USMCA Treatment Does Not Necessarily Provide Protection

One of the most consequential aspects of the measures is that covered goods may be subject to the additional tariff even when they otherwise qualify for preferential treatment under the United States-Mexico-Canada Agreement, known in Canada as CUSMA.

That makes the action notably different from earlier tariff measures that broadly exempted USMCA-compliant Canadian goods.

Energy products are excluded from the new Section 338 tariffs, but that exclusion does not necessarily extend to prepared chemical additives used in lubricant manufacturing. Whether a specific product is subject to the tariff will depend on its country of origin and classification under the Harmonized Tariff Schedule of the United States.

The broad product descriptions accompanying tariff actions are provided primarily for general reference. The applicable HTS classification determines the actual tariff treatment, and questions concerning the classification of individual products ultimately fall under U.S. Customs and Border Protection.

Potential Cost Exposure for Lubricant Manufacturers

Canada supplies U.S. manufacturers with chemical intermediates, specialty materials and finished chemical products, some of which are used directly or indirectly in lubricants, greases, fuel additives and related products.

The precise volume of lubricant-additive material affected by the measure is not yet clear. Potentially affected materials may include finished additive preparations as well as products containing components or intermediates sourced from Canada.

A 50% additional tariff could materially increase costs for U.S. lubricant manufacturers that rely on covered Canadian-origin additive products.

The extent of the exposure will vary by company. It will depend on the particular product involved, its HTS classification, its country of origin, contractual terms with suppliers and which party serves as the importer of record.

Companies purchasing from a U.S.-based additive supplier may also have indirect exposure if the supplier imports a covered product from Canada and passes the additional cost through to customers.

Some blenders may have little or no direct exposure, while others may depend on specialized Canadian-origin products that are difficult to replace on short notice. For affected companies, a tariff of this magnitude could influence purchasing decisions, supplier relationships and finished-lubricant economics.

The effect could appear through tariff surcharges, additive price increases or higher finished-product prices. The timing would depend in part on existing U.S. inventories, contractual arrangements and whether suppliers initially absorb any portion of the additional duty.

What Lubricant Companies May Want to Review Before August 19

Lubricant manufacturers, marketers and distributors with Canadian suppliers may want to begin reviewing their purchasing and import records before the August 19 effective date.

That review could include:

• Canadian-origin lubricant additives and related chemical products currently being purchased;
• the HTS classifications under which those products enter the United States;
• which party serves as the importer of record;
• open orders expected to enter the United States on or after August 19; and
• the availability and qualification status of alternative sources.

Companies may also want to determine whether finished lubricants, greases or related products imported from Canada fall within any of the tariff classifications covered by the three proclamations.

Importantly, the additional duty generally applies based on when merchandise is entered for consumption or withdrawn from warehouse for consumption—not simply when it was ordered, manufactured or shipped. Goods already in transit may therefore be affected if they enter the United States on or after August 19.

Companies may want to ask suppliers whether they anticipate tariff surcharges, sourcing changes or adjustments to delivery schedules. Purchase agreements may also warrant review to determine whether additional duties may be passed through automatically under existing terms.

The inclusion of HTS 3811.21.00 should not be interpreted to mean that every lubricant additive, chemical product or lubricant imported from Canada will face the new 50% duty.

That distinction is particularly important in the additives business. Finished additive packages, individual components, chemical intermediates and petroleum-based preparations may enter under different tariff headings. Similar products may also receive different customs treatment based on their composition and country of origin.

Lubricant companies may want to consult with their customs brokers, suppliers and trade counsel before reaching conclusions about specific products.

The immediate focus for potentially affected companies is identifying covered materials, quantifying the potential exposure and understanding how suppliers intend to manage the additional cost. With the tariffs scheduled to begin August 19, the window for that work is narrowing.

This article is intended for general industry information and does not constitute legal, customs or tariff-classification advice. Companies should confirm the treatment of specific products with qualified customs professionals.