United States Surtax Remission Order (Motor Vehicles 2025): SI/2025-60

Canada Gazette, Part II, Volume 159, Number 10

Registration
SI/2025-60 May 7, 2025

CUSTOMS TARIFF

P.C. 2025-465 April 15, 2025

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed United States Surtax Remission Order (Motor Vehicles 2025) under section 115footnote a of the Customs Tariff footnote b.

United States Surtax Remission Order (Motor Vehicles 2025)

Definition

Definition of importer

1 In this Order, importer means a person with a business number that is set out in column 1 of the schedule that both manufactures motor vehicles in Canada and imports them from the United States for the purpose of sale in Canada.

Remission and Conditions

Remission granted

2 (1) Remission is granted to importers of surtaxes paid or payable under subsection 2(2) of the United States Surtax Order (Motor Vehicles 2025).

Number of motor vehicles

(2) The remission is granted in respect of the number of motor vehicles set out in column 2 of the schedule that corresponds with the business number of the importer that makes a claim for remission.

Conditions

3 The remission is granted on the following conditions:

Coming into Force

Day made

4 This Order comes into force on the day on which it is made.

NOTE

(This note is not part of the Order.)

Issues

On April 9, 2025, Canada imposed 25% tariffs against imports of passenger vehicles and trucks from the United States (U.S.), in response to U.S. tariffs against Canadian auto imports, which were imposed on April 3, 2025. As part of Canada’s auto tariff announcement, the Government committed to establishing a framework for auto producers in order to incentivizes production and investment in Canada.

Background

On March 26, 2025, the U.S. issued a proclamation announcing its intention to apply tariffs on automotive goods. Effective April 3, 2025, U.S. global tariffs of 25% came into effect for imports of passenger vehicles and trucks. In the case of Canada, the tariffs apply to the full value of vehicles deemed non-originating under the Canada-United States-Mexico Agreement (CUSMA), but exclude the American content in CUSMA originating vehicles (i.e. for the latter, only that portion of the value of the vehicle added outside of the U.S. is subject to the tariff).

Effective April 9, 2025, Canada responded with reciprocal tariffs of 25% against imports of passenger vehicles and certain trucks from the U.S., further to the United States Surtax Order (Motor Vehicles 2025). Canada’s surtax order mirrors the U.S. approach with respect to CUSMA rules of origin:

As part of the announcement of Canada’s auto tariff response, the Government announced that a framework would be established to provide Canadian auto producers with relief from Canada’s counter tariffs, provided they maintain production and investment in Canada. Duty remission provides for relief of otherwise applicable duties or surtaxes for CUSMA-originating vehicles. Section 115 of the Customs Tariff provides the authority for the Governor in Council to remit surtaxes on the recommendation of the Minister of Finance.

Auto production in North America is highly integrated and mutually beneficial, based on the free flow of vehicles and auto parts maintained under CUSMA. Cross-border production and supply chains allow producers on both sides of the border to benefit from greater economies of scale, allowing for more specialization, greater efficiency and lower production costs, thus improving the competitiveness of North American automakers in global markets.

In 2024, Canada exported $44.4 billion in finished vehicles to the U.S., while importing $35.6 billion. The auto industry is a major employer in Canada, accounting for over 125 000 direct and 425 000 indirect jobs across the country. At the same time, Canada supports an estimated 75 000 direct jobs in U.S. automotive manufacturing through motor vehicles and parts imports. Canada is the largest international market for the U.S. automotive industry, with more than 40% of the vehicles sold in Canada assembled in the U.S. Meanwhile, 13% of the vehicles imports into the U.S. are produced in Canada, with approximately half of the value coming from U.S. parts.

Objective

The objective of the United States Surtax Remission Order (Motor Vehicles 2025) [the Order] is to provide relief from Canada’s auto counter tariffs for domestic auto producers, in recognition of the integrated nature of the North American auto industry, while promoting continued automotive production and investment in Canada.

Description

Pursuant to section 115 of the Customs Tariff, the Order establishes a remission framework to provide relief on surtaxes of 25% on passenger vehicles and certain trucks that originate in the U.S., in accordance with certain conditions. To be eligible for remission, the vehicles must be CUSMA-originating, imported between April 9, 2025, and April 8, 2026, and the claim for remission must be made within two years from the date of importation.

The remission framework is designed to allow Canadian-based producers to import a certain quantity of U.S.-assembled vehicles tariff-free, provided they maintain Canadian-based production. Specifically, the framework will allow for Canadian-based auto assemblers to import a specific quantity of CUSMA-compliant vehicles from the U.S. without incurring duties. As an incentive to maintain production in Canada, the tariff-free allowance will be adjusted based on the level of production in Canada, further to periodic reviews.

