Section 338 of the US Tariff Act of 1930 is a nearly century-old law that lets the US President impose additional duties — up to 50% — on goods from a country the US decides is discriminating against American trade. It had never been used before. On July 20, 2026, the Trump administration invoked it for the first time ever, aimed squarely at Canada, with the tariffs taking effect August 19, 2026 on close to CAD $20 billion of Canadian goods.
Let's start with what actually happened, because the headlines moved faster than most Canadian business owners could process them. On July 20, 2026, the US administration invoked Section 338 of the Tariff Act of 1930 — a provision that has existed since before the Second World War and had genuinely never been used by any president until now. It authorizes the White House to slap additional duties of up to 50% on goods from any country it determines is discriminating against US commerce. Canada is the first country it's ever been used against.
The proclamations cite three specific Canadian practices as the justification: provincial restrictions on the sale of US alcohol, a dairy quota-eligibility rule the US says disadvantages American suppliers, and Canada's surtax on US-made vehicles. Whether or not you think those are fair complaints is beside the point for your business — what matters is that the response was a blunt 50% tariff on roughly CAD $20 billion worth of Canadian-origin goods entering the United States, effective August 19, 2026. Canada's average tariff rate into the US jumped by close to two full percentage points overnight, from just over 4% to roughly 6.27%.
For a Canadian sourcing business, the headline number isn't really the story. The story is the precedent. A tool that sat unused for 96 years got pulled off the shelf and fired in a matter of weeks, with essentially no warning period for businesses to adjust. If you're building a supply chain — or a fulfillment model, or a cross-border logistics arrangement — on the assumption that Canada-US trade rules are stable and predictable, Section 338 is proof that assumption no longer holds.
It's worth sitting with how unusual this actually is in trade policy terms. Section 232 (steel, aluminum, autos) and Section 301 (China) had both already been used repeatedly in recent years, so businesses had at least some track record to model against — you could look at how fast a Section 301 list expanded last time and estimate your risk window. Section 338 has no track record. Nobody, including most trade lawyers, had a clear playbook for how fast it could move or how far it could reach, because it had simply never been tested. That's part of why it landed as such a shock: there was no prior pattern to price into anyone's risk model.
⚠️ Don't assume CUSMA protects you. Section 338 tariffs apply to Canadian goods entering the US regardless of whether they qualify as CUSMA-originating. Being fully compliant with the Canada-US-Mexico Agreement does not shield you from this specific measure — a detail that has caught out several exporters who assumed their CUSMA certificates were a blanket protection.
Section 338 isn't a blanket tariff on every Canadian export, and it's worth being precise about scope so you're not making sourcing decisions based on rumour. The current proclamations focus on categories tied to the three underlying disputes: certain dairy products, alcoholic beverages, and motor vehicles, alongside a wider set of goods swept in under the "discrimination" finding. Roughly CAD $17.7 billion of that $20 billion in exposure sits at the full 50% rate.
A meaningful list of categories is explicitly carved out. Energy products (oil, gas, electricity) are excluded. Potash is excluded. Fish and seafood are excluded. Critical minerals are excluded. And anything already caught under Section 232 tariffs — steel, aluminum, copper, automobiles, and auto parts — is excluded from Section 338 specifically, because it's already being taxed under a different mechanism.
Here's the distinction that trips people up: Section 338 taxes goods made in Canada and shipped into the US. It is not a tax on goods you import into Canada from China or Vietnam. If your business doesn't export anything to the US, you might read that and conclude this doesn't apply to you. That conclusion is only half right, and the next section explains why.
