New U.S. Tariffs on Canadian Aluminum and Canadian Retaliatory Surtaxes Coming

On August 6, 2020, President Donald Trump announced that the United States will be re-imposing a 10 per cent tariff on Canadian aluminum as of August 16, 2020. Canada responded immediately by announcing that by September 16, 2020, it will impose surtaxes or similar trade-restrictive countermeasures on aluminum and other aluminum containing goods imported from the U.S., on a dollar-for-dollar basis as the U.S. measures. The proposed Canadian surtaxes will be set at 10 per cent, the same rate that the U.S. will apply against Canadian aluminum.

The Government of Canada is accepting submissions from industry until September 6, 2020, on the proposed list of affected goods. Companies affected may wish to make submissions by the deadline.

BACKGROUND

In May 2018, President Trump, acting pursuant to section 232 of the Trade Expansion Act of 1962, imposed tariffs on steel and aluminum products from Canada on the basis that imports of these goods threatened to impair U.S. national security. Canada responded with countermeasures of its own. One year later, in May 2019, Canada and the U.S. mutually agreed to terminate their respective tariffs and surtaxes, and, in a joint statement, agreed that should imports surge in future and tariffs are re-imposed, the affected country may impose countermeasures, but only in the same affected sector. Since that time, Canada has benefitted from an exemption from the U.S. tariffs on steel and aluminum that remain imposed on other countries. However, by proclamation dated August 6, 2020, President Trump carved out from the exemption “non-alloyed unwrought aluminum provided for in subheading 7601.10” of the Harmonized Tariff Schedule of the U.S. Therefore, as of August 16, 2020, all such goods shipped from Canada to the U.S. will be subject to a 10 per cent U.S. tariff.

For further background information, see our May 2018 Blakes Bulletin: Canada Responds to New U.S. Steel Tariffs with Dollar-for-Dollar Measures Against Certain U.S. Imports and May 2019 Blakes Bulletin: Canada Lifts Retaliatory Surtaxes on Steel, Aluminum and Other Goods.

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 an amount equivalent to the value of Canada’s exports to the U.S. that are subject to the U.S. tariffs. Canada has published a list of proposed goods to be subject to a surtax of 10 per cent, the same levels of duties that the U.S. has applied to Canadian aluminum imports.

As set out in the Notice of Intent to Impose Countermeasures Action Against the United States in Response to Tariffs on Canadian Aluminum Products, Canada intends to apply the 10 per cent surtax to certain aluminum products covered primarily by chapter 76 of the List of Tariff Provisions, as well as other chapters covering items related to or including aluminum. For example, potentially affected goods of U.S. origin imported into Canada include the following aluminum goods:

• Unwrought aluminum
• Aluminum waste and scrap
• Aluminum powders
• Aluminum bars, rods and profiles; wire; plates, sheets and strip; foil; tubes and pipes
• Aluminum doors and windows
• Aluminum structures, tanks, vats and similar containers, including aluminum cans

In addition, Canada is proposing to charge the 10 per cent surtax on various other U.S. origin goods of aluminum, organized by Chapters of Canada’s Tariff Schedule as follows:

• Chapter 26 – aluminum ores; slag, ash and residues of aluminum
• Chapter 28 - aluminum oxide, aluminum hydroxide and fluorides, chlorides and sulfates of aluminum
• Chapter 32 – pigments used in paints and dyes
• Chapter 38 – reaction initiators
• Chapter 84 – refrigerators, washing machines
• Chapter 87 – bicycles; certain livestock trailers
• Chapter 94 – metal furniture; prefabricated buildings
• Chapter 95 – golf clubs; sports articles such as bats, hockey sticks, etc.

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 (CUSMA Countries) Regulations. This will limit the measures to goods of U.S. origin, rather than goods originating in third-party countries that are transiting through, or merely being distributed by the U.S.

CONSULTATIONS

The proposed Canadian surtaxes are expected to be imposed by September 16, 2020, and the government has given potentially impacted parties until September 6, 2020, to make submissions to the Department of Finance regarding expressed support for, or concern with, the proposed countermeasures. The Canadian government has requested that any submissions focus on products at the eight-digit tariff item level.

COMMENT

The measures being imposed by the U.S. and Canada come at an unfortunate time, just over one month since the Canada-United States-Mexico Agreement came into force, and in the midst of the COVID-19 pandemic, which has already negatively affected trade between Canada and the U.S. The tariffs and surtaxes will serve to increase production costs in the U.S. and the price of further processed aluminum products — such as auto parts and beer and other beverage cans — when sold in the U.S. and/or Canada. It is also unclear whether the U.S. is considering re-imposing tariffs on Canadian steel products. In short, the measures announced by the U.S. and by Canada introduce a new level of risk and uncertainty for business at a time when many are vulnerable.

Companies using aluminum in their operations should consider participating in Canada’s consultation process, including making a case for exclusions from any resulting surtaxes should there be a shortage of a particular aluminum product in Canada that is necessary for production.

For further information, please contact:

Greg Kanargelidis                  416-863-4306
Roy Millen                                604-631-4220
Amy Lee                                   416-863-4241
Skye Sepp                                416-863-3887

or any other member of our International Trade group.