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Customs

Canada initiates WTO dispute regarding US duties on Automobiles and Auto Parts

Publish Date: 
16 Apr 2025

Canada has requested World Trade Organization (WTO) dispute consultations with the United States of America (US) concerning US measures imposing a 25|% duty on automobiles and automobile parts from Canada. The request was circulated to WTO members on 07 April 2025.

Canada claims the measures are inconsistent with the US’ obligations under various provisions of the General Agreement on Tariffs and Trade (GATT) 1994.

What is a request for consultations?

The request for consultations formally initiates a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel.

US – Additional Duties on Imports of Automobiles and Automobile Parts from Canada Request for Consultations by Canada

The following communication, dated 03 April 2025, from the delegation of Canada to the delegation of the United States, is circulated to the Dispute Settlement Body in accordance with Article 4.4 of the DSU.

_______________

The Government of Canada hereby requests consultations with the Government of the United States pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), in conjunction with Article XXII:1 of the GATT 1994, with respect to measures adopted by the United States that impose a 25% tariff on automobiles, effective 03 April 2025, and a 25% tariff on automobile parts, effective on a date to be specified in the Federal Register but not later than 03 May 2025. These tariffs are in addition to any other duties, fees, exactions, and charges imposed by the US.

The legal instruments through which the US imposes and administers the tariffs, operating separately or in combination, include the following measures:

  • Section 232 of the Trade Expansion Act of 1962 (Section 232);
  • Section 301 of title 3, United States Code;
  • Section 604 of the Trade Act of 1974;
  • US Department of Commerce Report on the Effect of Imports of Automobiles and Automobile Parts on the National Security, dated 17 February 2019;
  • Presidential Proclamation No. 9888, dated 17 May 2019; and
  • Presidential Proclamation No. 10908, dated 26 March 2025,

as well as any amendments, replacements, renewals, extensions, implementing measures, exemptions, or other related measures or instruments thereto, including any subsequent measures that alter the rate or scope of the tariffs.

In particular:

  • Section 1 of Presidential Proclamation No.10908 provides in part that “all imports of articles specified in Annex I to this proclamation or in any subsequent annex to this proclamation, as set out in a subsequent notice in the Federal Register, shall be subject to a 25% tariff […] on 03 April 2025, for automobiles, and on the date specified in the Federal Register for automobile parts, but no later than 03 May 2025”;
  • Section 2 of Presidential Proclamation No. 10908 provides in Part that “[f]or automobiles that qualify for preferential tariff treatment under the USMCA […] the secretary may approve imports of such automobiles to be eligible to apply the ad valorem tariff of 25% […] exclusively to the value of the non-U.S. content of the automobile”;
  • Section 3 of Presidential Proclamation No. 10908 provides in Part that “[i]f US Customs and Border Protection (CBP) determines that the declared value of non-US content of an automobile […] is inaccurate due to an overstatement of US content, the 25% tariff shall apply to the full value of the automobile, regardless of the actual US content of the automobile. In addition, the 25% tariff shall be applied retroactively (from 03 April 2025, to the date of the inaccurate overstatement) and prospectively (from the date of the inaccurate overstatement to the date the importer corrects the overstatement, as verified by CBP) to the full value of all automobiles of the same model imported by the same importer”;
  • Section 4 of Presidential Proclamation No. 10908 provides in Part that “[t]he ad valorem tariff of 25$ […] shall not apply to automobile parts that qualify for preferential treatment under the USMCA until such time as the secretary, in consultation with CBP, establishes a process to apply the tariff exclusively to the value of the non-U.S. content of such automobile parts and publishes notice in the Federal Register.”; and
  • Section 7 of Presidential Proclamation No. 10908 provides in Part that “[w]ithin 90 days of the date of this proclamation, the secretary shall establish a process for including additional automobile parts articles within the scope of the tariffs […]”.

The Government of Canada considers that the above measures appear to be inconsistent with the United States’ obligations under the following provisions:

  • Article II:1(a) of GATT 1994, as the measures at issue fail to accord with the commerce of Canada treatment no less favourable than that provided in the US Schedule of Concessions that is annexed to GATT 1994;
  • Article II:1(b) of GATT 1994, as the measures at issue impose duties in excess of the bound rates set forth and provided in the US Schedule of Concessions that is annexed to GATT 1994; and
  • Article VIII:3 of GATT 1994, as the measures impose substantial penalties for minor breaches of customs regulations or procedural requirements.

The US measures described above, whether or not they are inconsistent with the GATT 1994, nullify or impair benefits accruing to Canada directly or indirectly under the GATT 1994.

The Government of Canada reserves the right to address additional measures, as well as any additional factual and legal claims, in the course of consultations and in any future request for panel establishment.

The Government of Canada looks forward to receiving the Government of the US’s reply to this request and to determining a mutually convenient date and place for the consultations.4

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