On March 4, 2025 the Premiers of Ontario and British Columbia announced retaliatory measures in response to the United States' ("U.S.") tariffs on Canadian exports, including that effective immediately, all U.S.-based companies would be banned from taking part in government procurement projects in Ontario and British Columbia, with Ontario urging its municipalities to enforce similar restrictions locally.
Since this ban is inconsistent with longstanding trade practices of fair and open procurement, numerous questions are being asked about the legal basis and scope of this ban, such as: what criteria defines a U.S.-based and Canadian-based company? Does the location of a head office or maintaining a certain number of Canadian employees matter? Are U.S.-based companies with existing contracts affected?
Ontario
On April 4, 2025 the Ontario government released its Procurement Restriction Policy (the "Policy") under the authority of the Management Board of Cabinet Act, 1990, and the Broader Public Sector Accountability Act, 2010. Existing procurement directives like the Building Ontario Businesses Initiative ("BOBI"), the Ontario Public Sector ("OPS") Directive and the Broader Public Sector ("BPS") Procurement Directive continue to apply. In the event of any conflict between or inconsistency with existing procurement directives, this Policy prevails.
Under this Policy, a "U.S. business" means a supplier, manufacturer, or distributor of any business structure (including a sole proprietorship, partnership, corporation, or other business structure) that:
- has its headquarters or main office located in the U.S., and
- has fewer than 250 full-time employees in Canada at the time of the applicable procurement process.
Procuring from a U.S. business is allowed only when both of the following conditions are met:
- if the U.S. business is the only viable source for the good/service; and
- the procurement cannot be delayed (e.g. risks to public health and safety, etc.).
This Policy applies to all public sector entities, which means government entities and all designated BPS organizations, unless otherwise specified.
Government entities include:
- all ministries;
- all provincial agencies (including any provincial agencies that are "Other Included Entities" under the OPS Procurement Directive);
- the Ontario Power Generation; and
- the Independent Electricity System Operator.
Designated BPS organizations include the BPS organizations that are subject to the BPS Procurement Directive (PDF).
The scope of the Policy captures all new procurements of goods and services of any value but does not apply:
- to any procurement already in progress at the time the Policy is effective (i.e. a procurement document has already been issued);
- when public sector entities use an existing Vendor of Record arrangement or other available arrangements;
- to contract extensions included in the original procurement; or
- to unforeseen situations of urgency contained in the OPS and BPS Procurement Directives.
Importantly, the Policy provides that a public sector entity "can rely on a business' representation that it does not meet the definition of a U.S. business."
The Policy is retroactive to March 4, 2025. It is expected that procurements issued after March 4th but prior to the release of the Policy will be disallowed if they are not subject to any exceptions.
Toronto
On March 26, Toronto City Council approved the "Mayor's Economic Action Plan in Response to U.S. Tariffs (PDF)" (the "Plan"), which contemplates a similar procurement ban in response to the protectionist trade measures implemented by the United States. Notably, the Plan adopts slightly different definitions for the terms a "USA Based Supplier", "Canadian Supplier"," and "Canadian Business Subsidiary," and as a result is possible that an entity may continue to be eligible for municipal procurements by the City of Toronto, which it is barred from participating in procurements by the Province of Ontario and its agencies.
A USA Based Supplier means a supplier, manufacturer or distributor of any business structure that conducts its activities on a permanent basis in the U.S. The business either:
- has its headquarters or principal place of business in any state or territory of the U.S.; or
- has at least 70% of its employees in the U.S. at the time of the bid submission.
USA Based Supplier does not include a Non-American Business Subsidiary.
A Non-American Business Subsidiary means a business subsidiary controlled by a parent corporation operating on a permanent basis in the U.S., that acts as a supplier, manufacturer or distributor of goods, where:
- the business subsidiary has permanent offices or production facilities outside of the U.S.; and
- a minimum of 70% of the deliverables will be provided by employees based outside of the U.S.
In contrast, a Canadian Supplier means a supplier, manufacturer or distributor of any business structure that conducts its activities on a permanent basis in Canada. The business either:
- has its headquarters or principal place of business in any province or territory of Canada;
- has at least 70% of its employees in Canada at the time of the bid submission; or
- is a Canadian Business Subsidiary.
A Canadian Business Subsidiary means a corporation operating in Canada, that acts as a supplier, manufacturer or distributor of goods and services and is controlled by a parent corporation outside of Canada, and where:
- the business subsidiary has permanent offices or production facilities; and
- a minimum of 70% of the deliverables will be provided by employees based in Canada.
Under the Plan, only Canadian Suppliers or Canadian Subsidiaries are allowed to bid on new competitive procurement under approximately C$350,000 for goods and services and C$8.8 million for construction. The Plan's call to disallow USA Based Suppliers is retroactive to March 7, 2025.
Mississauga and Oakville
Other major municipalities like Mississauga and Oakville utilize the definition of "Ontario Business" as defined in the BOBI for their procurement ban. An Ontario Business under BOBI means:
- The business is a supplier, manufacturer or distributor of any business structure that conduct its activities on a permanent basis in Ontario.
- The business either,
- has its headquarters or main office in Ontario, or
- has at least 250 full-time employees in Ontario at the time of the applicable procurement process.
Mississauga has created their own definition of "US Bidder" for inclusion in procurement bid documents. A US Bidder is:
- is a service provider, supplier, manufacturer or distributor of any business structure that conducts its activities on a permanent basis in the United States; and
- employs more than 65% of its full-time employees inside the United States on the closing date of the bid request.
Unlike Toronto which created a new monetary threshold to give preference to Canadian businesses under the Mayor's Plan, Mississauga and Oakville have sought to increase existing monetary thresholds contained in their current procurement bylaws that already provide for preferential treatment of Ontario Businesses.
British Columbia
In comparison to Ontario, British Columbia's procurement ban is more centralized following the Premier's introduction of Bill 7-2025 Economic Stabilization (Tariff Response) Act (the "Act") on March 13, 2025, having began its second reading on April 3, 2025. The purpose of the Act is to provide British Columbia's Lieutenant Governor in Council (essentially the Premier and Cabinet) broad overarching powers to make any law related to trade and the economy as a whole, without legislative interference.
The Premier's office would be able to pass any law so long as it addresses one of the following purposes contained in section 19 of the Act:
- addressing challenges, or anticipated challenges, to British Columbia arising from the actions of a foreign jurisdiction;
- supporting interprovincial cooperation in reducing trade barriers within Canada; or
- supporting the economy of British Columbia and Canada.
In addition, the Lieutenant Governor is able to compel any "government procurement entity" to follow a directive in relation to the procurement of goods or services as well as exclude or include any corporation, organizations, or classes of corporations and organizations from the definition of government procurement entity.
While this Act has yet to be finalized, its implementation into law is expected to occur quickly following its third reading.
Next Steps
Aside from Ontario and British Columbia, each province and territory (and many Canadian municipalities) have announced similar amendments to their procurement policies, which appear to be at different stages in their development.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
