A shipment of goat’s milk cheese worth $120,288 entered the United States on September 28. According to a sworn court declaration, the importer then paid $60,144.50 in new Section 338 duties. That single shipment captures the scale of a trade fight now moving from the border to a federal courtroom.
Gellert Global Group, a U.S. food importer headquartered in Elizabeth, New Jersey, sued President Donald Trump’s administration on October 20, challenging 50% tariffs imposed on selected Canadian goods. The company says its Canadian cheese imports alone could generate roughly $40 million a year in additional duties. The administration argues the tariffs are authorized by a 1930 trade law and are needed to counter Canadian discrimination against American commerce. The dispute could become an important test of presidential tariff authority after a major Supreme Court ruling earlier this year.
A Family Food Importer Puts Section 338 on Trial
Gellert filed its case in the U.S. Court of International Trade, the specialized federal court that handles major customs and tariff disputes. The plaintiff is a New York corporation headquartered in New Jersey. In a sworn declaration, co-CEO Thomas Gellert said the group employs more than 700 people across the United States and generates more than $1.7 billion in annual revenue. Its affiliated businesses have been importing food products for more than a century. That makes the dispute more than an abstract confrontation between Washington and Ottawa: the challenged duties are costs being paid by an American company when Canadian merchandise enters the United States.
The lawsuit seeks relief for Gellert and a proposed class of American importers affected by the tariffs. Its lawyers want the court to declare the Section 338 measures unlawful, halt further collection and order refunds with applicable interest. Gellert has also requested a preliminary injunction and summary judgment. As of October 25, the case remains pending, and the court has not ruled that the tariffs are unlawful. The company’s arguments therefore remain legal claims to be tested rather than established judicial findings.
A 50% Tariff Turns Into a $40 Million Annual Exposure
Cheese represents a substantial part of Gellert’s Canadian business. Thomas Gellert said the group imports more than 15 Canadian cheese product lines, including sheep’s milk cheese, mascarpone, borgonzola, chèvre-style goat’s milk cheese, brie and camembert. The company reported importing roughly $71 million worth of Canadian cheese in 2025. According to its declaration, these cheeses historically entered without duty under the USMCA but are now subject to an additional 50% Section 338 charge. Gellert estimates that continuing the tariff at that level would cost the business roughly $40 million annually.
The first weeks of collections illustrate how quickly those costs can accumulate. Gellert says its September 28 goat-cheese shipment had an entered value of $120,288 and generated $60,144.50 in Section 338 duties. On October 5, another shipment valued at $66,822 generated $33,411.50 in duties. Across 22 Canadian-cheese entries made between September 16 and October 11, the company says it paid at least $520,538. Gellert is absorbing the added costs through the end of 2026, but its declaration says doing so is putting pressure on working capital, reducing margins and delaying hiring and investment.
The Fight Centers on a 1930 Statute Never Used This Way Before
The Trump administration based the measures on Section 338 of the Tariff Act of 1930. The statute addresses foreign measures that discriminate against U.S. commerce or place it at a disadvantage and authorizes additional duties designed to offset that burden, subject to a maximum rate of 50%. A Congressional Research Service report described Trump’s July 2026 actions as the first time a president had expressly cited Section 338 to impose tariffs. The initial measures targeted Canadian practices involving dairy, alcoholic beverages and motor vehicles and ultimately took effect on August 22 after a short suspension.
Gellert argues that Congress later established a more comprehensive system for addressing unfair foreign trade practices through Section 301 of the Trade Act of 1974. Its lawyers contend that Section 301 superseded or limits how Section 338 can now be used. That remains a disputed legal theory. Section 301 provides a developed process involving U.S. Trade Representative investigations, consultations, potential public hearings and formal determinations before retaliatory action. The administration, however, continues to rely on Section 338, maintaining that the older statute expressly empowers the president to impose and modify duties when its statutory conditions are satisfied.
The Dairy Dispute Predates This Lawsuit
The administration’s dairy complaint is rooted in Canada’s tariff-rate quota system. In its July proclamation, the White House argued that Canada grants some foreign dairy commerce more favorable treatment than comparable U.S. products. It specifically pointed to differences between eligibility rules under the USMCA and the Canada-European Union Comprehensive Economic and Trade Agreement. Under the administration’s interpretation, retailers can obtain access to certain Canadian cheese quota allocations under CETA while retailers are excluded from corresponding USMCA allocations. The White House characterized that difference as discrimination against U.S. commerce.
The broader dairy dispute is not new, and its trade-law history is more complicated. A 2021 USMCA dispute panel found Canada’s earlier dairy quota allocation system inconsistent with parts of its obligations, prompting Canada to revise its policies. In a second dispute released in November 2023, two of the three panelists found that the revised measures did not breach the USMCA commitments cited by the United States. One panelist agreed with a principal U.S. claim concerning eligibility. USTR publicly expressed disappointment and said serious concerns remained. That mixed record helps explain why the meaning of Canadian “discrimination” is a central issue rather than an uncontested premise in the new litigation.