To inform these periodic reviews, companies seeking remission will be required to provide the Minister of Finance and the Minister of Industry with any requested reporting regarding the import and sale in Canada of U.S.-assembled vehicles and the manufacture of vehicles in Canada, including their Canadian content. Accommodation will be made for companies that are not currently producing in Canada due to retooling of their assembly facilities, such that any reduction in remission allowances will be linked to the overall level of vehicle production in Canada. Remission for companies that are in the process of retooling a facility will be linked to a production commitment once retooling is finished, with duties remitted having to be paid back should that production not come online as scheduled.

To protect business confidential information with competitiveness implications, the quantity of duty-free imports allocated to each manufacturer has been withheld from publication.

Regulatory development

Consultation

On March 4, 2025, Canada announced a public comment period with respect to the potential application of tariffs on a wide range of imports from the U.S., including auto imports. From March 4 to April 2, 2025, Canada’s public comment period resulted in extensive stakeholder input and feedback, with nearly 7 000 written submissions.

On the motor vehicles subject to this Order, the Government received 131 submissions, most of them from vehicle importers and retailers concerned about consumer affordability and the viability of their businesses due to tariffs on American vehicles that they sell. Other groups voiced support for the need to have a strong retaliatory response to U.S. tariff actions.

Given the existential threat posed by U.S. tariffs for Canada’s automotive manufacturers, the Government has taken a measured and calibrated approach by implementing counter tariffs to safeguard their space in the Canadian market, should a prolonged trade war unfold. The Government is also deploying a remission framework to minimize the adverse effects of the tariffs on Canadian auto producers, while incentivizing continued production and investment in Canada.

Modern treaty obligations and Indigenous engagement and consultation

Following an 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

Section 115 of the Customs Tariff provides the authority for the Governor in Council to remit duties on the recommendation of the Minister of Finance. A Remission Order under section 115 of the Customs Tariff is the most appropriate mechanism, as it was created to provide remission from duties, including surtaxes.

Regulatory analysis

Benefits and costs

U.S. tariffs place Canadian vehicles at a significant price disadvantage toward American vehicles in the U.S. market, which could negatively impact automakers’ ability to continue to produce and invest in Canada. Canada’s counter tariffs on U.S. autos will help to preserve the Canadian market for Canadian-made vehicles, especially those most impacted by U.S. tariffs due to their relatively higher Canadian content.

The auto remission framework will help to relieve some of the financial burden of the tariff conflict on Canadian auto producers, by allowing their imports to enter duty-free. Narrowing the scope of tariff coverage will also have the added benefit of lessening the affordability impacts for consumers in Canada arising from auto tariffs.

The remission framework will also create an incentive for auto producers to maintain production and investment in Canada, in order to maintain their eligibility for duty remission, thus supporting Canada’s continued role in cross-border automotive production and supply chains.

Small business lens

Analysis under the small business lens determined that the measure would not impose administrative or compliance requirements on Canadian small businesses. Although the process to claim remission of duties paid meets the definition of “administrative burden” set out in the Policy on Limiting Regulatory Burden on Business, none of the relevant importers meet the definition of “small business” in the policy. All eligible importers already possess the original customs forms required to justify remission and will benefit from the remitted funds.

One-for-one rule

This Order relates to tax administration and is exempt from the requirement to offset administrative burden and regulatory titles under the one-for-one rule. The requirement for Canadian importers to submit claims for remission meets the Red Tape Reduction Act definition of administrative burden on businesses. However, duties are considered to be “taxes” for the purpose of the one-for-one rule and have been exempted from the offset requirement.

Regulatory cooperation and alignment

Canada continues to engage with the U.S. to assess its objectives behind the tariffs and advocate for an arrangement or resolution that upholds free trade on the North American continent. In this respect, Canada is also actively exploring ways to consolidate its trade ties with Mexico. More broadly, Canada is consulting and cooperating with U.S. trade partners affected by American 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 strategic environmental and economic assessment is not required.

Gender-based analysis plus

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

Implementation, compliance and enforcement, and service standards

Once the Order enters into force, the Canada Border Services Agency (CBSA) will publish a Customs Notice detailing how eligible businesses may claim remission. The CBSA will assess any requests for remission made pursuant to the Order and will ensure compliance with its terms and conditions in the normal course of its administration of customs and tariff-related legislation and regulations. In doing so, the existing administrative framework will be leveraged to ensure that costs can be managed within existing resources. Any refund issued pursuant to the Order will be administered by the CBSA. Depending on the volumes and complexity of refund submissions, the CBSA strives to achieve a 90-day processing standard.

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