It's also worth noting how the rate itself was calculated. The 50% figure isn't an arbitrary round number — it reflects the administration's estimate of the trade impact of the practices it's citing, doubled as a deterrent. Trade lawyers reviewing the proclamations have pointed out that this kind of "estimate the harm, then multiply" approach gives the White House considerable discretion to justify future rate changes using the same underlying authority, which is one more reason not to treat 50% as a ceiling.
| Category | Section 338 Status | Notes for Canadian Businesses |
|---|---|---|
| Dairy products | Covered, up to 50% | Direct trigger for the proclamation |
| Alcoholic beverages | Covered, up to 50% | Tied to provincial listing practices |
| Motor vehicles (non-Section 232) | Covered, up to 50% | Tied to Canada's US-vehicle surtax |
| Steel, aluminum, copper, autos/parts | Excluded from 338 | Already taxed under Section 232 |
| Energy (oil, gas, electricity) | Excluded | Considered strategically sensitive |
| Potash, fish, critical minerals | Excluded | Named exemptions in the proclamation |
📌 Note: This list can change. Section 338, like Section 301 and Section 232 before it, is a living policy tool — categories get added, exemptions get negotiated, and rates get adjusted as trade talks continue. Treat any snapshot of "what's covered" as accurate for today, not for the next twelve months.
Because both of these showed up in trade news within weeks of each other, a lot of Canadian importers have started mentally merging Section 338 and Section 301 into one big "US tariff mess." They're actually separate tools doing separate jobs, and understanding the difference matters for how you plan your sourcing.
Section 301 is the older, more familiar mechanism — it's the authority the US has used since 2018 to tax Chinese-origin goods entering the United States, and in July 2026 it was expanded further, with additional duties of 10% to 12.5% applied across roughly 60 countries covering nearly all US imports. Section 301 taxes goods based on where they were made. If a product is manufactured in China and imported into the US, Section 301 duties apply on entry into the US, full stop — regardless of who eventually buys it.
Section 338 is different. It taxes goods based on where they were made in relation to where they're going: specifically, goods made in Canada and shipped into the US. It has nothing to do with China as a manufacturing origin. The two overlap only in one place, and it's a place that matters enormously for Canadian sourcing businesses: the supply chain model where you buy Chinese-made goods through a US distributor, US 3PL, or US Amazon fulfillment network before those goods ever reach a Canadian customer.
| Section 301 | Section 338 | |
|---|---|---|
| What it taxes | Chinese-origin goods (recently expanded to ~60 countries) | Canadian-origin goods entering the US |
| First used | 2018 | July 2026 (first-ever use) |
| Current rate range | 7.5%–25% base, plus new 10–12.5% layer | Up to 50% on covered categories |
| Who feels it directly | US importers of Chinese/global goods | Canadian exporters to the US |
| Who feels it indirectly | Canadian buyers purchasing via US resellers | Canadian businesses using US-based fulfillment for Canada-bound goods |
| CUSMA/USMCA protection | Not applicable (non-North American origin) | None — applies even to CUSMA-qualifying goods |
If you're a Canadian eCommerce seller or SME brand owner who buys Chinese-manufactured product through a US-based distributor or wholesaler, you are already paying a Section 301 markup baked into that distributor's price — even though you never touch US customs yourself. And if any part of your Canada-bound goods physically pass through US territory for warehousing, kitting, or fulfillment before final delivery to a Canadian customer, you're now sitting in the blast radius of a US administration that has shown it's willing to use century-old statutes with 30-day notice.
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We hear a version of this objection a lot: "We're a Canadian company selling to Canadian customers — none of this touches us." For a genuinely small number of businesses with a fully domestic, China-direct-to-Canada supply chain, that's true. For most of the Canadian importers and eCommerce sellers we talk to, it isn't, because the modern Canadian small-business supply chain is more entangled with US infrastructure than most owners realize.
Think about how many Canadian sellers use Amazon's US fulfillment network as a staging point before goods move north. Think about how many use a US-based freight forwarder or customs broker because the rates looked better, or because that's who the factory's shipping agent already had a relationship with. Think about how many buy finished goods from a US wholesaler or Alibaba Gold Supplier's US warehouse rather than sourcing the same product directly from the Chinese factory. Every one of those touchpoints is a place where US trade policy — not Canadian trade policy — determines part of your landed cost and your timeline.
