An importer of Canadian cheese sued on Oct. 20 to void the 50% Section 338 tariffs, which now also cover Canadian furniture, lamps, ATVs and boats.
If you sell high-ticket furniture, outdoor, powersports or marine products and any of them are made in Canada, your wholesale cost may be carrying a 50% duty that USMCA origin does not erase. That matters to every Ecommerce Paradise reader with a Canadian supplier, because the proposed refund class covers only importers of record, and in most dropship setups that is not you.
The filing does not stop collection by itself. This post covers what the complaint says, how a 1930 statute ended up on your supplier’s invoice, and the five checks I’d run on every Canada-origin SKU this week. Cabinets have their own step-up on Jan. 1, which I covered in my cabinet tariffs post, and your broker should tell you whether that stacks with Section 338 on a given item.
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Gellert v. Trump Challenges 50% Section 338 Canada Tariffs
Gellert Global Group Corp., a family-run importer of Canadian cheese, filed Gellert Global Group Corp. v. Trump at the U.S. Court of International Trade on Oct. 20. The Liberty Justice Center is bringing the case, according to its press release.
The complaint asks for a declaration that the Section 338 tariffs are unlawful, an injunction against collecting them, and refunds with interest. It also seeks a class of every importer of record that paid or will pay Section 338 duties on entries from Aug. 22, 2026, plus a “30-Day Subclass” for goods entered Sept. 15 through Oct. 8, per Thompson Hine’s summary. The plaintiffs also filed motions for a preliminary injunction and summary judgment, according to the Liberty Justice Center.
The legal theory has four parts. The plaintiffs say the administration exceeded its authority because Section 338 applies only to specific foreign discrimination against U.S. commerce. They say two of the cited Canadian policies were responses to the president’s own tariffs and the third, on dairy, is governed by USMCA. They say Congress displaced Section 338 with the Section 301 procedures. And they say the government broke the statute’s 30-day waiting period: Gellert’s cheeses were added to the list on Sept. 8, and duties were collected seven days later.
Gellert imported about $71 million of Canadian cheese in 2025 and alleges it will pay about $40 million a year in Section 338 duties, per Thompson Hine. “Congress already gave the executive branch a tool for responding to unfair foreign trade practices,” said Jeffrey M. Schwab, senior counsel and director of litigation at the Liberty Justice Center. Thomas Gellert, the company’s co-CEO, said: “These tariffs disrupt those relationships overnight.”
Cheese is the plaintiff’s problem. Furniture is yours. Three proclamations signed July 20, covering alcohol, dairy and “motor vehicles,” each imposed a 50% ad valorem duty effective Aug. 22. The motor vehicle annex is the broadest list despite its name, covering Chapters 4 through 97 of the tariff schedule, including furniture, textiles, toys and plywood, according to Zonos’s Section 338 guide. Five proclamations signed Sept. 8 then widened the lists, taking covered tariff lines from 554 to 659, per Global Trade Alert.
C.H. Robinson’s Sept. 17 summary lists what the Sept. 15 changes added: all-terrain vehicles, golf carts, certain small passenger vehicles, certain boats including larger outboard motorboats, furniture and home furnishings (office, kitchen and seating furniture, mattresses and furniture parts), decorative and household lighting, aluminum products, and iron and steel structural products. Import bans took effect Sept. 29 for alcohol, dairy and certain motorcycles.
The rules that hurt most are the stacking rules. Zonos reports that a USMCA certificate does not exempt goods from Section 338 and only lowers the ordinary duty rate. The 50% sits on top of the ordinary rate. Since Sept. 15, goods on the alcohol and general lists pay Section 232 duties and Section 338 duties together. Entry timing controls, so there is no grandfathering for goods already in transit, and coverage follows country of origin even if the goods are rerouted through a third country. Zonos notes that CBP has not addressed transshipment.
Sources differ on a few lines. Zonos does not mention motorboats or motorcycles, while C.H. Robinson and Global Trade Alert do, and one account lists cement as covered while others show it removed. Check the official annexes before you act on any single summary.
Section 338 Went From Dormant 1930 Law to 659 Tariff Lines
Section 338 of the Tariff Act of 1930 is a Smoot-Hawley-era provision that no president had used until July 2026, per Thompson Hine. The administration turned to it after the Supreme Court invalidated the IEEPA tariffs. The proclamations state their purpose as offsetting “Canadian discrimination against the commerce of the United States.”
