| TRUMP ADMINISTRATION TRADE ALERT – IMPORTS | |
| HEADLINE | Pause of Tariffs on Goods from Mexico and Canada That are Compliant With the USMCA |
| DATE | 6 March 2025 |
| AGENCY | Trump Administration, Executive Order |
| EFFECTIVE DATE | 7 March 2025, 12:01 a.m. Eastern Time |
| BACKGROUND | President Trump issued executive orders in February that imposed 25% ad valorem tariffs on articles that are products of Mexico and Canada in February 2025. These measures were delayed[CE1] after negotiation until March 4, 2025, which were then implemented for Mexico and Canada. After significant market disruption, especially to the automotive industry, the Administration issued revised executive orders on March 6 providing certain exceptions. |
| DETAILS | The original orders imposed: 1) An additional 25% tariffs on all products of Mexico 2) An additional 25% tariffs on all products of Canada, except "energy products" from Canada which will only have a 10% tariff The March 6 revisions provided an exception to these duties for articles that qualify for the United States – Mexico – Canada (USMCA) agreement(i.e., those articles that are entered free of duty under the terms of General Note 11 to the Harmonized Tariff Schedule of the United States (HTSUS)). Although the order cites the automotive industry as the impetus for the revision, the exception applies to any USMCA qualifying article. Additionally, the revised orders provide a lower 10% rate of duty for potash that does not enter under USMCA. The Administration has said in press reports that this USMCA exception will last until April 2. But it is noteworthy that there is no expiration date applicable to this exception included in the revised orders. Retaliation clauses in the original EOs on Mexico (clause (c)) and Canada (clause (d)), which threaten additional tariffs if a country imposes tariffs on U.S. goods, have not yet been employed even though Canada has enacted retaliatory tariffs on $30 billion in goods imported from the U.S. |
| BASIS | International Emergency Economic Powers Act (IEEPA), 50 U.S. Code § 1701 et seq. citing a declaration of national emergency in response to the "extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl"; the National Emergencies Act (50 U.S.C. 1601 et seq.) (NEA); section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483); and section 301 of title 3, United States Code. |
| HTS/ PRODUCTS |
All products of Mexico and Canada that are entered free of duty
as a good of Canada or Mexico under the terms of the USMCA (General
Note 11 to the HTSUS). This exception includes any qualifying
treatment in subchapter XXIII of chapter 98 and subchapter XXII of
chapter 99 of the HTSUS. The applicable HTSUS subheadings for potash are as follows: " 2815.20.0050 " 2815.20.0090 " 3104.20.0010 " 3104.20.0050 " 3104.30.0000 " 3104.90.0100 " 3105.10.0000 " 3105.20.0000 " 3105.60.0000 |
| COUNTRY | Mexico, Canada |
| CITE | Executive Order Amendment to Duties to Address the Flow of Illicit
Drugs Across Our Southern Border – The White House Executive Order Amendment to Duties to Address the Flow of Illicit Drugs Across Our Northern Border – The White House CSMS # 64335789 – GUIDANCE – Update on Additional Duties on Imports from Mexico – USMCA Qualifying Products and Potash CSMS # 64336037 – GUIDANCE – Update on Additional Duties on Imports from Canada – USMCA Qualifying Products and Potash |
The use of IEEPA for the imposition of tariffs is a relatively untested mechanism for the President's authority for raising tariffs. We anticipate that these tariffs will be challenged in court if they remain in place, even if the tariffs are ultimately only imposed on non-USMCA-qualifying importations of Canadian or Mexican origin. Importers are advised to track the liquidation of entries for which the IEEPA duties on goods from Canada or Mexico are assessed in order to file protests, if necessary.
Continue to watch this space for updates regarding the implementation of these and other tariff programs.
Summary
President Trump issued three executive orders that “impose, consistent with law, ad valorem tariffs on articles that are products of” 25% on products of Mexico, 25% on products Canada (except energy products, which are at a lower 10% rate), and an additional 10% on products of China as set forth in each order, under IEEPA and other authorities. These duties are effective Tuesday, February 4, 2025. There is no drawback or duty-free de minimis relief available for these duties, and they will apply on top of other applicable programs.
Products Affected
The executive orders cover “all articles” that are the product of Mexico, Canada, and China, “as defined by the Federal Register notice.” The Secretary of Homeland Security is tasked with determining and publishing “the modifications necessary to the Harmonized Tariff Schedule of the United States (HTSUS) in order to effectuate this order consistent with law.” This notice has not been published yet. While it is anticipated that these E.O.s will cover all products from each nation, with the exception of Canadian energy products, there are significant questions to be resolved. For example, if a Chinese item was excluded from the Section 301 tariffs, will it be subject to the tariffs under the February 1 E.O.? Similarly, does the E.O. apply equally to goods that originate in Canada or Mexico under the United States-Mexico-Canada Agreement (USMCA) as it does to goods that are substantially transformed in Canada or Mexico, but do not qualify as originating under USMCA?
Canadian “energy or energy resources,” which are subject to a 10% tariff instead of the 25% tariff applicable to other Canadian products, are defined by reference to section 8 of the president's order on January 20, 2025, Declaring a National Energy Emergency to include “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. 1606 (a)(3).”
Application in Relation to Other Duties
The rates of duty established in each order are defined to be in addition to any other duties, fees, exactions, or charges applicable to such imported articles.
No drawback program relief (19 CFR parts 190, 191) is available with respect to the duties imposed pursuant to these orders.
Duty-free de minimis treatment under 19 U.S.C. 1321 is not available for the articles affected by the tariff action.
For foreign trade zone products subject to each order, articles that are products of Canada, other than “domestic status” eligible products defined in 19 CFR 146.43, entered after the effective date must be admitted as “privileged foreign status” as defined in 19 CFR 146.41, and upon entry for consumption will be subject to the increased duties in effect at the time of admittance into the foreign trade zone.
There is no indication as to whether goods that are entered pursuant to one of the provisions of Chapter 98 of the HTSUS would be exempt from these duties.
Retaliation Clause
Each order contains a retaliation clause reserving the right to “increase or expand in scope” the tariffs imposed by each E.O., should the country retaliate by imposing additional tariffs on U.S. goods. Canada and Mexico have already announced tariff retaliations are planned, with Canada specifying 25% additional duties would be imposed on C$30 billion of U.S goods as of February 4, and an additional C$125 billion in goods in three weeks, according to Prime Minister Justin Trudeau's announcement February 1. He stated the list of products would include “American beer, wine and bourbon, fruits and fruit juices, including orange juice, along with vegetables, perfume, clothing and shoes … major consumer products like household appliances, furniture and sports equipment, and materials like lumber and plastics, along with much, much more” as well as some “non-tariff measures” related to critical minerals, energy procurement, and other unspecified partnerships. See Transcript of Trudeau's response to U.S. tariffs on Canada, Global News, Posted February 1, 2025, 10:21 pm, available at https://globalnews.ca/news/10993376/trudeau-trump-tariffs-us-canaaada/.
Products Excluded and/or Exclusion Process
No product exclusions or exclusion process were announced.
Removal of Duties
The Secretary of Homeland Security is charged with consulting with several other cabinet secretaries and the attorney general regarding the emergency situation and is required to “inform the President of any circumstances that, in the opinion of the Secretary of Homeland Security,” indicate the government of the tariffed country has taken “adequate steps” to alleviate the emergency that gave rise to the order. If the president determines sufficient action to stem the crisis has occurred, the tariffs will be removed. What constitutes “adequate steps” to justify removal is not defined.
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.
