A 96-Year-Old Law Nobody Expected to See Used
Eight days ago, U.S. importers woke up to a 50 percent additional duty on hundreds of Canadian-origin products — not under IEEPA, not under Section 232, but under a Depression-era statute so obscure that many trade lawyers had never considered it still operative. In firing up a fresh trade war with Canada, President Trump turned to a 96-year-old statute so obscure that many trade lawyers didn't even know it was still on the books, invoking Section 338 of the Tariff Act of 1930 to slap a 50 percent tax on roughly $20 billion worth of Canadian imports. The tariffs took effect at 12:01 a.m. Eastern Time on August 22, 2026, after last-minute negotiations failed. Now a second, equally consequential question is developing alongside the trade war itself: can these tariffs survive a court challenge? For U.S. importers, the answer shapes not just compliance decisions today but contingency planning for the months ahead.
What Section 338 Is — and Why It Has Never Been Used Before
On July 20, 2026, the United States announced three separate presidential proclamations under Section 338 of the Tariff Act of 1930, imposing an additional 50 percent ad valorem duty on specified products from Canada. Section 338 authorizes the President to impose duties when a foreign country is found to discriminate against or otherwise burden U.S. commerce.
Section 338 lets the President impose duties of up to 50 percent to offset discrimination against U.S. commerce. It has been dormant since the 1930s and 1940s, and this is the first time it has been used to actually impose tariffs, making it a genuinely new authority rather than an extension of Section 301, Section 232, or any other familiar modern tool.
The three proclamations — Proclamation 11046, which covers alcoholic beverages; Proclamation 11047, which covers dairy; and Proclamation 11048, which covers motor vehicles — each carry their own product annexes. The three sector names are misleading, however. The covered lists run to 554 HTS subheadings, and two of the three proclamations bear almost no relation to the sector named in the proclamation title. Scroll down to Annex II of each proclamation and the list broadens fast, reaching wine, hockey sticks, cement, plywood, furniture, fishing rods, seeds, clothing, wigs, and swimming pools.
The Legal Questions Trade Lawyers Are Now Raising
The president's Section 338 tariff authority has never been used, let alone tested in court. That gap is now drawing intense scrutiny from trade law specialists, many of whom see it as a collection of compounding legal vulnerabilities.
A lawyer involved in the case that resulted in the U.S. Supreme Court striking down President Trump's use of IEEPA says chances are "quite high" that the latest duties on Canada will land in court. George Mason University law professor Ilya Somin said there are many industry groups and U.S. states that will see damage from the escalating trade war with Canada.
The legal objections run to several layers. Somin argues that Section 338 is defunct because it was long ago superseded by other laws enacted in 1962 and again in 1974. Another issue is that Trump's tariffs may not meet various requirements for invoking the law. The statute requires an investigation, Somin said. Some scholars also view the provision as having been legally superseded by other provisions. Section 338 directs the International Trade Commission to "ascertain and at all times to be informed" about whether discrimination is occurring and to bring recommendations to the President, but it is unclear whether this is a procedural prerequisite to the imposition of tariffs.
Trade lawyers also note that Section 338(b) authorizes the president to escalate to a full import ban if Canada maintains or increases its discrimination — a provision that adds to the statute's legal complexity and political risk.
Why the Supreme Court's February Ruling Set the Stage
The legal terrain for these challenges was fundamentally reshaped earlier this year. On February 20, 2026, the U.S. Supreme Court issued its long-awaited ruling in Learning Resources, Inc. v. Trump, invalidating the President's use of the International Emergency Economic Powers Act to impose broad tariffs, including those imposed on Canada beginning in March 2025 and the so-called Liberation Day tariffs imposed on other countries in April 2025.
The ruling came via a 6-3 majority in which the justices stated that the language of IEEPA did not permit the executive branch to implement tariffs, noting that if Congress is to vest tariff authority to the executive branch, it must do so explicitly.