Section 338 itself won't tax your inbound Chinese goods. But it demonstrates, in real time, exactly how quickly the rules governing anything that touches US soil can change, with weeks of notice rather than years. A business that has built redundancy into its supply chain — a direct lane into Vancouver or Halifax that never crosses US customs — didn't need to change a single thing when this proclamation landed. A business that routes everything through a Seattle or Blaine, Washington 3PL is now re-reading its contracts and wondering what's next.
This is the actual lesson of Section 338 for Canadian sourcing: not "here's a new tariff to memorize," but "here's proof that supply chain concentration in a single foreign jurisdiction — even a historically friendly one — is a risk you're carrying whether or not you've priced it in."
The categories most exposed to this kind of indirect entanglement tend to be the ones where US fulfillment infrastructure is deepest: general consumer goods, home and kitchen products, apparel, beauty and personal care, and pet products all skew heavily toward Amazon FBA US as a launch strategy, simply because that's where the largest addressable market and the most mature tooling sit. If your brand falls into one of those categories and you built your operation US-first before adding a Canadian storefront, you are very likely carrying more US-side dependency than a brand that started Canada-first and never had a reason to route through American fulfillment centres.
Let's put real numbers against this, because "risk" is an abstraction until you see it on an invoice. Below is a simplified landed-cost comparison for a mid-sized Canadian importer bringing in a container of general merchandise (say, home goods or small electronics) valued at USD $50,000 FOB China, comparing a US-routed model against a direct-to-Canada model.
| Cost Component | US-Routed (via US distributor/3PL) | Direct to Canada (Vancouver) |
|---|---|---|
| Base goods value (FOB China) | CAD $67,500 | CAD $67,500 |
| Section 301 markup absorbed in US distributor price (est. 10–15%) | CAD $8,100 | N/A |
| US customs brokerage & MPF/HMF fees | CAD $1,400 | N/A |
| US warehousing / cross-dock (per shipment, avg.) | CAD $2,200 | N/A |
| Cross-border trucking (US to Canada) | CAD $1,800 | N/A |
| CBSA duties (MFN rate, illustrative 4%) | CAD $2,700 | CAD $2,700 |
| GST on import (5%) | CAD $4,181 | CAD $3,510 |
| Ocean freight to Vancouver + drayage | N/A (already landed via US port) | CAD $3,900 |
| Estimated total landed cost | ~CAD $87,881 | ~CAD $77,610 |
The exact figures will shift depending on your product category, container size, and carrier contracts — this table is illustrative, not a quote. But the pattern holds up across most of the client shipments we model at Epic Sourcing: a US-routed supply chain typically costs 10-15% more in total landed cost than a direct China-to-Canada lane, once you account for the Section 301 markup embedded in US distributor pricing, US brokerage fees, cross-dock handling, and the second round of cross-border trucking. That gap existed before Section 338. It just got a lot more visible.
💡 Pro Tip: Ask any US-based distributor or wholesaler you currently buy from directly whether their pricing includes Section 301 duties. Most won't volunteer this, but if you're paying a 10-25% premium over the factory's direct FOB quote, that markup is very likely where it's hiding.
There's also a cash flow dimension to this that doesn't show up in a simple landed-cost table. When you buy through a US distributor, duties and tariffs were already paid before you ever placed your order — the cost is baked into a single invoice, and you have no visibility into how it might move next quarter. When you import directly and pay CBSA duties and GST through your own CARM account, you have direct line of sight into every cost component, which makes it dramatically easier to model margin impact when a tariff schedule changes, negotiate with your factory on FOB pricing, or shop your freight lane between carriers. Control over the cost stack is worth something on its own, independent of whether direct sourcing turns out cheaper in any given quarter.
This didn't happen because Canadian businesses made a bad decision. It happened for entirely rational reasons that made sense for years. US ports handle vastly higher container volumes than Canadian ports, which historically meant more shipping lines, more frequent sailings, and more competitive freight rates. US-based 3PLs and fulfillment networks, especially Amazon's FBA infrastructure, are enormous, well-tested, and easy to plug into. A lot of factories in Guangdong and Zhejiang have shipping agents who default to quoting US port routings because that's where the bulk of their volume goes.
