Canada’s retaliatory tariff regime against U.S. goods has become more precise, not less complicated. On October 23, the Canada Border Services Agency revised its guidance for the 15%, 25% and 50% surtaxes imposed under the United States Surtax Order (2026), sharpening the treatment of goods entered under special Chapter 98 and 99 tariff classifications.
The change matters because those chapters cover traveller-related and other non-commercial provisions as well as special commercial relief provisions. The updated wording makes clear that being listed in Schedule 4 is not, by itself, enough to trigger the surtax: the underlying good must also fall within one of the tariff schedules carrying the 15%, 25% or 50% rates. For importers navigating counter-tariffs, remission orders and customs codes, that distinction can determine whether a shipment faces a substantial extra charge.
Ottawa’s October 23 Update Adds a Second Test
The most important change is in paragraph 7 of CBSA Customs Notice 26-23. Earlier guidance said goods classified under Chapters 98 and 99 were exempt unless the applicable Chapter 98 or 99 tariff item was specifically listed in Schedule 4. The October 23 wording adds another condition: a Schedule 4 item is exposed to the retaliatory surtax only when the good is also otherwise classifiable under a tariff item in Schedule 1, 2 or 3. Those schedules correspond to the 15%, 25% and 50% rates. Importers therefore have clearer direction to check both the special classification and the ordinary product classification.
The revision should not be mistaken for a new tariff law. CBSA’s customs-notice index labels the October 23 change as having no regulatory impact, while the underlying United States Surtax Order (2026) still shows its last amendment as September 8. The update instead makes the administrative guidance more explicit about how the regulation works. Even so, the distinction can have real cash-flow consequences when a company decides whether a shipment should be declared as subject to surtax or whether a past entry deserves another look.
The Three Rates Cover a $27.6-Billion Trade Response
Canada’s current countermeasure package took effect at 12:01 a.m. on September 8, 2026, after Ottawa said it would match new U.S. tariffs dollar for dollar and rate for rate. The federal government said the measures cover about $27.6 billion in imports from the United States and target sectors including steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, plastics and electronics. In some areas, notably steel and aluminum, existing Canadian counter-tariffs increased from 25% to 50% to match U.S. rates.
The three rates are tied to specific tariff items rather than chosen case by case. Schedule 1 carries the 15% surtax, Schedule 2 the 25% surtax and Schedule 3 the 50% surtax. The official list places many dairy tariff lines at 25% or 50%, while some machinery and equipment lines fall under 15%. That makes accurate Harmonized System classification essential. Two products that seem similar in a warehouse can face very different outcomes because their tariff codes place them in different schedules or outside the retaliation list entirely.
Why Chapters 98 and 99 Matter More Than They Sound
Chapters 98 and 99 are not ordinary product categories like dairy, machinery or furniture. Canada reserves them for special classification purposes. CBSA describes Chapter 98 as covering special non-commercial provisions, including traveller exemptions and other special circumstances, while Chapter 99 contains special commercial classification and duty-relief provisions. For Chapter 99 goods, the normal classification in Chapters 1 through 97 is still determined first before the special provision is applied. That layered structure explains why the October 23 clarification now stresses both classifications.
Schedule 4 of the 2026 surtax order names 14 Chapter 98 or 99 tariff items that can potentially remain exposed to the counter-tariffs. They include tariff item 9804.30.00, several 9825 and 9826 provisions, and commercial classifications such as 9966.00.00 and 9971.00.00. But the new CBSA wording makes clear that appearing in Schedule 4 is only part of the test. If the underlying product is not also classifiable under a tariff item in Schedule 1, 2 or 3, the notice says the retaliatory surtax does not apply.
Country of Origin, Not the Shipping Route, Drives the Surtax
The retaliatory surtax is based on origin rather than the last country from which a shipment is dispatched. Under the 2026 order, goods are treated as originating in the United States when they are eligible to be marked as U.S. goods under the CUSMA country-of-origin marking regulations. CBSA also says U.S.-origin goods can remain subject to the surtax even when they reach Canada from a third country. Routing an American-made component through another market therefore does not, by itself, remove the Canadian counter-tariff.
There are territorial carve-outs. Goods eligible to be marked as originating from Puerto Rico, Guam, the Northern Mariana Islands, American Samoa or the U.S. Virgin Islands are not treated as U.S.-origin goods for this surtax. Documentation is consequently critical. For commercial imports, proof of origin can include a commercial invoice or other records containing the required CUSMA data elements. For casual personal imports, goods marked as made in, produced in or originating in the United States are generally treated as U.S.-origin goods. At rates as high as 50%, an origin mistake can become costly quickly.
Other Exceptions Can Remove the Surtax Before Remission Is Needed
The Chapter 98 and 99 clarification sits beside several separate exceptions already in the 2026 regime. U.S. goods that were in transit to Canada when the order came into force are exempt if importers can prove the shipment was already bound for Canada and under a carrier’s control. CBSA lists bills of lading, cargo control records and similar shipping documents as possible evidence. A narrow exception also applies to Campobello Island residents returning through the island’s U.S. connection after an absence of less than 24 hours with personal or household goods.
