Canada Non-USMCA Goods: IEEPA 35% Surcharge Replaced by Section 122 at 10%

On February 20, 2026, the Supreme Court struck down the IEEPA 35% fentanyl surcharge that had applied to non-USMCA Canadian goods. Effective February 24, 2026 (per CBP CSMS #67844987), Section 122 at 10% replaces that prior 35% combined rate. USMCA-qualifying goods from Canada remain at 0%.

US importers sourcing goods from Canada that don't meet USMCA rules of origin requirements. This includes goods with insufficient North American content and transshipped goods from third countries through Canada. Canadian manufacturers whose products don't meet USMCA thresholds face a significant competitive disadvantage versus USMCA-qualifying Canadian goods.

Canada Non-USMCA Goods: IEEPA 35% Surcharge Replaced by Section 122 at 10% (effective 2026-02-24). On February 20, 2026, the Supreme Court struck down the IEEPA 35% fentanyl surcharge that had applied to non-USMCA Canadian goods. Bilateral trade deals negotiated under IEEPA authority served as the primary mechanism for country-specific tariff rates during the pre-February 2026 period. When the Supreme Court struck down IEEPA tariff authority on February 20, 2026, the legal basis for these bilateral deals became uncertain. The administration has maintained the effective rates from these deals without formal reimplementation under new statutory authority, meaning the rates apply in practice but their legal durability is uncertain. The Section 122 proclamation uses bilateral deals as a "replace" mechanism: countries with negotiated deals at or above the Section 122 base rate have their bilateral rate applied instead of the standard Section 122 rate. Countries like India (18%) and Vietnam (20%) face higher bilateral rates than the standard balance-of-payments surcharge rate of 10%, creating differentiation in the tariff treatment of US trading partners. USMCA partners Canada and Mexico are the most significant exception: USMCA-qualifying goods enter the US at 0%, completely bypassing both Section 122 and most bilateral deal frameworks. The trade policy trend clearly favors USMCA-qualifying supply chains and penalizes imports from countries without formal preferential agreements with the United States.

Importers from countries with bilateral deal rates should verify current effective rates with their customs broker, as the legal framework for these deals remains uncertain following the IEEPA ruling. The most reliable tariff reduction strategy remains USMCA qualification for Canadian and Mexican-origin goods, which provides statutory 0% rates. For countries without bilateral deals — such as Australia, New Zealand, and most of Africa — the standard balance-of-payments surcharge rate of 10% applies unless a Section 232 exemption is available.

• Canada Overview
• USMCA Explainer