Trade & Customs Oct 20, 2026 · 8 min read

Importer sues to overturn the 50% Section 338 tariffs on Canadian goods

A food importer takes on the 50% Canada tariffs. A family-run food importer sued on 20 October to overturn the 50% tariffs on about $20 billion of Canadian goods. The tariffs use Section 338 of the 1930 Tariff Act, which no president had used to impose a tariff before. Our view: this case is harder to win than the one that killed the IEEPA tariffs. Trade lawyer James Kim agrees: “Section 338 expressly does” allow tariffs. The suit asks for refunds and a class of importers. Forwarders should keep entry-level duty records now. Our call: the 50% is still being collected on 31 December.

The 50% Canada tariffs are now in court. Plan for refunds later, not relief now
A family-run food importer that depends on Canadian cheese sued the US government on 20 October 2026. It wants the 50% tariffs on about $20 billion of Canadian goods thrown out.
The case is Gellert Global Group Corp. v. Donald J. Trump. The Liberty Justice Center filed it at the US Court of International Trade (CIT), the federal court that hears import and customs disputes. The suit asks the court to strike down the tariffs, stop their collection and order refunds, according to Supply Chain Dive.
Our view, plainly: this is a slower and harder fight than the IEEPA case. Forwarders and their clients should treat it as a possible refund in 2027 or later. It is not a reason to change pricing or routing on Canadian goods this quarter.

What the tariffs are and why this law is unusual

The tariffs rest on Section 338 of the Tariff Act of 1930, better known as Smoot-Hawley. Section 338 lets a president impose duties of up to 50% on a country that discriminates against US commerce. According to the suit, as reported by Supply Chain Dive, it had not been used to impose tariffs in the 96 years since it was enacted. Georgetown scholars Peter Harrell and Jennifer Hillman, citing State Department records, told the Associated Press in September that the US considered using it against Spain in 1932 and China in 1949, but never did.
The proclamations were signed on 20 July 2026, according to trade law firm Sandler, Travis & Rosenberg. They first targeted motor vehicles, alcoholic drinks and dairy. Talks between Washington and Ottawa then broke down, and the 50% duty took effect on 22 August, Supply Chain Dive reported.
The list did not stay still. Canada’s counter-tariffs took effect on 8 September, per Sandler, Travis & Rosenberg. The US then widened its list and banned some imports outright, including motorcycles and beer, Supply Chain Dive reported. Customs broker GHY International says changes effective 15 September added 122 tariff classifications, plus all-terrain vehicles and more dairy products. Import bans on certain dairy, alcohol and motor vehicle headings started on 29 September.
Some goods are exempt. GHY lists energy, potash, goods already under Section 232 tariffs, certain civil aircraft, fish and critical minerals. USMCA origin does not help. GHY states: “USMCA origin does not exempt covered goods from either the duty or the import ban.” The AP put the covered goods at about 5% of Canadian imports.

What the lawsuit argues

Supply Chain Dive lists four main claims.
First, Section 338 has been superseded by Section 301 of the Trade Act of 1974, the law the US normally uses against unfair foreign trade practices. Lawyers call this “implied repeal”: a later law that covers the same ground replaces the older one. The complaint, as quoted by Reason, says Section 338 was “impliedly repealed,” and that “the Section 338 Tariffs are unlawful whether or not Section 338 survives.”
Second, the administration did not properly identify the Canadian discrimination. The complaint argues that Canada’s motor vehicle surtax and provincial alcohol buying decisions are “responses to tariffs” that “the United States imposed on Canada, not discrimination by Canada against the United States,” Reason reports.
Third, the tariffs hit products with no link to the alleged discrimination. The AP noted in September that the list included goods unconnected to the disputes, such as hockey sticks and cement. GHY says cement was removed from the list on 15 September.
Fourth, goods were added without a mandatory 30-day waiting period, according to Supply Chain Dive.
The suit also says the 50% rate was set at “the statutory maximum rate of 50 percent without tying it to any measured burden,” in Reason’s account. And it seeks certification of a class of affected importers. Reason reports that class could number “the hundreds, if not the thousands.”
Jeffrey Schwab, the Liberty Justice Center’s director of litigation, said Congress already built a tool for this in Section 301, with an investigation and public comment. “The administration cannot skip those protections by reaching for a 1930 statute,” he said, as quoted by Reason. Sara Albrecht, the group’s CEO, said: “No president should have the power to pull a dormant statute off the shelf.”
For the importer, the harm is practical. Thomas Gellert, the firm’s co-CEO, said in the release announcing the suit, as quoted by Supply Chain Dive: “These tariffs disrupt those relationships overnight and create costs and uncertainty that ripple through the entire supply chain.” The company relies on cross-border trade for certain cheeses, which were added to the list in September.