On top of that, many Canadian sellers started as Amazon.com sellers before expanding to Amazon.ca, so their fulfillment setup was built US-first and Canada got bolted on afterward. Others simply found it cheaper, on paper, to import into Seattle or Blaine and truck across the border than to build a direct relationship with a Vancouver-based customs broker and freight forwarder.
None of that was wrong when Canada-US trade relations were stable and US tariff policy moved slowly, if at all. The problem is that those same efficiencies now sit downstream of a US administration that has demonstrated, with Section 338, that it's willing to use dormant legal authority with almost no lead time. A supply chain built entirely for cost efficiency in a stable-rules environment is not the same as a supply chain built for resilience in a volatile one. Canadian importers spent fifteen years optimizing for the first. Most haven't yet started optimizing for the second.
It's also worth being honest that some of this dependency was never really examined in the first place — it was simply inherited. A founder sets up their first Amazon account, follows a US-focused course or YouTube tutorial on FBA, defaults to whatever fulfillment network the platform nudges them toward, and five years later that original default has become the load-bearing structure of a seven-figure business without anyone deliberately deciding it should be. There's no shame in that; it's how most sourcing operations actually get built, one practical decision at a time rather than through a grand strategic plan. But it does mean that a genuine review of "why does our supply chain look the way it does" often turns up more historical accident than deliberate design, which is exactly the kind of thing worth revisiting when the cost of that accident just became visible in a 50% tariff proclamation.
The practical response isn't to abandon Chinese or Vietnamese manufacturing — for the vast majority of product categories, Asia still offers the best combination of cost, capability, and capacity anywhere in the world. The response is to change the route, not the source: bring goods directly into a Canadian port, cleared through CBSA under Canadian rules, without a US routing in the middle.
Direct sourcing means your ocean freight is booked to the Port of Vancouver, the Port of Montreal, or the Port of Halifax rather than Los Angeles, Long Beach, Seattle, or Tacoma. It means your customs clearance happens through a licensed Canadian customs broker under CBSA's rules and your CARM (CBSA Assessment and Revenue Management) account, not through a US customs broker under CBP rules. It means your goods are subject to CBSA's Most-Favoured-Nation tariff schedule and GST/HST — not Section 301, not Section 338, not any future Section-whatever the US decides to invoke next.
This is genuinely a solved logistics problem in 2026. Vancouver alone handles well over a hundred shipping lines and services connecting to every major Chinese and Vietnamese port, and Halifax has expanded its Asia-Pacific connections significantly in the past few years as more Canadian importers have looked to diversify away from West Coast concentration. The idea that "you have to go through the US to get good freight rates" is outdated. It's cheaper, in most cases, to go direct once you factor in the hidden US-routing costs from Section 5 above — you're just not used to seeing the comparison laid out that way.
Diversifying your routing is one axis. Diversifying your manufacturing base is a related but separate decision, and Section 338 is a good moment to revisit both at once. China remains the deeper, more capable manufacturing base for complex products, tight tolerances, and fast prototyping — nothing has changed there. But Vietnam has become a legitimate direct-to-Canada alternative for a widening range of categories, helped considerably by CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership), which gives Vietnamese-origin goods preferential tariff treatment into Canada that Chinese-origin goods don't get.
| China Direct | Vietnam Direct (CPTPP) | |
|---|---|---|
| Manufacturing depth | Very high — broadest supplier base globally | Growing fast, strongest in apparel, footwear, furniture, electronics assembly |
| Typical MOQs | Lower, more flexible for most categories | Often higher; factories favour larger repeat orders |
| CBSA tariff treatment | MFN rates apply | Preferential rates possible under CPTPP with valid Certificate of Origin |
| Lead times to Vancouver | ~18–24 days transit (Shanghai/Ningbo) | ~20–26 days transit (Ho Chi Minh/Haiphong) |
| Exposure to US Section 301 escalation | Direct target of Section 301 | Currently outside Section 301's China-specific scope |
| Best fit | Complex products, tight specs, fast development cycles | Simpler assemblies, apparel, textiles, categories with CPTPP tariff savings |
We're not telling every client to abandon China — for most product categories that would be the wrong call, and China-plus-one (keeping China as your primary base while qualifying a second country for a portion of volume) is a more realistic strategy than a wholesale switch. What we are telling clients is: if your product category has a workable Vietnam option and you haven't priced it against your China cost with CPTPP tariff treatment factored in, do that math now, while you have the runway to act on it rather than scrambling during a future tariff shock.
