Canada Responds to New U.S. Steel Tariffs with Dollar-for-Dollar Measures Against Certain U.S. Imports

On May 31, 2018, the United States announced that it would be imposing tariffs on certain Canadian steel and aluminum products. Canada responded immediately by announcing that as of July 1, 2018, it will impose surtaxes or similar trade-restrictive countermeasures on steel, aluminum and other specified goods imported from the United States, with a value of up to C$16.6-billion. The proposed Canadian surtaxes will be set at 25 per cent and 10 cent, the same rates that the United States will apply against Canadian steel and aluminum. The Government of Canada is accepting submissions from industry until June 15, 2018 on the proposed list of affected goods. Companies affected may wish to make submissions by the deadline.

BACKGROUND

U.S. President Donald Trump directed the United States Department of Commerce (DOC) to conduct investigations under section 232 of the Trade Expansion Act of 1962 on imports of steel and aluminum into the United States. The DOC concluded that steel and aluminum imports threatened to impair the United States national security. As a result, in March 2018, President Trump announced that the U.S. would be imposing a 25 per cent tariff on steel imports and a 10 per cent tariff on aluminum imports. Canada (and Mexico) were exempted from the tariffs until the end of April pending conclusion of negotiations for a revised North American Free Trade Agreement. The exemption deadline was extended to midnight May 31, 2018 and was not further extended by President Trump. As a result, the increased U.S. duties now apply to Canadian steel and aluminum exports to the U.S. as of June 1, 2018.

CANADA’S RESPONSE

The Canadian measures are intended specifically to offset the U.S. measures and affect only U.S. origin goods. They will apply to imports of U.S. origin goods valued at C$16.6-billion, the value of Canada’s exports to the United States in 2017 that are subject to the United States tariffs. Canada has published two lists of proposed goods to be subject to a surtax of either 25 per cent or 10 per cent, the same levels of duties that the U.S. has applied to Canadian steel and aluminum imports.

As set out in the Notice of Intent to Impose Countermeasures Action Against the United States in Response to Tariffs on Canadian Steel and Aluminum Products, Canada intends to apply the 25 per cent surtax to certain iron and steel products covered by chapters 72 and 73 of the List of Tariff Provisions. Canada intends to apply the 10 per cent surtax on certain aluminum products, as well as on a wide assortment of consumer goods, including:

  • Foods: orange juice, water, yogurt, coffee, chocolate, pizza, whisky, ketchup, mustard, certain prepared meals, maple syrup, candy, cucumbers, certain jams and jellies, soy sauce, mayonnaise, salad dressing and soups.
  • Hygiene products: manicure or pedicure preparations, shaving lotions and creams, skin creams.
  • Household appliances and articles: mattresses, washing machines, automatic dishwasher detergents, candles, glues and adhesives, tableware and kitchenware, plastic household articles, toilet paper, facial tissues, tablecloths and serviettes, greeting cards, refrigerator-freezers, dish washing machines, lawn mowers, laundry washing machines, seats with wooden frames, pens and markers.
  • Recreational articles: boats, inflatable boats, sailboats, motorboats and sleeping bags.
  • Other: insectides, fungicides and herbicides, plastic bags, plywood, certain paper and paperboard.

The surtaxes will apply only to goods originating in the U.S. that are entitled 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. This will limit the measures to goods of U.S. origin rather than goods originating in third countries that are transiting through or merely being distributed by the U.S.

CONSULTATIONS

The proposed Canadian surtaxes are not intended to be imposed before July 1, 2018, and the government has given potentially impacted parties until June 15, 2018 to make submissions to the Department of Finance regarding the expected beneficial or adverse impact of the proposed countermeasures. The Canadian government has requested that any submissions focus on products at the eight-digit tariff item level and invites submissions that express support for, or concern with, the proposed measures. The government is inviting views on ways to alleviate any concerns that are raised by stakeholders.

COMMENT

The measures being imposed by the U.S. and Canada reflect the wide disparity of the two countries (and that of Mexico) respecting the renegotiation of the North American Free Trade Agreement. It is unclear whether Canada’s response measures will cause the U.S. to backtrack on its announced duties on steel and aluminum, but companies should prepare for the implementation of the announced measures as of July 1, 2018. In this connection, importers of the affected goods may wish to express support for, or concerns with, any of the measures, by the government’s deadline of June 15, 2018, in order for the submissions to be taken into account by the government.

For further information, please contact:

Greg Kanargelidis                      416-863-4306
Zachary Silver                           416-863-2970

or any other member of our International Trade group.

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