Section 338 Canada tariffs: importer sues for refunds

In brief: A New Jersey cheese importer has sued to strike down the 50% Section 338 tariffs on Canadian goods and win refunds, with interest, for every importer that paid them.

Implications:

Refunds: If the court rules against the tariffs, the duty you have paid since Aug 22 could come back with interest.
September goods: Goods first listed Sept 8 and entered from Sept 15 to Oct 7 carry a second, narrower claim over a skipped 30-day wait.
Paperwork: Refunds go to the importer of record, so if your supplier brought the goods in, any share has to come through them.

The News

Gellert Global Group, a family-owned food importer in New Jersey, sued the Trump administration at the US Court of International Trade on Oct 20 to strike down the 50% tariffs on Canadian goods imposed under Section 338 of the Tariff Act of 1930. The suit asks the court to declare the tariffs unlawful, block their collection and order refunds with interest. It also asks to represent every importer of record that has paid them on goods entered since Aug 22.

Gellert imports more than 15 kinds of Canadian cheese, including brie, camembert and goat’s milk cheese, mostly from Ontario producers it has bought from for more than 25 years, according to the complaint. Cheese joined the tariff lists in September. On 22 entries made between Sept 16 and Oct 11, the company paid at least $520,538 in duties, and it estimates the tariffs will cost it about $40 million a year.

Section 338 lets a president raise duties by up to 50% on a country found to discriminate against US commerce, and no president had used it to impose tariffs until this summer. The suit makes three main arguments:

The law was replaced: Congress replaced Section 338 with Section 301 of the Trade Act of 1974, which requires an investigation and public comment before tariffs.
The reasons don’t fit: The Canadian policies the White House cited, a vehicle surtax, provincial bans on US liquor and dairy quotas, don’t justify a tax on cheese, which was added to lists built around liquor and autos.
The clock was skipped: Products added on Sept 8 started paying on Sept 15, seven days later, when the statute requires 30.

The Liberty Justice Center, which has also sued over the IEEPA, Section 122 and Section 301 tariffs, brought the case and has already filed motions for a preliminary injunction and for summary judgment. “No president should have the power to pull a dormant statute off the shelf and use it to impose sweeping tariffs or import bans without the limits Congress required,” Sara Albrecht, its chairman and CEO, said. The White House said it would vigorously defend the tariffs as a response to Canada’s treatment of US dairy, alcohol and auto exports. Gellert is absorbing the cost rather than raising prices through the end of 2026, and says it may have to raise them if the tariffs continue.

Why It Matters

The suit puts refunds in play for every importer paying the 50% duty, and its narrow claim about timing may matter sooner than the attack on the law itself.

A harder case than IEEPA: The emergency powers law that the Supreme Court ruled against never mentioned tariffs, while Section 338 expressly allows them, so challenging the basic power is “a steeper climb,” James Kim, an international trade partner at ArentFox Schiff, wrote on LinkedIn. He expects the fight “to center over the limits Congress put on that authority.”
The 30-day claim is easy to check: It turns on two dates rather than on how to read a 1930 law. The suit proposes a subclass for goods first listed in the Sept 8 proclamations and entered from Sept 15 to Oct 7, and Gellert says it paid more than $381,000 on those entries alone.

Who’s Exposed

The tariffs cover about $20 billion of Canadian goods when they started, across hundreds of tariff lines, and they apply even when a product qualifies for USMCA. The lists reach well past the cars, liquor and dairy the White House named:

Cheese and dairy: Swiss, cheddar, Parmesan, Gouda and other cheeses, plus more dairy products, joined the list on Sept 15. The 30-day claim covers everything first listed on Sept 8, not only cheese.
Home and building goods: Despite its name, the motor vehicle list covers no cars; it covers wood products, cement, furniture, textiles and some machinery, and on Sept 15 it added paper, aluminum and iron products and more furniture.
Alcohol: Most Canadian beer, wine and spirits have been barred from entry since Sept 29, so the duty question for liquor importers covers entries before then.

Peer Insights

In the IEEPA refund round, the timing of an importer’s choices decided how much it got back and when.

Sued early: When CBP opened refunds on IEEPA entries it had already closed out, only importers that were plaintiffs in a trade court case could file.
Sold the claim early: Academy Sports sold rights to part of its IEEPA refund before the Supreme Court ruled, at about 15 cents on the dollar, then handed $72.2 million of its $83.7 million refund to the buyer.