Canada Tightens Rules on Steel Imports: What You Need to Know

Canada recently announced new measures to protect the Canadian steel industry, with measures to take effect before the end of the year.

In this update, we discuss “surtaxes” on steel imports that have been imposed pursuant to section 53 of the Customs Tariff (SC 1997, c 36) and related measures. These surtaxes may generally in industry or in the media be referred to as tariffs or duties.

This post sets out the current state of steel measures in Canada.

Why Is Canada Taking Action on Steel?

Steel is a foundational material used in construction, manufacturing, energy projects, vehicles, and household products. In recent years, the global steel market has been under strain due to:

• Overproduction in some countries, leading to very low-priced steel flooding world markets
• U.S. tariffs on steel, which can redirect excess foreign steel into Canada
• Pressure on Canadian steel producers and workers, including job losses and plant slowdowns

What Has the Government Changed?

Canada announced three main changes:

1. Lower limits on how much steel can be imported without surtaxes
2. New surtaxes on certain steel-based finished products
3. Removing exceptions to surtaxes that were previously available to ease the transition to these new measures

Let’s look at each in turn.

1. Lower Limits on Imported Steel (Tariff-Rate Quotas)

Canada uses something called a tariff-rate quota (TRQ) for steel. In simple terms, this means:

• A certain amount of steel can be imported at normal duty rates.
• Once that limit is exceeded, surtaxes (tariffs) apply.

What’s new?

The government has reduced the amount of steel that can enter Canada surtax-free.

• Imports above the new limits are still subject to a 50% surtax.
• For countries with whom Canada has a free trade agreement in place, the limits are being reduced from 100% of 2024 volumes to 75% of 2024 volumes.
• For countries that do not have a free trade agreement with Canada, the limits are being reduced from 50% of 2024 volumes to 20% of 2024 volumes.
• These limits are subdivided into product groupings and new limits become available every quarter. The limits are also country-specific, meaning that no one country can use up the entire quarterly limit. You can see the current quarterly limits, single country restrictions, and the amounts used on Global Affairs Canada’s website here.
• The United States and Mexico (Canada’s CUSMA partners) are exempt from these limits.

2. New Surtaxes on Steel-Derivative Products

The government is also targeting steel-derivative products from all countries — finished or semi-finished goods that contain a significant amount of steel.

What are steel-derivative products?

The current list of goods subject to the steel derivatives surtax is available here. These are products made from steel, such as:

• Certain fasteners;
• Stranded wire, ropes, and cables;
• Structural components;
• Prefabricated steel items;
• Some furniture containing metal;
• Some large industrial components, like wind-tower sections.

If the product is not on the linked list, it is not subject to this 25% surtax.

What’s changing?

• Beginning on December 26, 2025, a 25% surtax will apply to certain steel-derivative products imported into Canada from any country.
• The surtax applies to the full value of the product, not just the steel inside it. This is different from the U.S. approach to steel derivative products where the U.S. tariffs apply to the steel content in the product.
• This surtax does not stack with the other steel measures.

3. Ending a Key Exemption for U.S. Origin Steel (“Sunsetting” the Horizontal Remission)

Another important change is the government’s decision to end a special surtax exemption for certain U.S. steel products.

What was the “horizontal remission”?

Until now, Canada allowed for remission (refund or waiver) of its 25% retaliatory surtax on some U.S. steel products when they were imported specifically for use in manufacturing in Canada.

In practice, this meant that:

• Canadian manufacturers could import certain U.S. steel inputs without a surtax.
• Even though Canada had retaliatory steel surtaxes in place against the United States, those surtaxes were not applied in these cases.
• The exemption applied broadly across many products, which is why it was referred to as “horizontal”

What is changing?

The government is now phasing out (sunsetting) this remission. This horizontal remission will no longer be available for steel goods imported for manufacturing purposes beginning February 1, 2026.

• Steel imported for use in auto manufacturing will still benefit from remission.
• Aluminum goods will also continue to benefit from the horizontal remission when imported for manufacturing.

The Current State of Steel Measures in Canada

As a result of these new measures, there are now 5 different surtaxes that may apply to steel imports coming into Canada:

• The tariff rate quotas that apply to goods from all countries except the United States and Mexico and apply a 50% surtax for certain steel goods imported above the set volume limits;
• Canada’s 25% retaliatory surtax measures on U.S. origin steel;
• Canada’s 25% surtax on Chinese origin steel;
• Canada’s 25% surtax on non-U.S. steel that is made from steel melted and poured in China (or where the origin of the steel is unknown);
• Canada’s 25% surtax on steel derivative products.

Importantly, the Government has confirmed that these measures do not stack on top of each other. Any given product will only be subject to one of these 5 measures, in the following order of precedence:

• 1. Surtaxes on steel imports over the established tariff rate quotas for non-CUSMA countries.
  2. Either: a) surtaxes on U.S. steel and aluminum products; b) surtaxes on Chinese steel and aluminum products; or c) surtaxes on non-U.S. imports that contain steel melted and poured, or aluminum smelt and cast, in China.
  3. Surtaxes on steel derivative products from all countries (effective December 26, 2025).

As these new rules take effect, their impact will vary by sector — and the conversation between government, industry, and downstream users is likely to continue.