Written By Sabrina A. Bandali, Jessica Horwitz, George Reid, Ethan Gordon and Andrei Mesesan
On August 23 and 26, 2024, Canada announced a series of measures to address the threat of increased imports of Chinese electric vehicles (EVs), and steel and aluminum products and promised additional consultations on the imposition of surtaxes on a broader range of imports. The specific measures announced were:
- a 100 percent surtax on imports of Chinese EVs effective October 1, 2024, and limitation of point-of-sale EV purchase incentives to imports from countries with which Canada has a free trade agreement;
- a 25 percent surtax on imports of certain Chinese steel and aluminum effective October 15, 2024, with the list of specific target products to be refined in response to consultation comments;
- mandatory reporting by importers of the “country of melt and pour” for imports of certain steel product imports effective November 5, 2024; and
- further government consultations on batteries, battery parts, semiconductors, solar products, and critical minerals.
These measures represent Canada’s initial response to the threat of increased imports of Chinese EVs, as well as long-standing concerns about overcapacity in the Chinese steel and aluminum industries, and the effects that increased imports in these sectors will have on Canadian workers and investments. Canada’s moves align with similar policy responses to Chinese industrial policy taken by the United States and the EU.
The government’s promise of imminent consultations on a broader range of goods strongly suggests that Canada will impose further border measures to protect strategically important sectors. Canadian business should prepare for this fresh wave of tariffs, potential retaliation by China and disruptions to supply chains, planned investments and capital projects.
China has already responded to Canada’s announced EV, steel and aluminum tariffs. On September 3, 2024, China announced its intention to initiate an anti-dumping investigation into Canadian canola exports to China and a separate investigation into exports of as-yet unspecified Canadian chemical products. Days later, China requested consultations with Canada under the WTO Dispute Settlement Understanding regarding the WTO-consistency of the EV, steel and aluminum tariffs, a pre-condition to initiating the WTO dispute resolution process. Both China and Canada are members of the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), which provides an alternative appeal mechanism to resolve appeals of WTO disputes in the absence of a functioning and staffed WTO Appellate Body, somewhat increasing the likely effectiveness of WTO dispute settlement.
1. Surtaxes and Other Measures Related to Imports of EVs from China
Effective October 1, 2024, importations of Chinese-made EVs will be subject to a 100 percent surtax under Section 53 of the Customs Tariff. The imposition of surtaxes follows a 30-day consultation that concluded on August 1, 2024.
The EVs subject to the surtaxes are substantially all electric, and certain hybrid, passenger automobiles, trucks, buses, and delivery vans. The complete list is available here.
Additional details about the surtax will have to wait until the government issues the formal order imposing the surtaxes.
The 100 percent surtax will apply in addition to the 6.1 percent Most-Favoured Nation duty rate currently imposed on EVs manufactured in China and imported into Canada.
In addition, Canada will limit eligibility for the Incentives for Zero-Emission Vehicles (iZEV), Incentives for Medium and Heavy Duty Zero Emission Vehicles (iMHZEV), and Zero Emission Vehicle Infrastructure Program (ZEVIP) purchase and lease incentives to EVs manufactured in countries which have negotiated free trade agreements with Canada. For example, EVs manufactured in the United States, Mexico, the European Union, Japan or South Korea (among others) will remain eligible for these incentives.
The surtaxes on Chinese EVs align Canada with its most important trading partner. The United States has announced that the tariff rate on EVs under Section 301 of the Trade Act of 1974 will increase from 25 percent to 100 percent in 2024 as well as increased tariffs on EV batteries, battery components and parts, and critical minerals. Across the Atlantic, the EU imposed provisional countervailing duties of up to 37.6 percent on imports of EVs from China effective July 5, 2024, following investigations and findings of “unfair subsidization" in China causing a threat of economic injury to EU EV manufacturers.
2. 25 percent Surtax on Steel and Aluminum Products
Effective October 15, 2024, importations of certain Chinese steel and aluminum goods will be subject to a 25 percent surtax under Section 53 of the Customs Tariff. The government has announced a brief consultation period on this measure that concludes on September 20, 2024.
The steel and aluminum goods proposed to be subject to the 25 percent surtaxes are listed in a Notice of Intent published by Finance Canada. The government will announce the final list of goods subject to the 25 percent surtax on October 1, 2024. The brief consultation process provides an opportunity to make submissions on changes to the proposed list.
The 25 percent surtaxes will apply to goods originating from China, regardless of the country in which the seller is located or the route of shipment to Canada. The Notice of Intent specified that the rule of origin that will be referenced in the surtax order is whether the goods were “substantially manufactured” in China, in accordance with the rule that applies for product origin marking purposes under the Determination of Country of Origin for the Purpose of Marking Goods (Non-CUSMA Countries) Regulations.
The 25 percent surtax will not apply to steel or aluminum goods that were in transit to Canada on the day on which the surtaxes come into force.
The surtaxes will be in addition to any applicable anti-dumping and countervailing duties.
