Customs Notice 26-23: What the October Update Changed for US Surtax Filing

CBSA updated Customs Notice 26-23 on October 23, adding clarification to paragraph 7. If you’ve been filing CADs against the US surtax since September, the change is narrow but worth catching: it specifies how to handle goods that qualify for CUSMA preferential treatment when the surtax applies.

The surtax itself has been in force since September 8, 2026. Canada imposed it in response to the US Section 338 tariffs on Canadian exports. The goods subject to the surtax mirror the categories the US targeted under Section 338, and the surtax rate varies by HS code. It sits on top of the normal MFN duty rate.

Origin Is the Gate

The surtax applies only to goods originating in the US. That origin determination is where most filing errors land. A pallet of steel parts shipped from a Buffalo warehouse is not necessarily US-origin. If the steel was melted and poured in China, shipped to the US for warehousing, then trucked to Toronto, the origin is China. The surtax does not apply. You file the CAD using Chinese origin, pay the MFN duty rate for Chinese goods (or the SIMA duty if it’s subject goods), and you’re done.

Conversely, a CUSMA-qualifying product made in the US is both US-origin and potentially subject to the surtax. The October 23 update clarifies that CUSMA preferential treatment is applied first, then the surtax is calculated on top of that preferential rate. So if a US-made machine part qualifies for duty-free treatment under CUSMA, it enters duty-free under CUSMA, then the surtax is added. The surtax is not part of the value for duty calculation. It’s a separate line on the CAD, much like SIMA duties.

The verification burden is the same as any origin claim: you need supplier documentation that establishes where the goods were produced or substantially transformed. A commercial invoice showing a US shipper address does not prove US origin. If your supplier is a US distributor sourcing from Asia or Mexico, get that in writing. If CBSA pulls the shipment for origin verification and your importer of record cannot produce proof, you’re liable for the surtax retroactively, plus interest, plus the AMPS penalty for incorrect origin declaration.

Filing the CAD

The surtax is declared as a separate duty line on the CAD. Your broker enters the normal duty rate (MFN or preferential), then adds the surtax rate that corresponds to the HS classification. The CARM portal calculates the total duties owing and rolls it into the Statement of Account. If you’re releasing prior to payment under an RPP bond, the surtax amount counts toward your outstanding balance just like regular duty.

The October update does not change the HS codes subject to the surtax. It does not change the rates. Paragraph 7 is procedural: it tells brokers how to sequence the duty calculation when CUSMA preference and the surtax both apply. In practice, most brokers were already doing it that way, because that’s how the CARM system is set up to handle it. The update formalizes it in the Customs Notice so there’s no ambiguity if CBSA audits a file three years later.

Cost Impact and Routing Decisions

The surtax rate varies by HS code, and for importers running tight margins on US-sourced industrial inputs, the added cost is real. Some are shifting suppliers. We’re seeing more inquiries about sourcing the same products from Mexico (CUSMA-qualified, no surtax) or from Asia through the Port of Montreal instead of cross-border trucking. If you’re running that math, remember that ocean freight and longer lead times have their own cost. Moving from just-in-time trucking from Michigan to container shipments through Montreal changes your working capital and warehouse dwell time at our sufferance facility.

For some importers, the surtax is temporary cost planning, not a supply chain redesign. The assumption is that when the US lifts Section 338 tariffs, Canada will rescind the surtax. That’s a policy call above our level, but it’s worth noting that SIMA duties have been in place on some product categories for over a decade. Temporary trade measures can outlive the crisis that triggered them. Budget as if the surtax is permanent until CBSA publishes a rescission order.

What to Do This Week

If you import from the US and you’re not certain whether your goods are subject to the surtax, pull the Customs Notice 26-23 from CBSA and check the HS code list. If your code is on it, verify origin with your supplier. If the goods are US-origin, confirm your broker is filing the surtax line on the CAD. If the goods are non-US origin but shipped from the US, make sure your broker has documentation to support the origin claim. CBSA will be verifying compliance on shipments that match the surtax HS codes, looking for misdeclared origin.

If your goods qualify for CUSMA preferential treatment and are also subject to the surtax, the October 23 update confirms the sequence: CUSMA preference applies first, surtax applies second. Your brokerage team should already be filing it that way, but if you see a CAD that looks wrong, that’s the rule to cite.

Most of these Customs Notice updates are shrug-and-wait. This one isn’t. The surtax is live, the rates are significant, and origin errors trigger AMPS penalties. If you filed September and October imports without the surtax on goods that should have had it, you have a voluntary disclosure window under section 32.2 of the Customs Act to correct it before CBSA finds it. After that, it’s a penalty on top of the duties owing.

If your September CADs are sitting in a pile and you’re not sure whether the surtax was filed correctly, that’s the kind of file review we run daily. Get in touch.

Source: CSCB