Why Some Canadian Cheese Is Being Taxed Under Alcohol and Auto Headings
One of the most unusual details in Gellert’s filing is where its cheeses appear in the tariff system. The company says its chèvre-style goat’s milk cheese, brie and camembert are assessed under HTSUS heading 9903.03.14, associated with the Section 338 action involving motor vehicles. Its sheep’s milk cheese, mascarpone and borgonzola are assessed under heading 9903.03.12, associated with the alcohol action. U.S. Customs and Border Protection said September modifications added 122 tariff classifications to those two headings, with the changes taking effect on September 15.
Gellert argues that putting these cheeses into tariff schedules connected to disputes over alcohol and automobiles shows how far the measures have moved from the specific practices originally identified by the administration. The White House takes a broader view of Section 338, saying product coverage can be modified to continue offsetting the burden on U.S. commerce and better serve the public interest. The lists are still changing. On October 23, Trump modified the motor-vehicle-related tariff list again, removing some plywood, paper, machinery, refrigeration equipment and packing products while adding categories including certain valves, carpets and waste products. Those latest changes are scheduled to become effective October 30.
A Seven-Day Gap Creates a Separate Procedural Challenge
The timing of the September tariff expansion gives Gellert another legal argument. Trump issued the relevant product-list modifications on September 8. CBP subsequently instructed importers that the revised lists would apply to goods entered for consumption beginning at 12:01 a.m. Eastern time on September 15—only seven days later. The same guidance said 122 additional classifications were being brought within the two affected tariff headings. Gellert says its Canadian cheeses first became subject to Section 338 duties on that September 15 effective date and that it had paid no Section 338 duties on the products before then.
Section 338 itself contains a 30-day timing provision. The White House’s October 23 proclamation describes the law as permitting additional duties “not to take effect earlier than 30 days” after the president issues the relevant finding proclamation. Gellert therefore argues that the newly added products were subjected to tariffs prematurely. The administration has another statutory provision to rely on: Section 338 also permits the president to suspend, revoke, supplement or amend a proclamation when the public interest requires it. Whether that amendment authority permits newly covered products to take effect without another 30-day period is among the questions now awaiting judicial resolution.
The Supply Chain Starts in Upstate New York
Gellert’s court declaration demonstrates how a tariff placed on a Canadian finished product can reach backward into American agriculture. The company says one of its Ontario-based brie suppliers purchases cow’s milk from dairy farms in upstate New York. That American milk crosses into Canada, is processed into brie and then returns to the United States as finished cheese. Gellert says its Canadian cheeses regularly enter through Alexandria Bay and Champlain in New York and through Detroit, Michigan. Because Gellert is the importer of record, it becomes responsible for the additional Section 338 duty when those shipments enter the country.
That circular supply chain complicates the idea that an import tariff necessarily creates a clean dividing line between foreign and domestic producers. Gellert says domestically produced alternatives are not readily available in the quantities its customers require. Its sworn declaration also states that U.S. consumer demand for goat cheese exceeds domestic goat-milk production. Those statements are the company’s assertions rather than independent government estimates, but they illustrate its argument about the commercial consequences. If higher landed costs reduce Canadian orders, Gellert says the effects could travel backward to American farms supplying Canadian processors and forward to U.S. distributors, restaurants and retailers.
The Stakes Reach Beyond Cheese
Canada has already responded to the U.S. measures with counter-tariffs. Effective September 8, the Canadian government imposed tariffs of 15%, 25% and 50% on products covering C$27.6 billion in imports from the United States, describing the response as dollar-for-dollar retaliation against the U.S. Section 338 measures. Targeted sectors include dairy, steel, appliances, agricultural equipment, pulp and paper, and electronics. The broader economic relationship is enormous: USTR estimates that total U.S.-Canada goods and services trade reached $872.3 billion in 2025, including $715.5 billion in goods trade alone. Even a dispute affecting a fraction of that commerce can ripple through deeply integrated North American supply chains.
The lawsuit also arrives after the Supreme Court ruled on February 20, 2026, that the International Emergency Economic Powers Act did not authorize the president to impose tariffs. Section 338 presents a different legal problem because, unlike IEEPA, it expressly discusses additional duties and sets a maximum rate. Gellert therefore must attack the administration’s interpretation and use of that specific delegation rather than merely argue that the statute says nothing about tariffs. The White House has said it will vigorously defend its Canadian tariff policy, and its October 23 proclamation shows that the government is still actively adjusting the measures. For Gellert, the immediate dispute concerns hundreds of thousands of dollars already paid and potentially tens of millions more. For future presidents, the case could help define how much tariff authority remains inside a nearly century-old law.