Switching from a US-routed model to a direct-to-Canada model isn't just a shipping decision — it changes who you deal with for customs and what documentation you need in place. If you've never imported directly before, here's the baseline.
You need a Business Number with an import-export program account from the CRA, and you need to be registered in CARM, CBSA's online portal for managing import declarations, duty payments, and your Release Prior to Payment (RPP) bond. If you've historically imported by having a US entity handle customs and then trucking finished, duty-paid goods across the border as "already cleared" inventory, you likely haven't needed a CARM account of your own — that changes the moment you clear goods directly at a Canadian port.
You'll also want a relationship with a licensed Canadian customs broker (Epic Sourcing works with several depending on the port and product category), correct HS tariff classification for your goods under Canada's tariff schedule — not the US HTS codes you may have been using — and, if you're bringing in goods from Vietnam and want to claim CPTPP preferential rates, a valid Certificate of Origin from your supplier proving the goods qualify under CPTPP's rules of origin.
💡 Pro Tip: Get your CARM account and RPP bond set up before your first direct shipment is on the water, not after. Processing can take longer than importers expect, and a shipment arriving at a Canadian port with no bond in place means demurrage charges while you scramble to sort out release.
Beyond paperwork, there are real operational differences worth planning for. Transit times to Vancouver from major Chinese ports are broadly comparable to transit times to US West Coast ports — you're not adding significant time by going direct. Where the difference shows up is in the last mile: instead of ocean freight to a US port, cross-dock, and cross-border trucking to your Canadian warehouse (often three separate handoffs with three separate delay points), direct-to-Canada is ocean freight to a Canadian port, customs clearance, and delivery to your warehouse — two handoffs instead of three.
Fewer handoffs generally means fewer places for something to go wrong, which matters more than people expect when a shipment is delayed by weather, port congestion, or — increasingly relevant in 2026 — a sudden change in cross-border policy that stalls trucks at the Peace Arch or Pacific Highway crossing for reasons that have nothing to do with your specific shipment.
For Canadian importers on the East Coast, Halifax has become a genuinely competitive option for Asia-origin freight, particularly if your customer base skews toward Ontario and Quebec — rail connections from Halifax into central Canada have improved, and for some importers the total transit time comparison against a US East Coast port plus cross-border trucking now favours Halifax outright.
One more practical point: warehousing strategy often needs to shift alongside your routing. Businesses that built their inventory model around a single US fulfillment hub serving both American and Canadian customers will need to decide whether to maintain a separate Canadian warehouse or 3PL relationship once they route directly. For most SME importers this is a net positive, not a burden — Canadian third-party logistics providers in the Lower Mainland, the Greater Toronto Area, and Atlantic Canada have matured considerably over the past few years, and running your own Canadian inventory rather than pulling from a shared cross-border pool typically improves delivery speed to Canadian customers regardless of what's happening with US tariff policy.
If Section 338 has you rethinking your supply chain but you don't know where to start, here's the order we'd actually work through with a client. In the first two to three weeks, map your current supply chain end to end and flag every point where goods, money, or paperwork touches US territory or a US entity — this includes fulfillment centres, customs brokers, freight forwarders, and any US-based distributor you buy Chinese-origin goods through. In parallel, pull your last twelve months of landed cost data and calculate what percentage of your total cost is attributable to US-side fees, markups, and duties, so you have a real number instead of a guess.