The timeline moved fast. The original effective date was Aug. 19, pushed to Aug. 22 after a three-day suspension, according to Zonos. The Sept. 8 proclamations set the Sept. 15 list changes and the Sept. 29 bans. Global Trade Alert puts covered trade at $20.30 billion out of $383.1 billion in total 2025 U.S. imports from Canada, about 5.3%. Trade paying the full 50% rose from $14.52 billion to $16.66 billion on Sept. 15, and the trade-weighted average U.S. tariff on Canada moved from 7.17% to 7.50%.
The $20 billion spans many industries, and a national average hides what a furniture seller feels. A 7.50% average tells you nothing about a Canadian-made sectional.
This is not the first tariff refund fight this year. I walked through the earlier one when the court certified a refund class for non-plaintiffs. I covered it again when Phase 3 opened Oct. 6 for plaintiffs only. My read is that refunds, when they come, go to the party whose name is on the customs entry.
There is a real counterpoint. No court has ruled, and I found no hearing date in the coverage I reviewed. A proposed class is not a certified class. The IEEPA outcome does not transfer automatically either, because Section 338 is a different statute with different text, and Zonos notes it lets the president bar covered articles from entry if the conduct the proclamations describe continues. I found no government response to the suit in the sources I reviewed.
What 50% on Canadian Furniture and ATVs Does to Your Margins
My read is that the lawsuit changes your planning only at the margin. Unless the court grants the preliminary injunction the plaintiffs filed for, the duties keep getting collected, and your supplier’s next price sheet will reflect that whether or not Gellert eventually wins.
Here is hypothetical math, not a reported figure. Say a Canadian-made outdoor furniture set costs you $2,400 and sells for $3,600, which leaves $1,200 in gross margin. If the customs value equals your cost, a 50% duty adds $1,200, and your margin is zero before ads, payment fees and freight. If the supplier absorbs half, you keep $600. To hold the original $1,200 on a full pass-through, you would price the set at $4,800, a 33% increase.
That price move lands in a soft market. I covered the New York Fed’s finding that tariff price effects can take up to a year to show up. Meanwhile I wrote up the consumer sentiment drop to 46.3 as durables buying sank. A 33% increase on a $3,600 set into that demand is not a pricing decision, it is a test of whether the SKU still deserves shelf space.
Who actually pays the duty matters most. In a typical dropship setup the supplier or its distributor is the importer of record, so the duty arrives as a higher wholesale cost, not a customs bill in your name. That means the refund class, if certified and successful, pays your supplier, not you. Ask them in writing whether they are the importer of record and whether they will pass refunds through. If you are a Canadian operator shipping to U.S. buyers, ask a customs broker how Section 338 applies to your shipments, because Zonos’s guide does not address delivered-duty-paid sales. I covered the Canadian side of the border in my guide to starting a U.S. business from Canada.
Three scenarios, with thresholds I’d use. If a SKU still clears your margin floor after the duty, keep selling and update the price in Shopify before the next ad flight. If it clears only if the supplier absorbs part of the duty, negotiate now, while Black Friday volume is on your side. If it falls below the floor on any realistic pass-through, drop the SKU or swap the supplier. My dropshipping suppliers guide covers how to vet the replacement.
Swapping carries its own cost. LTL freight is the wild card, and LTL rates topped 80% above 2018 for the first time this month, per the AFS index I covered. A cheaper-looking domestic supplier 2,000 miles away can eat the savings in freight.
Your books need to see this too. Make sure the duty lands in cost of goods and not as a mystery dip in margin, and use a bookkeeping tool built for ecommerce such as Finaloop to track landed cost per SKU.
If you pay Canadian suppliers in Canadian dollars, a multi-currency account such as Airwallex keeps the currency side clean. I explained the setup in my Airwallex walkthrough.
The operator complexity here is the real cost: HTS codes, annex lists, importer-of-record questions, repricing, supplier calls. If you would rather hand that work to a team, my turnkey done-for-you service builds and runs high-ticket stores so a tariff change is a spreadsheet update on our side, not a weekend of yours.
Not sure which of your Canadian SKUs survive a 50% duty? Bring the list to the store owners and me inside the community and pressure-test it before your next order. Join the Skool community →
5 Section 338 Checks to Run on Canada-Origin SKUs This Week
Run these in order. Each one takes an hour or less, and the first two decide whether the other three matter.
