Tariff Watch: Canada Responds, Section 338 Drawback Confirmed, CBP Updates PSCs
This week’s Tariff Watch covers Canada’s retaliatory tariffs on U.S. goods, CBP’s confirmation that Section 338 duties are eligible for duty drawback, updated Post Summary Correction procedures, and other trade developments affecting importers and exporters.
Welcome to this week’s edition of Tariff Watch, the ongoing series from J.M. Rodgers designed to keep importers, manufacturers, and supply chain leaders ahead of rapidly shifting US trade policies.
The final week of August 2026 will be remembered as the moment the US-Canada trade war escalated, but there were some bright spots for American importers this week. Customs and Border Protection (CBP) confirmed that Section 338 tariffs are eligible for duty drawback, and separately updated procedures that should lead to faster processing times. Here’s what to know this week:
What’s New
- Canada strikes back with retaliatory tariffs on US goods: Prime Minister Mark Carney announced last Tuesday that Canada will impose counter-tariffs on approximately $27.6 billion of US goods. Described as a “dollar-for-dollar” retaliation to the US Section 338 duties, the Canadian tariffs will range from 15% to 50% and are set to take effect next week.
- CBP issues Section 338 guidance and confirms drawback eligibility: CBP issued a Cargo Systems Messaging Service (CSMS) bulletin clarifying that while USMCA preferential status does not shield goods from the 50% Section 338 tariffs, these new duties are eligible for duty drawback. US companies importing Canadian products that are subsequently exported or destroyed now have a chance of recovering a substantial amount of these unprecedented duties.
- CBP updates PSC procedures: CBP quietly rolled out the expanded validation and automation logic for Post Summary Correction (PSC) procedures that it announced earlier in August. The PSC process allows importers to correct errors, apply retroactively granted exclusions, and reclaim overpaid duties before liquidation without the expense and long wait times of a formal protest. These updates to CBP’s Automated Commercial Environment (ACE) are intended to reduce conflicting post-entry filings affecting classification and valuation changes.
Who’s Impacted
Canada’s retaliatory tariffs weren’t unexpected, yet they still deliver another blow to integrated North American supply chains. Here’s who’s affected by this week’s news the most:
- US exporters selling to Canada: The September 8 retaliatory tariffs will hit a massive swath of US exports. Sectors targeted include steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. US exporters in these industries face up to a 50% duty at the Canadian border, severely hampering their competitiveness.
- Importers of Canadian goods: The 50% Section 338 tariffs are not limited to the headline categories of automotive, alcohol, and dairy. Companies importing a broad range of Canadian products such as furniture, hand tools, plywood, essential oils, and electronics are discovering their goods are also trapped on the annex lists and subject to the surcharge.
- Cross-border ecommerce brands: Between the permanent suspension of the US de minimis exemption, the imposition of Section 301 forced-labor tariffs, and now the Section 338 conflict, cross-border fulfillment costs between the US and Canada have skyrocketed almost overnight.
What We’re Seeing
Supply chain leaders are finding novel ways to mitigate sudden rises in overhead. Here’s what we’re seeing them do to stop the bleeding:
- US exporters are rushing freight north: Because Canada’s retaliatory tariffs do not take effect until 12:01 a.m. on September 8, US exporters are treating this week as a sprint. Logistics teams are working overtime to push as much inventory across the border into Canada as possible before the counter-tariffs trigger.
- Importers are initiating Section 338 drawback programs: With CBP officially confirming that the 50% Canadian tariffs are eligible for drawback, companies are aggressively pursuing this recovery avenue. Importers who bring in Canadian goods and subsequently export them (or manufacture them into exported items) are setting up drawback programs to recover the crushing 50% duties.
- Line-by-line HTS audits: Because Section 338 applies to specific 8-digit HTS codes rather than broad industries, compliance teams are doing line-by-line audits of their Canadian imports. Since goods already subject to Section 232 duties are excluded from the new 50% tariff, importers are scrutinizing their metal and derivative classifications to see if they can claim the 232 carve-out.
What We’re Monitoring
Here at J.M. Rodgers HQ, we continue to monitor these developing situations:
- The textile TRQ rollout: On Tuesday of this week, September 1, CBP is expected to launch the tariff-rate quota (TRQ) system for textile and apparel imports impacted by the Section 301 forced labor tariffs. We’re particularly interested in seeing the official quota limits and entry instructions. Apparel importers have been paying the unmitigated 10% duty for over a month, waiting for the relief promised by the TRQ.
- The launch of Canada’s retaliatory tariffs: We’re following the announcements from the Canada Border Services Agency (CBSA), looking for final implementation guidance regarding their September 8 counter-tariffs. We’re also monitoring diplomatic channels to see whether the US Trade Representative and Ottawa can strike a new deal before next week.
Sources
- Canada Announces Retaliatory Tariffs on US Goods, The Guardian
- New Section 338 Tariffs and Canadian Retaliatory Tariffs, Diaz Trade Law
- Modifications to the Processing of Post Summary Corrections, CBP
- Full List of US Tariffs Hitting Canada After Talks Collapse, Newsweek
- Section 338 Tariffs: What Ecommerce Brands Need to Know, DCL