From roughly week three to week six, get one or two of your highest-volume SKUs quoted for a direct-to-Canada lane — same factory, same product, quote for FOB China to Vancouver or Halifax instead of your current routing — and get your CARM account and customs broker relationship in place in parallel so you're ready to act on the quote rather than losing another month to paperwork once you decide to switch. This is also the point to ask your factory directly whether they can produce a valid Certificate of Origin if you're evaluating a Vietnam alternative, and to have a candid conversation with your current US-based 3PL or distributor about exactly how much of your landed cost is attributable to fees and markups on their side of the border.
By week eight to twelve, run a pilot shipment on the direct lane for those SKUs, side by side with your existing routing if volume allows, and compare actual landed cost, transit time, and customer delivery experience against your US-routed baseline. Track this in a simple spreadsheet rather than trusting memory or gut feel — the comparison only holds up if you're capturing every fee on both sides, including ones that are easy to forget like insurance, storage overage charges, and the labour cost of managing two separate broker relationships during a transition period. Most clients who go through this process end up shifting the majority of their volume to a direct lane within two to three sourcing cycles, once the pilot data confirms what the modelling suggested. The businesses that stall out usually do so not because the direct lane performed worse, but because nobody set a decision date to formally cut over — the pilot just runs indefinitely alongside the old routing instead of replacing it.
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The most common mistake we see is panic-switching an entire supply chain based on a headline before actually modelling the numbers for your specific products and volumes. Section 338 does not affect goods you import from China into Canada — it affects Canadian exports to the US and, indirectly, businesses whose Canada-bound goods route through US infrastructure. If you jump straight to "we need to move all our manufacturing out of China" without separating the routing question from the manufacturing question, you'll likely spend money solving a problem you don't actually have while leaving the real exposure — your US-routed logistics — untouched.
The second common mistake is assuming a new country automatically means a clean start on tariffs. Vietnam's CPTPP advantage only applies if your goods genuinely qualify under CPTPP's rules of origin — CBSA and international customs authorities scrutinize transshipment closely, and moving final assembly to Vietnam while sourcing components and doing the substantive manufacturing in China won't pass muster if it's audited. The origin has to be real, not a relabeling exercise.
The third mistake is underestimating how long it takes to stand up a new direct lane properly — CARM registration, broker relationships, HS classification review, and supplier Certificates of Origin all take real time. Businesses that wait until a tariff change is already in effect to start this process end up making rushed decisions under pressure, which is exactly the wrong time to be signing new freight and customs arrangements.
This is the exact problem Epic Sourcing's Canadian team works on with clients every week — not just finding a factory, but building a sourcing and logistics structure that doesn't leave you exposed every time trade policy shifts. Through The Epic Suite, we manage the full process from supplier vetting through production oversight, verification reporting, and freight coordination direct into Vancouver, Montreal, or Halifax, so you're never dependent on a US intermediary you don't control.
For businesses still evaluating whether a Vietnam option makes sense alongside their existing China supply base, The Product Wizard helps map your product against manufacturing capability in both countries, factoring in real landed cost — including CPTPP tariff treatment where it applies — rather than a surface-level factory quote comparison. And for businesses that need a faster, hands-on entry point, Hot Source gets a direct sourcing and shipping lane stood up quickly for a specific product line, so you have a working alternative to your current US-routed setup without waiting for a full supply chain overhaul.
Whatever stage you're at — still assessing your exposure, ready to pilot a direct lane, or looking to move volume off US infrastructure entirely — the team has done this rerouting work for Canadian clients before Section 338 was ever on the radar, because US-Canada trade friction has been building for a while. This is just the moment it became impossible to ignore.
Rerouting your logistics is the operational fix. The contractual fix is just as important and gets overlooked more often. If your purchase agreements with factories are silent on who bears the cost when a tariff schedule changes mid-order, you're exposed regardless of which country you're sourcing from or which port your goods land at.
