Canada Signals Stronger Forced Labour Import Measures Following New U.S. Tariff Threat

On June 2, 2026, the United States Trade Representative (“USTR”) announced its finding that sixty trading partners, including Canada, have failed to impose and effectively enforce a ban on the importation of goods produced with forced labour (the “Announcement”). This finding was the result of an investigation that had been launched by the USTR pursuant to section 301(b) of the Trade Act of 1974 (“Section 301”), targeting these 60 countries for investigation shortly after International Emergency Economic Powers Act (“IEEPA”) tariffs were struck down by the U.S. Supreme Court.

As a result of this finding, USTR has proposed an additional 10% duty on goods from Canada and other countries that have “committed to impose and enforce such a prohibition through an Agreement on Reciprocal Trade, or economies that have imposed a partial regime with the effect of preventing the importation of certain forced labor goods”. Goods from countries found not to have met this requirement will be subject to a 12.5% additional duty.

Importantly, as proposed by the USTR and consistent with other tariff measures proposed by the Trump Administration, this additional duty would not apply goods that satisfy the rules of origin under the Canada-United States-Mexico Agreement (“CUSMA”). Those goods would continue to be able to enter the United States without being subject to the additional 10% duty.

In response to the Announcement, Canada has indicated that additional measures to strengthen its prohibitions against imports of goods made in whole or in part from forced labour will be introduced before Parliament rises for the summer.

In this client alert, we consider the USTR’s findings with respect to Canada’s actions on forced labour, and how Canada may respond.

Section 301 and the Forced Labour Investigation

Section 301 authorizes the United States to take trade measures, including tariffs, in response to foreign practices that it determines are unjustifiable, unreasonable, or discriminatory and that burden US commerce.

On March 12, 2026, USTR initiated 60 Section 301 investigations addressing the “failure to impose and effectively enforce” prohibitions on imports of goods made from forced labour. These investigations were launched in the aftermath of the U.S. Supreme Court’s decision in late February to strike down the Trump Administration’s tariffs imposed under IEEPA, and shortly after a temporary 10% global tariff was imposed pursuant to section 122 of the Trade Act of 1974, which is set to expire in July.

In the Announcement, USTR reported that 54 of the reviewed jurisdictions do not have formal prohibitions on such imports, while six jurisdictions, including Canada, Mexico, and the European Union, have measures in place but were assessed as not effectively enforcing them. The USTR argues that this failure to properly address forced labor issues in supply chains “creates a dynamic where American workers are forced to compete globally on an unlevel playing field.” Based on this, USTR has proposed additional duties of:

• 10% on imports from jurisdictions like Canada with some prohibitory framework; and
• 12.5% on imports from jurisdictions without such measures.

As set out in the Annex to the Federal Register Notice for the proposed additional duty, there are a large number of goods that are proposed to be exempt from these additional duties. These include staples such as coffee, as well as natural gas, electricity, and many electrical components for aircraft. Perhaps most importantly for Canadian exporters, the USTR’s proposal specifically exempts goods that are compliant with CUSMA. This exemption for goods that qualify as originating under CUSMA has been fairly consistent for broad-based tariffs imposed by the Trump Administration, including the IEEPA tariffs that were struck down.

The Announcement indicates that the proposal will be open to public comment (until July 6, 2026), and hearings have been scheduled for July 7, 2026, to discuss USTR’s proposal prior to any final determination being made.

The Investigation’s Findings with respect to Canada and Canada’s response

Canada has prohibited the import of goods “that are mined, manufactured or produced wholly or in part by forced labor” since July 1, 2020, as a result of amendments to the Customs Tariff that were implemented along with CUSMA. Though the USTR’s report on their investigation findings (the “Report”) acknowledges the existence of this prohibition, it indicates that it has not been effectively enforced. To support this view, it cites a 2025 submission to USTR made by the Coalition Against Forced Labour in Trade that itself cites public reporting from September 2024 that states that, at that time, only 50 shipments had been intercepted by Canadian authorities for suspicion of being made in whole or in part using forced labour, and only two of those shipments were ultimately found to be prohibited from being imported into Canada on that basis.

The Report also alleges that “Canada has not taken action to restrict the importation of goods for which there is a known risk” of forced labour, citing Canada’s limited action to investigate goods that US Customs and Border Protection has identified as being made with forced labour.

The Report does not specifically cite the Fighting Against Forced Labour and Child Labour in Supply Chains Act, which came into force on January 1, 2024, and requires certain entities and government institutions to publish annual reports addressing risks of forced or child labour in their supply chains. As we discussed in our November 2025 client alert, Modern Slavery Alert: Public Safety Canada issues its 2025 Report as Bill C-251 seeks to upend Canada’s Modern Slavery Regime (the “November Update”), in 2025, 4,313 entities submitted reports under the Act to the Canadian government discussing activities undertaken to address the risk of modern slavery in their supply chain. The United States does not employ similar transparency legislation at a federal level.

In response to the Report, Minister Dominic LeBlanc, who is responsible for Canada-US trade, issued a statement indicating that Canada has a robust regime in place to address forced labour but would also “soon be taking action to make it even stronger, including through the introduction of new legislation this month”. It is unclear what this new legislation may consist of. The previous Trudeau government had announced that it would introduce legislation to create a new regime for supply chain due diligence that would “increase the onus on importers to demonstrate their supply chains are free of forced labour” and a new oversight agency to ensure ongoing compliance, however that never materialized.

More recently, Bill C-251, a private member’s bill that was introduced in late 2025 and discussed in our November Update, proposed amendments to expand import restrictions by introducing a rebuttable presumption that goods from designated sources, including entities, regions or countries, are produced with forced or child labour. Imports from these sources would be prohibited from entering Canada unless the importer is able to rebut this presumption. This would effectively impose a due diligence obligation on importers whose supply chains are exposed to these designated sources and may address some of the concerns raised by the USTR in its Report.

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McCarthy Tétrault’s International Trade and Investment Law Group advises a large number of clients across a variety of industries on modern slavery and trade related matters and has significant experience in assisting clients develop strategies and policies around modern slavery and supply chain compliance more generally. We will continue to monitor and report on any further developments in this space.