United States Surtax Order (2025-1): SOR/2025-66

Canada Gazette, Part II, Volume 159, Number 6

Registration
SOR/2025-66 March 3, 2025

CUSTOMS TARIFF

P.C. 2025-265 March 3, 2025

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance and the Minister of Foreign Affairs, makes the annexed United States Surtax Order (2025-1) under subsection 53(2)footnote a and paragraph 79(a)footnote b of the Customs Tariff footnote c.

United States Surtax Order (2025-1)

Definition of goods that originate in the United States

1 In this Order, goods that originate in the United States means goods that are eligible to be marked as goods of the United States in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations.

Non-application

2 This Order does not apply to goods that originate in the United States that are in transit to Canada on the day on which this Order comes into force.

Surtax — tariff items set out in schedule

3 (1) Subject to subsection (2), goods that originate in the United States that are classified under any of the tariff items set out in the schedule are subject to a surtax in the amount of 25% of the value for duty determined in accordance with sections 47 to 55 of the Customs Act.

Exception

(2) The following goods are not subject to the surtax:

Coming into force

4 This Order comes into force, or is deemed to have come into force, on March 4, 2025.

SCHEDULE

(Subsection 3(1) and paragraph 3(2)(b))

Tariff Items — Goods Subject to Surtax

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

On February 3, 2025, the United States (U.S.) delayed unwarranted tariffs on goods imported from Canada, to come into effect on March 4, 2025. In response to these measures, Canada had announced its intention to implement reciprocal surtaxes of 25% for an initial set of key imports from the U.S.

Background

The North American region is the most economically integrated in the world, centred on the large and mutually beneficial Canada-U.S. trade relationship featuring over $1 trillion in goods and services crossing the border annually. Canada is the top export destination for U.S. goods overall and these trade ties support nearly 8 million American jobs. Canada also supports the U.S. economy with nearly $1 trillion in foreign direct investment per year and as its top supplier of energy. Canadian and American industries are made stronger and more globally competitive because of integrated supply chains that produce higher value-added goods for export to other regions.

There have been significant engagements by Canada since the U.S. elections to argue against any application of U.S. tariffs, to ensure the negative consequences of tariffs for the U.S. are clear, and to emphasize that Canada is prepared to respond. U.S. tariffs would be a direct and flagrant violation of its market access obligations under the Canada-U.S.-Mexico Agreement (CUSMA), as well as its commitments at the World Trade Organization

On February 1, 2025, the Trump Administration announced the imposition of 25% tariffs against imports of all Canadian goods (except energy products targeted with 10% tariffs), originally due to come into force on February 4. In response, Canada announced reciprocal and targeted surtaxes against certain American goods. However, on February 3, the two sides agreed to delay the imposition of these trade actions until March 4, allowing for an interim period in which to negotiate and attempt to resolve issues.

Given the U.S. decision to move ahead with its tariffs on March 4, the government announced that Canada will implement reciprocal surtaxes targeting an initial set of key imports from the U.S., with further potential response measures to come after a period of public comment.

Section 53 of the Customs Tariff provides for the ability to apply trade measures, including surtaxes, to respond to acts, policies or practices of other countries’ governments that adversely affect, or lead directly or indirectly to adverse effects on, trade in goods or services of Canada.

Objective

The objective of the surtaxes is to encourage a prompt end to American tariffs against Canadian goods, in order to stave off the negative impacts of the tariffs for Canadians.

Description

Pursuant to section 53 of the Customs Tariff, the United States Surtax Order (2025-1) establishes reciprocal surtaxes on a range of goods imported from the U.S., including consumer and household products such as certain food products, appliances, cosmetics, furniture and apparel; plastic products; aftermarket tires; and pulp and paper. These cover a total of $30 billion in annual imports from the U.S., based on 2023 trade figures.

The surtaxes do not apply to most goods classified under Chapters 98 and 99 of the Schedule to the Customs Tariff, even if the goods are classified in a tariff item subject to the surtax. Chapter 98 waives customs duties on certain non-commercial importations such as travellers’ exemptions, while Chapter 99 waives customs duties on certain commercial importations such as goods for specific uses (e.g. religious goods) and in select situations to assist a small number of complex manufacturing activities.

Any applicable surtaxes will be calculated on the basis of the value for duty of the imported goods, as determined in accordance with sections 47 to 55 of the Customs Act. These surtaxes will apply in addition to any applicable customs duty imposed under the Customs Tariff.

The surtaxes will only apply to the relevant goods originating in the U.S., which shall be considered as those goods eligible to be marked as goods of the U.S. in accordance with the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations. The surtaxes will not apply to those U.S. goods that are already in transit to Canada on or before the date that this Order enters into force.

The surtaxes will remain in place until the U.S. eliminates its tariffs against Canada.

