Section 338 Is No Longer Theoretical

Three proclamations, one Depression-era statute, and someone apparently wants to be oiled up, covered in honey, hot wax, and feathers.

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I wrote an article in December 2024, then another two this year. The point was to demonstrate my passion for minutiae. As I say, “The truth is in the details.” Very smart people will search for sentences and words they can exploit to support their desires and intentions, and I suspected they would invoke section 338 to implement (still more) tariffs. I honestly thought 338 was a non-starter, because subsequent laws and treaties supplanted it, made it obsolete, and legally laughable. 338 is so draconian, no one would use it, right?

“338 is so draconian” should have been the clue telling me that it was, in fact, in the toolbox and ready to be deployed. This administration would never let 338 sit by, idly gathering dust, right?

On July 20, 2026, the administration formally invoked Section 338 of the Tariff Act of 1930 for the first time to impose an additional 50% tariff against a strange range of Canadian products. The duties take effect August 19, 2026, thirty days from signing, consistent with the statute’s own notice requirement.

Notice (Note?) that there is a requirement for notification only. There is no requirement for permission. And unlike 122, there is no need to ask Congress to renew these tariffs.

Why Section 338, Why Now

The Supreme Court’s February 2026 decision eliminated IEEPA as a general tariff tool. The administration responded immediately with a Section 122 global surcharge — temporary by statute, capped at 15%, and limited to 150 days without congressional extension. 122 is due to expire this week because we know Congress will not extend it. We know this because the Earth is round, because 1+1=2, and because some things in life are certain. 

I suspect the WH had 338 in their back pocket from the beginning, as a replacement to 122. 

Scott Lincicome, vice president of general economics at the Cato Institute, put it plainly: “We crossed the Rubicon. The invocation of 338 is the nuclear option for Trump tariffs.” 

That observation is apt — and sobering (tariffs on alcohol—sobering—get it?) The Cato Institute warned as early as October 2024 that several U.S. laws provide the president with vast and discretionary authority to unilaterally impose sweeping trade restrictions, and that no institution — not Congress, not domestic courts, not U.S. international agreements — provides a quick, surefire check on such actions. Section 338 was specifically identified in that analysis as a statute that “remains on the books, confers wide authority to the executive branch, and could therefore be ripe for abuse by a protectionist administration.”

What the Three Proclamations Actually Do

Trump signed three proclamations to launch the tariffs under Section 338, declaring that Canada has unfairly discriminated against American autos, alcohol, and dairy products. Several features of the proclamations deserve close attention. 

The scope of each EO is broader than the stated justifications suggest. Because I care for you, my dear readers, I saved you the trouble of reading the lists.

USMCA preference does not exempt covered goods. Treating Section 338 as operating entirely outside the USMCA framework is a position that will almost certainly be litigated. Calling Atticus Finch!

First, Alcohol and Hockey

I don’t drink alcohol.  So, this doesn’t affect me. But it might affect you, so a summary: according to the EO, in March 2025 Canada stopped buying US booze, but kept buying booze from other countries. This hurts exporters of hooch brewed, fermented, or distilled in the US, especially from US-origin grains and grapes. So, an additional 50% duty on ethanol-infused liquids from our neighbor to the North, USMCA be damned.

The Canadians’ pulling US alcohol off shelves was a response to our IEEPA tariffs. When the IEEPA tariffs were revoked, Canada should have allowed US alcohol back on the shelves, but it did not. It kept the ban on US alcohol as a bargaining chip against our 232 tariffs. The Canadian alcohol bans were retaliatory in origin, remain retaliatory in character, and persist because U.S. tariffs on steel, aluminum, and autos remain in force. Citing those Canadian bans as unprovoked discrimination — the statutory predicate for Section 338 — requires ignoring the sequence of events that produced them.

The products effected are in chapters 22, 33, 44, 48 (?), and heading 9506 (of course). 9506 is for articles of field- and ice-hockey.  Because we hate it when US hockey players use Canadian sticks.

The EO for alcohol and the two lists are found here. 

Second, Cheese and NA Beer

Dairy farmers are better off under the USMCA than under NAFTA. This is true.

The US filed a dispute re: Canada dairy with a USMCA panel and lost. This invites the question of why the administration is reaching for an almost 100-year old law instead of enforcing the 2020 agreement it negotiated.

The list of effected items is in HS chapters 4, 5, 12, 13, 17, 19, 22, 33, and 35 and includes nonalcoholic beer (2202.91). Nonalcoholic beer is not dairy. I know this to be true.

The EO for dairy and the two lists are found here. 

Third, Automotive (but it’s not Automotive)

In the automotive proclamation, the list of tariffed items does not in fact include automobiles or auto parts (with the exception of motorcycles, which are vehicles but ARE NOT automobiles so don’t get mad at me bikers!): 

·      honey, lemon oil, candles

·      feathers, silk, women’s dresses

·      jewelry, digital cameras, color monitors (of course)

·      a dozen roses

·      OK, the roses weren’t on the list but I wanted you to know that I care.

Someone needs to explain what is happening in the White House on weekends, because at some point between “automotive discrimination” and “feathers and silk and women’s dresses,” the process went somewhere that no trade lawyer, no economist, and no sentient adult with a working knowledge of the automotive supply chain can fully account for. 

The EO for automotive and the two lists are found here.

The Implied Repeal Question Is Now Live

In my earlier piece I (not a lawyer!) flagged the implied repeal problem: Section 338(d) was likely superseded by Section 252 of the Trade Expansion Act of 1962. No court had ever ruled on it because no president had ever used the statute.

Courts may find that Section 338 survived because Congress never explicitly repealed it (my pessimistic guess), or they may find it was superseded (calling SCOTUS!). Broadly, the courts have been deferential to the executive branch on tariff matters. But deference has limits, and the implied repeal argument has never been tested at this level. As far as I know. Not a lawyer. But then again: the WH is telling us that, when it comes to candles, oil, and feathers—buy American?

The Cato briefing paper noted that Section 338’s use was “threatened repeatedly in foreign policy exchanges in the mid-twentieth century” but never invoked to impose restrictions — and that invoking it to impose significant trade restrictions is almost certainly a violation of the United States’ WTO obligations. That WTO dimension now moves from theoretical to operational as well. 

What Importers Should Do Before August 19

The effective date is thirty days from signing. That is not much time for importers with Canadian supply chains to evaluate exposure or adjust sourcing and logistics.

Three immediate priorities: 

1. Review each affected product against the proclamation annexes at the HTS classification level
2. Do not assume USMCA eligibility provides protection on covered goods (it does not)
3. Evaluate whether any goods subject to existing Section 232 duties fall within the covered categories and therefore outside the Section 338 proclamations

O’Meara & Associates’ motto is “The truth is in the details.” Read the fine print before August 19. Have fun with the alcohol, honey, oil, and feathers.