Amendment to Duties To Address the Flow of Illicit Drugs Across Our Northern Border
The order raises the additional tariff on most Canadian goods from 25% to 35%, effective August 1, 2025, escalating the ongoing trade and drug-enforcement dispute with Canada first declared in February 2025.
It also adds new anti-circumvention rules that impose a 40% duty on goods transshipped through Canada to dodge existing tariffs, and requires a public watchlist of countries and facilities used in such schemes.
What this order does
What it orders
The order increases the additional ad valorem tariff rate on Canadian goods currently subject to the 25% rate — imposed under EO 14193 to address fentanyl trafficking — to 35%, effective August 1, 2025. It modifies the Harmonized Tariff Schedule accordingly. USMCA-qualifying goods, energy products at the 10% rate, and other prior carve-outs remain unchanged.
The order adds a separate anti-transshipment provision: goods determined by U.S. Customs and Border Protection to have been routed through Canada to evade applicable duties face a 40% rate plus potential penalties under existing customs fraud statutes. The Secretaries of Commerce and Homeland Security must publish, every six months, a list of countries and facilities involved in circumvention schemes. The Department of Homeland Security is directed to continue monitoring the northern border situation and to recommend further action if Canada retaliates or fails to address the illicit drug crisis.
Who it affects
U.S. importers of Canadian goods not covered by USMCA duty-free treatment or the energy carve-out, Canadian exporters selling to the U.S. market, and any third-country manufacturers or intermediaries attempting to route non-originating goods through Canada to avoid existing tariffs.
Why it matters
The 10-percentage-point increase directly raises landed costs for U.S. businesses importing affected Canadian goods, potentially pushing up prices for downstream buyers and consumers. The new circumvention penalties add legal and compliance risk for importers and supply chains that route goods through Canada.
What must happen and when
How the order is supposed to work
The tariff increase is self-executing: goods entered for consumption on or after 12:01 a.m. EDT on August 1, 2025 face the new 35% rate automatically via the amended Harmonized Tariff Schedule. DHS, consulting with the U.S. International Trade Commission, may make further HTSUS modifications by Federal Register notice. The anti-circumvention list must be published every six months by Commerce and DHS through CBP. DHS retains broad delegation to adopt rules and employ all IEEPA powers, and may redelegate within the department. A severability clause preserves the rest of the order if any provision is invalidated.
Actions and deadlines
- Apply the increased 35% additional tariff rate to all applicable Canadian goods entered for consumption
- Publish a list of countries and facilities used in tariff circumvention schemes
- Determine whether additional Harmonized Tariff Schedule modifications are necessary and publish any changes in the Federal Register
- Monitor northern border situation and inform the President of circumstances warranting further action or indicating Canada has addressed the emergency