Canada: Canada Imposes Retaliatory Measures In Response To U.S. Steel And Aluminum Tariffs

On Friday, June 29, 2018, the Government of Canada announced the final details of its retaliatory measures made in response to steel and aluminum tariffs imposed by the U.S. Canada's retaliatory measures, effective July 1, 2018, impose surtaxes on imports of steel, aluminum and a very wide range of other industrial and consumer products from the U.S.

Follow the links below to read today's public announcements:

Canada's June 2018 notice and consultations

The U.S. imposed tariffs on certain steel and aluminum products from Canada, at rates of 25% and 10% respectively, that took effect on June 1, 2018. For further details on these measures and their implications for the international trading regime, see our previous article U.S. Announcement of Massive Tariffs on Steel and Aluminum.

In response to these measures, Canada issued a Notice of intent to impose countermeasures action against the United States in response to tariffs on Canadian steel and aluminum products that proposed a list of tariff headings to which the countermeasures would apply. Canada's Department of Finance committed to impose countermeasures against up to CAD $16.6 billion in imports, the same value as the 2017 Canadian exports affected by the U.S.' measures. We provided further details regarding this notice in our previous article, The Maple Leaf Strikes Back: Canada Announces Retaliatory Tariffs on U.S. Products.

Canada's Department of Finance held consultations that were open until June 15, 2018. The consultations allowed companies to make submissions to express support for, or concern with, the proposed countermeasures, including detailed information substantiating any expected beneficial or adverse impact, as well as to provide views on ways to alleviate such concerns. The Canadian government reportedly received more than 1,000 submissions during the consultation process.

Canada's countermeasures come into force on July 1, 2018

Canada's countermeasures will apply to the list of products outlined at the heading, subheading or tariff item level in Tables 1 and 2, as set out in today's Department of Finance announcement, and should be read in conjunction with the Schedule to Canada's Customs Tariff. Goods from Table 1 will be subject to a 25% surtax. Goods from Tables 2 and 3 will be subject to a 10% surtax.

Canada's countermeasures will come into force on July 1, 2018 and will remain in place until the U.S. eliminates its trade-restrictive measures against Canada. Today's announcement from Global Affairs Canada includes the following statement:

Today the Government of Canada announced that in direct, measured and proportional response to U.S. tariffs on Canadian steel and aluminum, reciprocal surtaxes on $16.6 billion of imports of steel, aluminum and other products from the United States will come into effect July 1, 2018. Canada continues to work towards full and permanent removal of these unjustified and illegal U.S. tariffs.

Canada's retaliatory surtaxes do not automatically apply to all listed products imported from the U.S. Only goods that are eligible to be marked as U.S. goods under the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations are subject to the surtaxes.

The countermeasures will not apply to U.S. goods that are in transit to Canada on the day on which these countermeasures come into force. The surtaxes will apply on goods released from a Customs Bonded Warehouse or Sufferance Warehouse on or after July 1, 2018 regardless of the date of importation.

The vast majority of the goods listed in the Department of Finance's Notice released on June 1, 2018 made the final list; however, some goods, such as nut purees, beer kegs and aluminum foil, were removed.

Surtaxes will apply to the value for duty of the goods

The administration of the surtax orders is the responsibility of the Canadian Border Services Agency. The goods listed in Tables 1, 2 and 3 are subject to surtaxes on the value for duty in accordance with the United States Surtax Order (Steel and Aluminum) and the United States Surtax Order (Other Goods). Surtaxes will apply to both commercial and personal importations of goods.

Canada's Duties Relief and Duty Drawback Programs continue to be available to importers for duties, including surtaxes, paid or owed by Canadian businesses that meet the requirements of the programs.

The Canada Border Services Agency has updated Memorandum D16-1-1: Information pertaining to the application, collection and adjustment of surtaxes to provide further clarity on how the surtaxes are to be applied.

Canada makes $2 billion available to defend and protect Canadian workers

In the same announcement, the Government of Canada committed to making up to $2 billion available to defend and protect the interests of Canadian workers and businesses in the steel, aluminum and manufacturing industries. This includes a comprehensive set of measures:

  • Extending the duration of work-sharing agreements by 38 additional weeks under the Employment Insurance program to help employers retain their skilled workforce and avoid layoffs during challenging times.
  • Increasing funding to the provinces and territories to increase the capacity of the job and training programs available to workers affected by the U.S. measures.
  • Providing liquidity support to affected businesses.
  • Offering up to $250 million in new support through the Strategic Innovation Fund to help bolster the competitiveness of Canadian manufacturers and better integrate the Canadian supply chain of steel and aluminum.
  • The Government of Canada will invest $50 million over five years to help Canadian companies diversify their exports to take advantage of new trade agreements, such as CETA and CPTPP. Working in partnership with business associations, this will include new "export readiness" grants.

The Government of Canada has further agreed to work with stakeholders over the coming weeks on appropriate responses and safeguards.

What next?

With Canada's countermeasures coming into force in a matter of days, Canadian companies that rely on goods imported from the U.S. should, if they have not already, carefully review the listed tariff classifications and examine the anticipated impact on their supply chain.

Companies may wish to consider whether their goods are being imported under the proper tariff classification as well as whether the goods are truly originating from U.S. within the meaning of Canada's country of origin marking regulations.

Affected companies may also wish to examine opportunities for sourcing goods from countries other than the U.S., including by considering the benefits of Canada's other trade agreements, such as the Canada-European Union Comprehensive Economic Trade Agreement ("CETA") and Comprehensive and Progressive Agreement for Trans-Pacific Partnership ("CPTPP").

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