Goods imported under qualifying permits for Canada’s Import for Re-Export Program can also escape the surtax when all program conditions are met, including required processing and re-export timelines. CBSA separately identifies situations involving previously duty-paid U.S. goods returning to Canada, certain repaired or altered goods, temporary baggage and conveyances brought in by non-residents, and eligible ships’ stores. These distinctions matter because an exception means the surtax does not attach in the first place, while remission generally provides relief from a surtax that would otherwise be payable.
Broad Remission Still Protects Key Canadian Supply Chains
Ottawa continues to provide broad, time-limited remission for several categories of imports used in Canadian operations. Finance Canada says generally available relief covers goods used for public health, health care or public safety; qualifying steel goods used in automotive or aerospace manufacturing; and non-steel goods used in Canada for manufacturing, processing, food or beverage packaging, or agricultural production. The horizontal remission is available both retroactively and prospectively until June 30, 2027.
For eligible importers, this can be simpler than seeking company-specific relief. Finance Canada says businesses that self-assess as meeting the existing conditions do not need to submit a separate remission request to the department. The surtax can instead be waived at importation or refunded if already paid by following CBSA procedures and using the proper authorization code. The obligation shifts to recordkeeping: there is no single list of every good eligible for horizontal remission, so importers must maintain documents showing the prescribed Canadian use. A factory input may qualify because of what happens to it after importation, not merely because of its product name.
Product-Specific Relief Can Be Claimed Without Starting From Scratch
Canada’s relief system also includes product-specific remission. Finance Canada says the existing schedules cover hundreds of products determined not to be produced in Canada, including a wide range of steel inputs. Depending on the schedule, relief can apply to surtaxes imposed under the 2025 U.S. measures, the 2026 order, the steel and aluminum framework or the motor-vehicle framework. That is especially important for manufacturers dependent on specialized inputs for which a practical domestic substitute is unavailable.
The claiming process remains procedural. CBSA requires supporting records such as Commercial Accounting Declarations, purchase orders, invoices, bills of lading or waybills. It also assigns authorization codes to different forms of relief; code 25-0466C, for example, is used for eligible manufacturing, processing or packaging remission. If relief was missed at importation, a business can correct or adjust its customs accounting and seek a refund under the applicable rules. For many remission claims, the importer must claim within two years after importation. Eligibility therefore has to be matched by the right documentation and customs entry.
Travellers and Low-Value Shipments Do Not Get a Blanket Pass
The counter-tariffs also reach personal imports, although ordinary traveller exemptions still matter. Canadian residents returning after less than 24 hours do not receive a personal exemption. After an absence of at least 24 hours, the standard exemption is up to C$200, while an absence of at least 48 hours can qualify for up to C$800. CBSA says the 15%, 25% or 50% surtaxes can apply to U.S. goods that fall outside those exemptions or exceed the applicable limit. A routine cross-border purchase can therefore become much more expensive once the surtax is added to other duties and taxes.
Low-value courier or postal treatment is not an automatic shield. CBSA’s 2026 guidance says U.S.-origin goods can remain subject to the retaliatory surtax even when they qualify for remission of ordinary duties or taxes under postal or courier programs, and the surtax can apply below de minimis thresholds. Separate remission may still be available, but CBSA warns that many goods entering through the Courier Low Value Shipment program may not satisfy the conditions of the broader remission order. Small shipment size does not necessarily mean small compliance risk.
CARM Coding Turns Tariff Policy Into an Accounting Obligation
For commercial importers, the policy ultimately lands in the customs declaration. CBSA assigns a separate code to each 2026 surtax rate: 26186A for 15%, 26186B for 25% and 26186C for 50%. The surtax amount is entered in field 85 of the Commercial Accounting Declaration, and importers using self-declaration must calculate it themselves. Goods that qualify for an exception are to be declared as non-subject to surtax at the time of accounting.
After the October 23 clarification, that means checking several layers before filing: the ordinary tariff item, any Chapter 98 or 99 classification, whether the special item appears in Schedule 4, and whether remission is available. CBSA can examine goods at importation and conduct post-release verifications of tariff classification, value and origin. Non-compliance can bring additional surtax, taxes, penalties and interest. Companies needing more certainty can request binding advance rulings on classification, marking or free-trade-agreement origin. When the potential surtax is 50%, getting the classification right before repeated shipments begin can be far cheaper than fixing a series of entries afterward.
Exceptional Remission Remains the Backstop for Hard Cases
Businesses that do not fit an existing exception, Chapter 98 or 99 provision, product-specific remission or horizontal relief can still ask Finance Canada for exceptional remission. The government says it will consider cases where goods used as inputs cannot be sourced domestically, either nationally or regionally, or reasonably from non-U.S. suppliers. It may also consider other exceptional circumstances that could have severe adverse effects on the Canadian economy. Finance Canada describes this type of remission as an exception that must be justified by compelling public-policy circumstances, not a routine way around retaliatory tariffs.
The evidentiary burden is substantial. Applicants may need to provide their business number, tariff classification, import volumes and values, sourcing efforts, contracts, manufacturing-cost breakdowns, pricing effects, employment and investment impacts, and information about Canadian competitors. Finance Canada may consult domestic producers before making a recommendation, and relief ultimately requires approval through an Order in Council. The October 23 CBSA update therefore fits a broader policy design: maintain pressure on U.S. trade while reducing unintended damage inside Canada. For importers, the decisive issue is the combination of classification, origin, use, timing and available relief—not simply whether a product appears on a tariff list.