Start with your Incoterms. A lot of Canadian importers default to whatever term their factory suggests, which is often FOB (Free on Board) — the factory's responsibility ends once goods are loaded at the origin port, and you carry the freight, insurance, and customs risk from there. That's usually fine, but it means you, not the factory, absorb any surprise cost that shows up between loading and delivery. Some importers prefer DDP (Delivered Duty Paid), where the seller handles freight and customs clearance and hands you goods already landed — convenient, but it puts your factory or their forwarder in control of a customs process you have limited visibility into, which can be a problem if you're trying to build a direct-to-Canada relationship with your own broker. EXW (Ex Works) puts the most responsibility on you as the buyer from the earliest point, which gives you maximum control but requires you to actually have the freight and customs relationships to use that control well. There's no universally "correct" choice — the point is to choose deliberately rather than by default, and to understand exactly where your risk starts and ends under whichever term you use.
Beyond Incoterms, look at whether your supplier contracts include any language on tariff or duty changes — a force majeure clause covering sudden regulatory shifts, a price renegotiation trigger if landed cost moves by more than a set percentage, or at minimum a requirement that your factory notify you promptly of any change to their own export costs that might get passed through. Most standard factory contract templates don't include this, because most factories didn't think they needed to until the last few years. It's a reasonable ask in any new supplier negotiation now, and existing suppliers are often more willing to add this kind of clause than importers expect, especially for accounts they want to keep long-term.
Cargo insurance and trade credit insurance are worth a second look too. If you're shifting to a new direct lane with a new broker and a new set of carriers, make sure your cargo insurance coverage actually extends to the new routing and that you're not assuming coverage that only applied to your old US-routed arrangement. And if currency exposure is a factor — most Chinese and Vietnamese factories quote in USD, while your revenue is in CAD — a widening USD/CAD spread during a period of trade volatility can move your margin as much as any tariff does, which is a good reason to talk to your bank or a forex specialist about simple hedging options if you're not already doing so.
📌 Note: None of this is legal advice — trade and customs law is genuinely specialized, and if you're restructuring supplier contracts or Incoterms in response to tariff risk, it's worth a conversation with a customs lawyer or licensed broker who can review your specific agreements. Epic Sourcing can point you toward partners we work with regularly if you need that referral.
Everything above is written for the far more common case among our clients: a Canadian business importing goods from China or Vietnam to sell in Canada. But a meaningful number of Canadian brands also manufacture or finish goods domestically and export some portion of that output into the US market — and for that group, Section 338 is a direct hit, not an indirect one.
If you fall into this category, the first thing to check is whether your product category is actually named in the current proclamations — dairy, alcoholic beverages, and motor vehicles are explicitly covered, along with a broader set of goods swept in under the discrimination finding, while energy, potash, fish, critical minerals, and anything already under Section 232 are excluded. Given how narrowly targeted the underlying disputes are, plenty of Canadian exporters will find their specific goods aren't covered at all, at least for now. Don't assume exposure without checking your actual HS classification against the proclamation text or with a customs broker.
If your goods are covered, the calculus shifts from "avoid routing through the US" to "actively evaluate whether the US remains a viable market for this product at a 50% tariff." For some categories and margin structures, that math still works, particularly for premium or differentiated products where US buyers have limited alternative supply. For others, it doesn't, and the more resilient move is to double down on Canadian and diversified international markets rather than trying to absorb or pass through a 50% cost increase. Either way, this is a decision to make deliberately with real numbers, not a decision to defer while hoping the tariff gets rolled back in negotiations — Section 338 could just as easily expand as contract, and building a plan around "this will probably get fixed" is not a plan.
No. Section 338 is a US tariff on goods made in Canada and shipped into the United States — it does not tax goods you import from China, Vietnam, or anywhere else directly into Canada. Where it can affect you indirectly is if part of your supply chain routes through the US before goods reach Canada, or if you're a Canadian manufacturer or exporter who ships finished goods south of the border. If your entire supply chain runs China or Vietnam to a Canadian port with no US touchpoint, Section 338 itself doesn't change your costs. The bigger takeaway for most importers is less about this specific tariff and more about what it signals: that US trade policy toward Canada can shift with very little notice, which is a real risk for anyone whose logistics depend on US infrastructure even if the goods themselves are never subject to a US-Canada tariff.