Why this is not IEEPA again

The IEEPA case worked because that emergency law never mentioned tariffs. Section 338 does. That is the core problem for the challengers, and the lawyers outside the case say so.
James Kim, an international trade partner at ArentFox Schiff, wrote in a LinkedIn post quoted by Supply Chain Dive: “I would say that this is likely a harder case for the challengers than IEEPA.” He explained: “The Supreme Court held that IEEPA did not authorize tariffs.” And: “Section 338 expressly does.” His conclusion: “That makes a challenge to the basic tariff authority a steeper climb.”
Kim expects the fight to turn on the limits Congress wrote into the law. “Were the Canadian measures discrimination under Section 338, or retaliation for U.S. tariffs?” he asked. He also noted: “Those labels aren’t necessarily mutually exclusive; retaliation could still qualify as discrimination.”
Others see more room for the challengers. Ryan Majerus of King & Spalding, a former US trade official, told the AP in September: “This law is literally a blank canvas because it’s never been litigated.” Albrecht said then, according to the AP: “There is a very strong argument that (Section 338) was superseded.”
Our reading, as an outlook and not legal advice: the big “implied repeal” argument is the long shot. In our view, asking a court to find that Congress quietly replaced a law it never formally repealed is a big ask. The narrower points look stronger to us: products with no clear link to the alleged discrimination, and goods added without the 30-day wait. If the challengers win something, we think it is more likely to be a partial win on specific goods than a ruling that wipes out the whole programme.

What happened last time

The IEEPA fight is the best guide to timing. The Supreme Court struck down those tariffs on 20 February 2026, according to Greenberg Traurig. On 27 March, CIT Judge Richard Eaton ordered Customs and Border Protection (CBP) to refund IEEPA duties, even on entries whose liquidation was final. Liquidation is CBP’s final calculation of the duty owed on an entry.
Even then, money did not flow quickly. By 10 April, Barnes & Thornburg reported: “No refunds are being issued yet.” CBP was building a new refund tool inside its ACE system, called CAPE, and said its refund system was “75% complete.” The first phase covered only unliquidated entries and entries that had liquidated within the previous 80 days.
The lesson for forwarders: even a clean win took months to turn into cash, and claims ran entry by entry. The Section 338 case starts from the beginning, at the trial court. Meanwhile, the CIT ruled in May against the temporary 10% Section 122 tariff that followed IEEPA, and the administration is appealing, Supply Chain Dive reports. Appeals add time.

What forwarders and brokers should do now

Keep clean records. For every Canadian entry carrying the Section 338 duty, log the entry number, the tariff code, the entry date and the duty paid. Flag goods added in September. In our reading, that is where the 30-day argument is most likely to apply.
Watch liquidation dates. Under US customs law, an importer normally has 180 days after liquidation to file a protest with CBP, Greenberg Traurig notes. After that, liquidation is usually final. In the IEEPA case, a court order reached even final entries. Nobody should assume that happens twice. Whether to protest is a call for each client and their customs counsel.
Talk to clients about the class. If the court certifies a class, importers who never sued could be covered. That is a question for the court, and it may take time. Clients who want certainty may prefer to talk to counsel about their own options.
Keep the 50% in quotes. The duty is still being collected. It stacks on top of other duties, per Sandler, Travis & Rosenberg, and USMCA origin does not remove it. Landed-cost quotes for covered Canadian goods should assume it stays.
Expect more change to the list. Sandler, Travis & Rosenberg notes the tariff “could be further modified in the future.” It has changed several times since August. Shippers moving dairy, alcohol, vehicles, ATVs and the long tail of added goods should check the list before each booking.

Our call

We expect the 50% Section 338 duty to still be collected on 31 December 2026. We do not expect the CIT to block collection before then. We expect at least one more importer suit or motion to join the class by the end of Q1 2027. If refunds come at all, we think they arrive no earlier than late 2027, and more likely for specific products than for the whole list.
This is our outlook, not legal advice.

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