While this is the first formal announcement of surtaxes on Chinese steel and aluminum, the decision is not unexpected considering the current trade climate and recent actions taken by Canada's major trading partners including the ones described above. The government did not engage in specific public consultations about imposing surtaxes on Chinese steel and aluminum before the announcement, although it is accepting comments for a brief period now. The Notice of Intent indicates that during the EV consultations, stakeholders raised issues relating to broader Chinese industrial policy, overcapacity, and labour and environmental standards. Longstanding calls from representatives of the steel and aluminum sectors identifying concerns with China and urging the government to act may have also informed the measures.
As with the EV surtaxes, Canada’s imposition of surtaxes on Chinese steel and aluminum brings it into line with the United States, which has had s.301 tariffs on Chinese steel and aluminum products in place since 2018. The United States will also be increasing tariff rates on certain Chinese steel and aluminum products from 0–7.5 percent to 25 percent in 2024.
3. Amendments to General Import Permits 80 and 81—Country of Melt and Pour
From November 5, 2024, importers will have to report the “country of melt and pour” (COMP) of certain steel products imported into Canada. Optional COMP reporting for steel began on February 21, 2024.
On August 23, 2024, Canada announced a 30-day consultation period related to the proposed regulatory changes to General Import Permits ("GIP") No. 80 and GIP 81 requiring importers of certain carbon and specialty steel products to declare the COMP to the Canada Border Services Agency (CBSA) at the time of importation. The consultation period closes on September 23, 2024. If implemented, the regulatory changes will come into force on November 5, 2024.
An importer is required to declare importations of steel products listed in Items 80 and 81 of the Import Control List under GIP 80 (carbon steel products) or GIP 81(specialty steel products). Mandatory COMP reporting will be added to the GIP 80 and GIP 81 declarations, requiring importers to collect data farther up the value chain for the goods. Some steel products subject to GIP 80 and GIP 81 will be excluded from COMP reporting. COMP reporting will be “in the form and manner determined by the Canada Border Services Agency”. Under the current optional COMP program, the declaration is made through the Single Window Integrated Import Declaration.
Under the proposed amendments to GIP 80 and GIP 81, COMP is defined as the country where the raw steel contained in a carbon steel product is first produced in a steel-marking furnace in a liquid state and poured into its first solid state that can take the form of a semi-finished product that is a slab, billet or ingot or of a finished steel mill product. Because steel products may pass through several stages of production by several suppliers before import into Canada, the imposition of COMP reporting imposes an additional supply chain transparency and due diligence requirement on importers.
The government has proposed several exemptions to COMP reporting of goods that are otherwise subject to Items 80 and 81 of the Import Control List:
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Goods Excluded under Proposed Amendments to GIP 80 |
Goods Excluded under Proposed Amendments to GIP 81 |
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The COMP reporting requirement implements Canada's commitments to the United States in its Joint Statement on Section 232 Duties on Steel and Aluminum from May 2019, to establish an agreed-upon process to monitor aluminum and steel trade between them. The United States has already implemented a COMP reporting regime for steel and aluminum.
COMP reporting will give the government improved visibility into the supply chains of steel importations. We expect that this additional data will facilitate the enforcement of the 25 percent surtax on steel and aluminum as well as inform decisions by government on future tariff measures and trade remedies. Notably, nearly all goods identified in GIP Nos. 80 and 81 are the same as the goods identified by Finance Canada as subject to the 25 percent surtax imposed on steel and aluminum products from China.
Country of Smelt and Cast Reporting for Aluminum Products
The government is also looking into introducing requirements for importers to similarly report "country of smelt and cast" for aluminum products. There has been a consultation open since May 2024 on this topic. Since September 2019, General Import Permit No. 83 has required importers of certain aluminum products to report imports to facilitate Global Affairs Canada's aluminum import monitoring program. Aluminum products subject to GIP 83 include alloyed and not alloyed unwrought aluminum products, and wrought aluminum products limited to bars, rods, profiles, wires, plates, sheets, strips, foils, tubes and pipes, tube and pipe fittings and other articles of castings and forgings.
At this time, there is no mandatory or optional country of smelt and cast reporting for aluminum, but we expect to see developments on this front in 2025 as this information may become relevant for the enforcement of the upcoming surtaxes.
4. Consultations on The Next Wave of Tariffs
In addition to the surtax on Chinese EVs and steel and aluminum products from China, Canada announced that it will launch a 30-day consultation period related to other sectors "critical to Canada’s future prosperity", including batteries and battery parts, semiconductors, solar products, and critical minerals. The United States has already indicated that it will increase tariffs on batteries, battery components and parts, critical minerals, and solar cells between 2024 and 2026. This suggests that the recent announcements may represent the harbinger of more trade protections to come.
The Bennett Jones International Trade & Investment group has extensive experience in trade remedies and customs/border administration, including tariff-related interventions by government.
Please note that this publication presents an overview of notable legal trends and related updates. It is intended for informational purposes and not as a replacement for detailed legal advice. If you need guidance tailored to your specific circumstances, please contact one of the authors to explore how we can help you navigate your legal needs.
For permission to republish this or any other publication, contact Amrita Kochhar at kochhara@bennettjones.com.
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