Section 301 is the mechanism the US has used since 2018 to tax Chinese-origin goods, and it was expanded further in July 2026 to add 10-12.5% duties across roughly 60 countries. Section 301 taxes goods based on their country of manufacture, wherever they're headed. Section 338 is a completely different, previously unused authority that taxes goods based on their country of export relative to the US — specifically, Canadian goods entering the US. They can overlap for a Canadian business that buys Chinese-made goods through a US distributor: the goods pay Section 301 duties on the way into the US, and if any Canada-bound portion of that flow gets treated as re-exported Canadian-origin inventory, it could theoretically intersect with Section 338 exposure too. For most Canadian importers, Section 301 is the more directly relevant of the two, since it's baked into the price of anything you buy from a US-based reseller of Chinese goods.
In most cases we model, yes — once you account for the full cost stack rather than just comparing ocean freight rates. A US-routed shipment typically carries Section 301 markup embedded in distributor pricing, US customs brokerage fees, warehousing or cross-dock charges, and a second leg of cross-border trucking that a direct-to-Canada shipment simply doesn't incur. Ocean freight rates to Vancouver from major Chinese ports are generally competitive with rates to US West Coast ports, so you're not paying a meaningful freight premium to go direct. The businesses that still find US-routing cheaper tend to be those with existing sunk costs in US-based fulfillment infrastructure (like Amazon FBA US) that would be expensive to unwind — for a new supply chain or a new product line, direct almost always wins on total landed cost.
You need a Business Number with an import-export program account through the CRA, registration in CBSA's CARM portal, and typically a Release Prior to Payment bond so goods can clear before duties are formally assessed. You'll also want a relationship with a licensed Canadian customs broker and correct HS tariff classifications under Canada's schedule. If you're planning to import from a CPTPP country like Vietnam and want preferential tariff treatment, you'll need your supplier to provide a valid Certificate of Origin as well. None of this is complicated individually, but it can take several weeks to set up properly, so it's worth starting before you have a shipment already on the water.
Not necessarily, and definitely not as a blanket strategy. Section 338 doesn't tax Chinese-origin goods at all, so it isn't, by itself, a reason to move manufacturing. Vietnam is worth evaluating on its own merits — CPTPP tariff treatment, growing manufacturing capability in certain categories, and diversification value — but the decision should be based on your specific product, your factory's capability match, and real landed cost modelling, not a reaction to a headline about a different country. Most of our clients who successfully diversify do it as "China plus one" — keeping China as the primary base for complex or high-mix products while qualifying a Vietnamese supplier for categories where it makes clear cost or risk sense, rather than moving everything at once.
There's no way to predict this with certainty, and that's precisely the point of this article. Section 338 sat unused for 96 years and was then invoked with about a month's notice between the proclamation and the effective date. The same administration has shown a pattern of using tariff authority quickly and adjusting scope as trade negotiations continue, so treating the current category list and 50% rate as fixed would be a mistake. The practical response isn't trying to predict the next move — it's building a supply chain that isn't dependent on the outcome, by keeping your sourcing and logistics routed directly between your manufacturing country and Canada wherever that's operationally realistic.
Possibly, and it's worth checking specifically rather than assuming either way. Section 338 currently covers certain dairy products, alcoholic beverages, motor vehicles outside the Section 232 categories, and a broader set of goods swept in under the underlying discrimination finding — while energy, potash, fish, critical minerals, and anything already taxed under Section 232 are explicitly excluded. If your product isn't in a covered category today, you're not affected by the current proclamation, though that could change if the scope is expanded. If it is covered, you're looking at a real 50% cost increase on that portion of your business, and it applies whether or not your goods qualify as CUSMA-originating — CUSMA compliance does not exempt you from Section 338. The right move is to check your specific HS classification against the current proclamation text with a customs broker rather than relying on general summaries like this one, since exact scope can shift with negotiations.
Whether you're already exposed through a US-routed fulfillment model or just want to make sure your next shipment isn't sitting in the path of the next trade policy surprise, Epic Sourcing's Canadian team is here to help.
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