That ruling forced the administration to pivot quickly. The tariffs most negatively impacting Canada — such as those on steel, aluminum, autos, and lumber — are imposed under different legislation, specifically Section 232 of the Trade Expansion Act of 1962, and were not impacted by the IEEPA ruling. Section 338 is now the latest alternative authority the administration has reached for. The president replaced the IEEPA duties with a stopgap tariff statute — which also faced a legal challenge — before putting in place levies on most nations citing forced labor in supply chains. A coalition of U.S. states is challenging that authority as well. Section 338 tariffs are now the newest front in that litigation landscape.
Canada's Retaliation Adds a Second Wave of Exposure
Importers focused entirely on inbound Canadian goods may be missing half of their exposure. As a result of the United States' decision to impose a 50 percent tariff on $27.6 billion of Canadian goods effective August 22, the Government of Canada will match the U.S. Section 338 tariffs dollar for dollar. Effective September 8, 2026, Canada will impose 15, 25, and 50 percent tariffs on products drawn from those targeted by U.S. Section 338 and Section 232 tariffs, with individual product rates based on the matching U.S. rate for the same goods.
The announced Canadian targets include U.S. steel, dairy, appliances, agricultural machinery and equipment, pulp and paper, and electronics, alongside the goods already hit by U.S. Section 232 and Section 338 actions. Any American business that ships goods into Canada has nine days from today to review its exposure before those measures activate.
Section 338 tariffs are not time-limited as other tariffs have been. The duties carry no expiration date and remain in force until the President modifies or terminates them. That durability makes the legal challenge question even more consequential for long-term supply chain planning.
What Legal Uncertainty Does — and Does Not — Mean for Compliance
A common mistake importers make during periods of legal volatility is to treat a potential court challenge as a reason to delay compliance. That approach carries serious customs risk. Until and unless a court issues a stay or injunction blocking these tariffs, they remain fully in force. The Section 338 tariff is an additional 50 percent ad valorem duty, stacked on top of the ordinary duty rate that already applies to the product, the Section 301 forced-labor tariff of 10 percent where applicable, and any antidumping or countervailing duties.
The tariff applies as of 12:01 a.m. Eastern Time on August 22, 2026, to goods entered for consumption or withdrawn from warehouse for consumption. It applies based on country of origin — where the goods are made, not where they are shipped from — and applies even to goods that qualify for USMCA preferential treatment.
Importers should also screen product codes carefully. The duty is now live. If your compliance check started and ended with the three headline categories — motor vehicles, alcoholic beverages, and dairy — there is a meaningful chance you have not found your actual exposure yet. Entries must use HTSUS headings 9903.03.12 through 9903.03.16, which correspond to the dairy, alcohol, and motor vehicle provisions plus two carve-out categories. Energy, potash, Section 232 goods, and a few other categories are excluded.
How ASR Can Help
Navigating a tariff built on a statute that has never been tested in court — while managing stacked duties and a retaliation timeline that kicks in on September 8 — is exactly the kind of complex, fast-moving situation where working with an experienced freight forwarder makes a measurable difference. ASR WorldWide Express coordinates closely with licensed customs broker partners who are actively monitoring CBP guidance, classification updates, and court filings on Section 338. We can help you audit your Canadian-origin shipments against the live HTS list, structure your entries correctly under the new Chapter 99 headings, and build contingency scenarios for the retaliation wave beginning September 8.
Call us at +1 786 373 3003 or email shipping@asrwe.com to speak with a specialist. The compliance window is narrow and the stacking risk is real.
Important Disclaimer
This article is informational only and does not constitute legal, tax, or customs advice. Section 338 is an active and rapidly evolving trade action. The legal status of these tariffs may change as court challenges develop and CBP guidance is updated. Importers and exporters should consult a licensed customs broker and qualified legal counsel before making compliance or sourcing decisions based on the information presented here.
