Effective September 8, 2026, Canada implemented retaliatory tariffs on certain U.S. goods in response to the initial 50% tariffs imposed by the United States under Section 338 of the Tariff Act of 1930. To operationalize these measures, the Canada Border Services Agency (CBSA) issued Customs Notice 26-23, establishing binding administrative rules on how the surtax will be applied, calculated, and collected.
How the Surtax Applies
As noted in our previous bulletin the surtax applies exclusively to goods originating in the US regardless of where they are shipped from. Goods eligible to be marked as originating in US territories—specifically Puerto Rico, Guam, the Northern Mariana Islands, American Samoa, or the US Virgin Islands—fall outside the scope of the surtax.
The surtax covers approximately $28 billion in US exports, targeting a broad mix of manufactured, industrial, and consumer products—including cheese products, household appliances, cosmetics, agricultural equipment, motorcycles, and video game consoles. The product list aligns with items targeted by US Section 338 and 232 measures, focusing on US equivalents of Canadian goods facing US tariffs as well as key swing-state exports.
Excluded Tariff Categories and Transactions
A number of product categories and transaction types fall outside the surtax:
- Chapters 98 and 99 Exemptions: Goods classified under Chapters 98 or 99 (covering temporary importations, personal exemptions, and conveyances) are exempt unless the specific tariff item is listed in Schedule 4 to the United States Surtax Order (2026).
- No Tariff Stacking: Goods subject to surtax under the Steel Derivative Goods Surtax Order are not surtaxed again; the two measures are non-cumulative.
- In-Transit Shipments: Goods bound for Canada and under carrier control prior to September 8, 2026, are excluded, provided the importer holds documentation proof (such as a bill of lading).
- Returning Duty-Paid Goods: US-made goods previously imported and accounted for in Canada on a duty-paid basis are exempt upon return.
- Repairs and Alterations: Goods crossing the border for repair or alteration are exempt, provided the underlying Canadian good was previously duty-paid (excluding foreign repairs to vessels under item 9971.00.00).
- Import for Re-Export: Importations authorized under an Export and Import Permits Act (EIPA) permit for processing and subsequent re-export within designated timelines are fully exempt.
How to Calculate the Surtax
The surtax (15%, 25%, or 50%) applies to a good’s Value for Duty (VFD) —determined under sections 47 to 55 of the Customs Act—on top of regular customs or anti-dumping duties. The 5% GST is then calculated on the combined value for tax, which includes the surtax amount.
Refunds, Corrections and Remission
Importers who over-declare or mis-assess surtaxes have several mechanisms for recovery and relief:
- Corrections & Adjustments: Commercial importers can submit corrections or adjustments via the CARM Client Portal (CCP) or EDI/API.
- Recourse & Appeals: While the legal imposition of the surtax itself cannot be appealed under the Customs Tariff or the Customs Act, official CBSA re-determinations of origin, classification, or valuation may be appealed under Section 60 of the Customs Act within 90 days, provided all amounts owed have been paid.
- Government Remission: Transitional relief remains available under the Department of Finance’s US Remission Framework for businesses facing exceptional harm or unable to source critical US inputs elsewhere.
- Duties Relief & Drawback: Both Duty Drawback and Duties Relief remain available for surtaxes paid or payable. For CUSMA-origin goods, CUSMA’s “lesser of two duties” limitation does not apply.
- Remission Orders: Continues to provide remission for certain qualifying goods imported for public health, health care, public safety, national defence; goods imported for use in manufacturing, processing, production or packaging; and specified steel and aluminum goods for use in motor vehicles, and aircrafts
Key Takeaways for Businesses
- Verify CUSMA Origin: Confirm origin marking rules rather than shipping routes, as origin alone triggers the surtax.
- Audit Exclusions & Retain Records: Check eligibility for in-transit or repair exclusions and maintain proof (e.g., bills of lading, prior duty payments) for CBSA verification.
- Ensure Precise CARM Declarations: Self-assessed CARM errors can trigger post-release audits, penalties, and interest.
- Update Contracts & Supply Chains: Review contract terms (price escalation, tariff liability, force majeure) and identify alternative supply sources where possible.
- Pursue Relief & Advance Rulings: Evaluate government remission, Duty Drawbacks, or CBSA Advance Rulings to mitigate cost impacts and ensure certainty.
Fasken’s International Trade & Investment Law Group is available to advise importers and exporters, including with respect to the above matters, and will continue to monitor the evolving trade relationship between Canada and the US.
