Tax Insights: Canada implements tariff rate quotas and surtaxes on imports of steel mill products

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In brief

What happened? 

The federal government has implemented tariff rate quotas (TRQs) on imports of steel mill products from countries that:

• do not have a free trade agreement (FTA) with Canada, effective June 27, 2025
• have an FTA with Canada (except for the United States and Mexico), effective August 1, 2025

A 50% surtax will apply on imports of steel mill products from all countries (except for the United States and Mexico) that exceed the specified quantity threshold in five steel product categories.  

In addition, effective July 31, 2025, a 25% surtax will apply on certain steel and aluminum goods imported for commercial purposes into Canada that contain steel melted and poured, and/or aluminum smelted and cast, in China.

Why is it relevant?

Companies that import foreign steel (other than from the United States and Mexico) will incur higher costs if the volume of imports exceeds the quarterly quotas. There will also be additional administrative requirements, such as obtaining import permits and tracking quota limits to avoid significant cost increases. However, Canadian steel manufacturers may benefit from reduced foreign competition and a more stable market, potentially leading to increased demand for their products.

Importers of steel and aluminum goods will need to demonstrate that the country of melt and pour, or of smelt and cast, is not China. If an importer is not able to provide the required documentation (when requested), the imported goods will be subject to a 25% surtax.

Actions to consider

Canadian businesses that use imported steel should review their supply chains to understand potential cost increases and compliance requirements and evaluate whether sourcing steel from domestic suppliers is more advantageous. 

Businesses that import steel and aluminum goods should also review their supply chains to determine whether those goods contain steel melted and poured, and/or aluminum smelted and cast, in China. If they do, they should consider diversifying their supply chain to find similar imported goods that would not be subject to the 25% surtax. 

In detail

Tariff rate quotas (TRQs)

TRQs¹ will apply on imports into Canada of steel mill products in these five steel product categories:

• flat
• long
• pipe and tube
• semi-finished
• stainless steel

Imports into Canada that exceed specified quantity thresholds will be subject to a 50% surtax (which is in addition to any existing duties).

The quota for tariff‑free imports into Canada will depend on whether the country has an FTA with Canada. The TRQ will be based on, for:

• non-FTA countries:
  • 2024 volume levels (2.6 million tonnes), starting June 27, 2025²
  • 50% of 2024 volume levels, starting August 1, 2025
• FTA countries (except the United States and Mexico) – 2024 volume levels, starting August 1, 2025²

The total quota volume limit, which is based on 2024 (or 50% of 2024) volumes, applies for each product category, up to which goods may be imported without a surtax. The annual quota is to be administered in quarterly periods, so that if the quota for a category in a three-month period has been filled, the surtax will apply to additional imports in that category for the remainder of that period. Any remaining quota at the end of a quarter will roll forward to the next period.

Each product category also has a limit on the share of the quarterly quota that imports from a single country of origin can fill, so if that limit is reached, the surtax will apply to all subsequent imports from that country in that category for the remainder of that quarter.

The TRQs are a temporary measure, to be reviewed periodically for appropriateness and effectiveness.³ It is intended to help stabilize the Canadian steel market in light of US steel tariffs⁴ that could cause foreign-origin steel, which was originally destined for the United States, to be redirected to Canada.

Goods that contain steel melted and poured, and aluminum smelted and cast, in China

Starting July 31, 2025, a 25% surtax⁵ will apply on certain goods imported for commercial purposes into Canada if that good contains:

• steel melted and poured in China
• aluminum smelted and cast in China

This is in addition to any other duties owing on the import. However, the surtax will not apply to steel and aluminum goods:

• that originate in the United States (and qualifies for Canada-United States-Mexico Agreement [CUSMA] treatment)
• for which the cumulative value for duty of all goods subject to the surtax order and accounted for under a single Commercial Accounting Declaration does not exceed $5,000

In addition, Canada’s duties relief and duty drawback programs are available to importers for the surtax paid or owed by Canadian businesses, subject to the provisions of the CUSMA.

This surtax is intended to “address risks associated with persistent global overcapacity and non-market policies and practices in the steel and aluminum sectors,” which have been made worse by US steel and aluminum tariffs⁴ imposed under section 232 of the US Trade Expansion Act of 1962.

The takeaway

US tariffs on steel and aluminum imports and global overcapacity (caused by non-market practices), particularly from China, has led many exporters of steel and aluminum to seek new markets. These measures are intended to “help stabilize the Canadian market and prevent harmful diversion of foreign steel from third countries into Canada while minimizing impacts on Canadian importers and downstream users.” Canadian steel-dependent businesses should evaluate their supply chains and diversify towards domestic steel suppliers or preferred trading partners.

We can help your business assess the origin of steel and aluminum imports and navigate this current global trade environment. See our:

• Tariffs, Trade and Policy Resource Centre for information to help your business assess and manage US tariffs and evolving trade relations
• Tariff relief: Unlocking government support for Canadian federal and provincial/territorial tariff‑related support programs

^{1. For more information, see Department of Finance Backgrounders at www.canada.ca/en/department-finance.html:
 - “Tariff-rate quotas on imports of steel mill products” (June 27, 2025)
 - “Support for the Canadian Steel Sector” (July 16, 2025)}

^{2. The TRQs do not apply to non-FTA countries before June 27, 2025 and FTA countries before August 1, 2025.}

^{3. The government had committed to an initial 30-day review after the TRQs were implemented for non-FTA countries on June 27, 2025. This review likely resulted in the TRQs also applying to FTA countries starting on August 1, 2025.}

^{4. See our Tax Insights “US tariffs on steel and aluminum imports from Canada” (September 2, 2025 update).}

^{5. Customs Notice 25-28: Steel Goods and Aluminum Goods Surtax Order (July 31, 2025) at www.cbsa-asfc.gc.ca. In addition, a 25% surtax already applies on imports of steel and aluminum products from China; see our Tax Insights “Canada to impose surtaxes on steel and aluminum products from China and Chinese-made electric vehicles” (October 29, 2024 update).}