Executive summary

On 8 September 2026, the United States (US) President signed five proclamations under Section 338 of the Tariff Act of 1930 (Section 338) escalating the US response to Canadian measures affecting US alcoholic beverages, dairy products and motor vehicles. Three proclamations prohibit importation of specified Canadian-origin goods currently subject to the additional 50% Section 338 duties, effective for covered products imported on or after 12:01 a.m. Eastern Time (ET) on 29 September 2026. Two proclamations modify the scope of the products subject to the 50% duties, removing goods such as rock salt and cement and adding others, including all-terrain vehicles (ATVs) and additional dairy products, effective 15 September 2026.

Covered products imported before 29 September 2026 but not yet entered for consumption, or withdrawn from warehouse for consumption, remain subject to the 50% duty rather than the prohibition.

United States-Mexico-Canada Agreement (USMCA) originating status does not exempt covered merchandise, and Section 338 measures apply in addition to duties imposed under Section 232 of the Trade Expansion Act of 1962.

Background

On 20 July 2026, the President signed Proclamations 11046 (alcoholic beverages), 11047 (dairy) and 11048 (motor vehicles), imposing an additional 50% ad valorem tariff on specified Canada-origin goods under Section 338 of the Tariff Act of 1930 (Section 338). Section 338 authorizes the President to declare additional duties of up to 50% ad valorem on imports from a foreign country upon a finding that the country discriminates against US commerce or applies an unreasonable charge, exaction, regulation or limitation that is not equally enforced on like articles of every foreign country. The duties were scheduled to take effect 19 August 2026, were suspended for three days by Proclamation 11056 while negotiations continued, and became effective at 12:01 a.m. ET on 22 August 2026 after those negotiations broke down. US Customs and Border Protection (CBP) issued filing guidance in CSMS #69606660 on 21 August 2026, establishing Harmonized Tariff Schedule of the United States (HTSUS) headings 9903.03.12 through 9903.03.16.

For more on the July Section 338 proclamations, see EY Global Tax Alert, US imposes additional 50% tariff on certain Canadian imports under Section 338, dated 21 July 2026.

New proclamations

The September proclamations recite that, following the effective date of the duties, Canada did not remove the measures at issue. With respect to alcoholic beverages, the proclamation cites an escalation, including Saskatchewan's 27 August 2026 announcement that the province would impose an additional 50% levy on US alcoholic beverages, having previously been one of two provinces that did not outright ban US product. With respect to dairy, the proclamation cites Canada's continued maintenance of its tariff-rate quota allocation measures on US cheeses. With respect to motor vehicles, the proclamation cites Canada's failure to revoke its motor vehicle tariff scheme. Separately, on 8 September 2026, Canada imposed responding tariffs on approximately US$20b of US exports, including steel, dairy and agricultural equipment.

Scope of import prohibitions

The prohibitions apply only to the Canadian-origin goods identified in the annexes to the three exclusion proclamations, with coverage determined by HTSUS classification. Based on the annexes:

• Alcoholic beverages: A broad range of specified Canadian alcohol, including beer, wine, vermouth, cider and other fermented beverages, whisky, rum, gin, vodka, brandy, liqueurs and cordials will be excluded. For certain classifications, the prohibition reaches only products packaged in bottles, cans, boxes, kegs or similar direct-to-consumption containers.
• Dairy and related products: Specified whey products, including certain whey protein concentrates and modified or dried whey, together with certain molasses products and non-alcoholic beer will be excluded.
• Motor vehicle products: Motorcycles and similar cycles with reciprocating internal combustion engines exceeding 800 cc will be excluded.

A transition rule applies. Covered products imported before 29 September 2026 but not yet entered for consumption, or withdrawn from warehouse for consumption, remain subject to the existing 50% Section 338 duty, rather than the prohibition.

Scope modifications to Section 338 product coverage

The two modification proclamations adjust the product lists underlying the July actions on alcoholic beverages and motor vehicles. The stated rationale is that a revised scope will continue to offset the burden on or disadvantage to US commerce while better serving the public interest. Publicly identified changes include the removal of rock salt and cement and the addition of ATVs and additional dairy products. Because the fact sheet published with the proclamations does not enumerate HTSUS numbers, importers should work from the annexes to the proclamations to identify the affected subheadings.

What this means for businesses

For merchandise listed in the exclusion annexes, duty modeling is no longer the relevant exercise; importers should confirm classification against the annexes, determine whether goods can be imported before 29 September 2026 and assess alternatives for merchandise that cannot, keeping in mind that the packaging-dependent scope for certain alcohol classifications may distinguish bulk shipments from consumer-ready product within the same subheading.

For the 15 September 2026 scope changes, the compressed timeline is the practical issue, as importers of ATVs and newly added dairy products have limited time to update classification logic, broker instructions and landed cost models before the additional 50% duty attaches, while those importing removed items such as rock salt and cement should confirm effective date treatment before adjusting entry declarations. Neither measure turns on USMCA qualification, so originating status provides no relief from the duty or the prohibition, and contractual exposure merits review, particularly force majeure, illegality and International Commercial Terms (Incoterms) provisions in agreements that assume a Canadian product can lawfully enter the United States.

Actions to consider

Affected entities should, depending on their particular circumstances, consider the following actions:

• Map Canadian-origin imports at the eight-digit HTSUS level against the annexes to each of the five proclamations to distinguish prohibited merchandise from merchandise that remains dutiable at 50%.
• Assess in-transit and warehoused inventory against the transition rule and confirm entry timing with brokers, including whether goods can be entered for consumption before 29 September 2026.
• Update Chapter 99 reporting logic and broker instructions for the 15 September 2026 additions and removals and reconcile against CBP filing conventions.
• Evaluate contractual and commercial exposure for prohibited merchandise, including supply agreements, distribution arrangements, purchase commitments and insurance coverage.
• Model alternative sourcing, market redirection and operating model changes for affected product lines, recognizing that USMCA qualification does not provide relief.
• Monitor for CBP implementing guidance, Federal Register publication of the proclamations and any further presidential action modifying, expanding or terminating the Section 338 measures, as well as further Canadian responses.