States and identify whether any goods imported by your company are on Canada's countermeasures list;
  4. review current purchase orders - do you need to cancel shipments that will arrive after July 1, 2018 or attempt to speed up delivery before the tariffs are imposed;
  5. review long term supply contracts for supplies on inputs - do you need to cancel shipments that will arrive after July 1, 2018 or attempt to speed up delivery before the tariffs are imposed;
  6. review supply alternatives - can these goods be purchased from another source country (e.g., EU member as the Canada-EU CETA may apply);
  7. review supply agreements to see if there are penalties for terminating agreements with suppliers;
  8. review pricing of goods sold in Canada and determine whether price increases are necessary for resales or downstream goods;
  9. implement changes to systems to reflect duty-included pricing of items
  10. update posted pricing to reflect and price increases or changes to sourcing of goods;
  11. review whether any changes to sourcing affects NAFTA treatment of downstream goods and NAFTA certificates of origin;
  12. determine whether your customs broker needs additional bonds to cover the countermeasure tariffs; and
  13. be ready for more change.

We would be pleased to discuss additional steps that should be taken. Corporate Counsel may be able to identify risks and potential opportunities by taking proactive steps.

U.S. Exporters Should Submit Consultation Letters

U.S exporters do not have to stay silent.  U.S. exporters who are affected by Canada's countermeasures have 14 days to reach out to their buyer/Canadian importers and ask them to help convince the Government of Canada to remove their items from the countermeasures list. If you do nothing, there will be Canadian countermeasures unless the Trump Steel Tariffs and Trump Aluminum Tariffs are reversed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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