- List every SKU made in Canada. Ask each supplier for the country of origin and the eight-digit HTS code, then compare it with Annex II of Proclamations 11046, 11047 and 11048, the lists Zonos identifies as controlling coverage. Do not rely on a USMCA certificate to clear an item.
- Ask suppliers who the importer of record is. Get it in writing, along with whether they will pass any Section 338 refund through to you. If you are the importer, keep entry numbers, entry dates, the Chapter 99 headings claimed, duties paid and liquidation dates, which a trade-compliance explainer from Shopappy lists as the records you need for a fast refund claim.
- Recompute landed cost and margin on every flagged SKU. Use the 50% on top of the ordinary duty, then pause Google Shopping spend on any SKU below your floor. My piece on why high-ticket Google Ads need a complete conversion system explains why a negative-margin click is worse than no click.
- Line up alternatives before Black Friday. Check Inventory Source for substitutes and confirm the country of origin on each item yourself. Then run the high-ticket Black Friday stress test on the swapped catalog.
- Tell customers before they ask. Set up a Klaviyo flow for price or lead-time changes. Add a macro in Gorgias for “why did my price change.”
Wholesale2b is another place to look for substitute suppliers. Spocket is a third.
If you want a second set of eyes on your catalog and supplier list, book a call through my discovery page.
If you ship cross-border yourself, a shipping tool such as Easyship is worth a look. My ecommerce shipping guide covers the basics.
Frequently Asked Questions
Does the lawsuit stop the 50% tariffs?
No. The plaintiffs filed a preliminary injunction motion, but until a court grants it, customs keeps collecting the duties, per the Liberty Justice Center’s filing summary.
Will I get a refund if the plaintiffs win?
Only importers of record that paid the duty would qualify, and only if a class is certified. If your supplier is the importer of record, ask whether they will pass a refund through. I tracked the earlier tariff refund process in Phase 3 Tariff Refunds Open With 425,517 Entries Accepted.
Does USMCA origin exempt Canadian goods?
No. According to Zonos and C.H. Robinson, USMCA origin only lowers the ordinary duty rate, and Section 338 applies on top.
How do I know if my product is covered?
Match your eight-digit HTS code against the annex lists in Proclamations 11046, 11047 and 11048, and ask a licensed customs broker to confirm. If you are still choosing products, my high-ticket niches list is a place to start. The free niches list at ecommerceparadise.com/niches works too.
What about goods made in China?
Those fall under different tariff actions. I covered one of them in US Names 77 Chinese Goods for Tariff Cuts. Check Your SKUs.
Will customers dispute a price change?
Some will, especially if the surprise comes after checkout. Tell buyers early, and read my chargeback prevention guide before you reprice.
Is this legal or customs advice?
No. I am not a lawyer or a customs broker, and this post reports public filings and summaries. Confirm product-specific treatment with a licensed broker before you change prices or shipments. My brutal truth post on high-ticket dropshipping explains why supplier exposure is part of this business.
Rather not reprice and re-source a catalog every time a tariff list changes? My team can build and run the high-ticket store for you. See the turnkey done-for-you service →
I’ll keep tracking the Gellert docket and the next CBP bulletin. Subscribe to the YouTube channel for daily breakdowns. More breaking news coming through the day.
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- Everything You Need to Launch a High Ticket Dropshipping Business in 2026
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Trevor Fenner is an ecommerce entrepreneur and world traveler from Seattle, Washington, and the founder of Ecommerce Paradise, a platform focused on helping entrepreneurs build and scale profitable high-ticket ecommerce and dropshipping businesses. With over a decade of hands-on experience, Trevor specializes in high-ticket dropshipping strategy, niche and product selection, supplier recruiting and onboarding, Google & Bing Shopping ads, ecommerce SEO, and systems-driven automation and scaling. Through Ecommerce Paradise, he provides free education via in-depth guides like How to Start High-Ticket Dropshipping, advanced training through the High-Ticket Dropshipping Masterclass, and fully done-for-you turnkey ecommerce services for entrepreneurs who want a faster, more hands-off path to growth. Trevor is known for emphasizing sustainable, real-world ecommerce models over hype-driven tactics, helping store owners build scalable, sellable, and location-independent brands.
He maintains homes in Seattle and Bali, spends most of the year overseas, and usually returns to Seattle for about a month each summer.
