On March 4, 2025, the Premier of Ontario announced that, effective immediately, all United States-based companies are banned from taking part in government procurements as long as U.S. tariffs on Canadian exports are in place.
In general, eligibility restrictions for awarding government contracts based on the jurisdiction of a supplier are inconsistent with longstanding procurement principles of open, fair and transparent procurement, free from discrimination on the basis of geography. These principles are derived from multilateral trade agreements such as the World Trade Organization Agreement on Government Procurement (WTO-AGP) and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) as well as domestic trade agreements, including the Canadian Free Trade Agreement (CFTA).
Under such agreements, parties have agreed that they will treat suppliers of another party no less favourably than the suppliers of their own jurisdiction and that they will not treat a locally established supplier less favourably than another locally established supplier on the basis of the degree of foreign affiliation or ownership.
Government procurement relations between Canada and the U.S. are governed by the WTO-AGP. The Province of Ontario and certain provincial agencies are subject to the WTO-AGP, which raises a question of whether U.S. suppliers can challenge restrictions on their participation in Ontario procurements.
With few details from the announcement, questions remain about the scope of the ban on U.S.-based suppliers. For example, does it apply to broader public sector entities such as colleges, universities, school boards and hospitals or just provincial ministries? Does it cover all Ontario Crown agencies, or will some be exempt? Does it cover municipalities? We note that the Building Ontario Businesses Initiative Act, 2022, which mandates public sector entities to give Ontario businesses preference when conducting procurements for goods and services under a specified threshold amount, does not apply to municipalities.
In addition, questions remain about how U.S.-based suppliers will be defined for the purposes of the procurement ban, including whether there will be residency requirements and whether it will apply to Canada-based subsidiaries of U.S. companies.
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