Regulatory development

Consultation

Given the gravity of the U.S. tariff threat and need to ensure an immediate and robust response to the tariffs in real time, there was no opportunity to conduct public consultations. Nevertheless, to minimize any adverse effects stemming from the United States Surtax Order (2025-1), as well as any future trade actions, the Government intends to establish a remission process to consider requests for relief from surtaxes. The remission policy will address exceptional and compelling circumstances that, from a public policy perspective, are found to outweigh the primary rationale behind the application of the surtaxes. Remission will ensure that Canadian importers, workers and businesses are not unduly burdened by the surtaxes. Further details outlining a framework and process for how the Government will consider remission requests will be published soon.

Concurrent to the announcement of the initial response, the Department of Finance also published a notice of intent launching a public comment period to solicit input and feedback on a broader proposed list of imported American goods that could be subject to future measures. The comment period invites formal submissions from industry associations, large corporations, small and medium-sized enterprises, manufacturers, contractors, suppliers and distributors, food processors, retailers, provinces and territories, and Canadian citizens. All comments will be taken into consideration in determining the appropriate course of action going forward and refining the scope of Canada’s response, should the application of U.S. tariffs persist.

Modern treaty obligations and Indigenous engagement and consultation

Following the completion of the assessment of modern treaty implications, no adverse impacts on potential or established Indigenous or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982, were identified in the Order.

Instrument choice

Subsection 53(2) of the Customs Tariff provides the authority for the Governor in Council, on the recommendation of the Minister of Finance and the Minister of Foreign Affairs, by Order, to make goods that originate in any country subject to a surtax for the purpose of responding to acts, policies or practices of a country that adversely affect, or lead directly or indirectly to adverse effects on, trade in goods or services of Canada.

Other instruments were considered, but were found unsuitable in terms of effectively addressing the impact of U.S. tariffs in a timely manner.

Regulatory analysis

Benefits and costs

The surtaxes represent Canada’s first response to the unwarranted, unilateral tariff actions by the U.S., which contravene CUSMA’s liberalized trade regime, limit Canada’s market access, and threaten the integrity of North American supply chains.

Initial surtaxes provide a signal of Canada’s resolute intent to force a prompt end to the U.S. tariffs, while setting the tone for potential future actions following the public comment period. Taken together, the initial response and potential future trade actions by Canada will encourage the removal of U.S. tariffs to protect Canadian industries and their integrated supply chains. Should the U.S. eliminate its tariffs against Canada, Canada’s trade measures would be repealed.

This Order targets certain key American exports, in order to support and advance political and business advocacy efforts in the U.S. To mitigate any negative impacts for Canada, products were generally selected for relatively low import dependence on the U.S. The selection limits disruptions to Canadian supply chains by mostly focusing on finished goods for which Canadian consumers generally have alternatives. In this regard, the goods targeted are generally available from other exporting countries or domestically, thus avoiding situations of short supply or having to incur the cost of the surtax. Importers, distributors, and retailers who maintain their U.S. supply for these goods would pass on the additional cost of the surtax, ultimately to those consumers willing to buy the goods.

In certain cases, the surtaxes will increase the costs of inputs used by various manufacturing industries in Canada. Some importers may pass the incremental importation costs onto their Canadian clients, increasing the costs for downstream manufacturers reliant on American inputs, while others may be able to more rapidly secure these products domestically, or from other markets not subject to the surtaxes.

Small business lens

Analysis under the small business lens determined that the measure would not impose administrative or compliance requirements on Canadian small businesses. Taxes (including surtaxes) are not included in the definitions of administrative and compliance burden in the Policy on Limiting Regulatory Burden on Business.

One-for-one rule

The one-for-one rule does not apply, as there is no incremental change in administrative burden on businesses. Duties and taxes (including surtaxes) do not meet the definition of administrative burden in the Red Tape Reduction Act and are not subject to the offset requirement under the rule.

Regulatory cooperation and alignment

Canada has been forced to respond to the U.S. tariffs with its own unilateral surtaxes, but it will engage as needed with other international partners who may be affected by U.S. tariff actions.

Effects on the environment

In accordance with the Cabinet Directive on Strategic Environmental and Economic Assessment (SEEA Directive), a preliminary scan concluded that a SEEA is not required.

Gender-based analysis plus

No impacts based on gender and other identity factors have been identified for this proposal.

Implementation, compliance and enforcement, and service standards

The CBSA is responsible for administering Customs Tariff legislation and regulations, including this Order. Once the Order enters into force on March 4, 2025, the CBSA will publish a Customs Notice to inform the importing community of issues related to the administration of the surtaxes.

Contact

Mike Mosier
Director
Trade and Tariff Policy
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Email: tariff-tarif@fin.gc.ca