Washington opens public hearings today on a proposed Section 301 forced labour tariff that would add a 10 percent duty to Canadian exports, as Ottawa races to prove its border enforcement has teeth
OTTAWA, July 7, 2026
The price of Canada’s access to the American market goes under the microscope in Washington this morning, as the Office of the United States Trade Representative opens three days of public hearings on a proposed 10 percent tariff on Canadian goods tied to what the agency calls Ottawa’s failure to enforce its ban on imports made with forced labour. The hearings, which run from today through Thursday, July 9 at the U.S. International Trade Commission, follow the closure of the written comment window at midnight last night and mark the final procedural stage before the administration finalizes the largest Section 301 action in the statute’s history.
The stakes for Canadian exporters are immediate and concrete. Under the proposal published by USTR on June 2, Canada sits in a tier of fourteen trading entities, alongside Mexico, the European Union, Ecuador, Indonesia and Pakistan, that would face a 10 percent additional duty on goods entering the United States. The remaining forty-six investigated economies, which USTR found have never enacted any forced labour import prohibition at all, would face a steeper 12.5 percent rate. A final determination is expected by roughly July 20, according to reporting by Tech Times, timed to land before a temporary 10 percent global tariff imposed under Section 122 of the Trade Act expires on or about July 24.
For Ottawa, the hearings are less a courtroom than a credibility test. Canada is not accused of lacking a law. It is accused of failing to use one.
A Finding Aimed at Enforcement, Not Absence
The June 2 determination capped an investigation that USTR launched on March 12, 2026, when it self-initiated sixty parallel Section 301 investigations into the forced labour import regimes of virtually every major American trading partner. In its findings, the agency concluded that fifty-four economies have failed to impose any prohibition on the importation of goods produced with forced labour, while six economies, Canada among them, have such prohibitions on the books but have failed to effectively enforce them.
“The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable. This creates a dynamic where American workers are forced to compete globally on an unlevel playing field,” U.S. Trade Representative Jamieson Greer said in the agency’s announcement. “We will no longer tolerate this disparity.”
Greer acknowledged that some partners, including Canada through CUSMA, have taken initial steps, but insisted that “each of our trading partners must do more to ensure that trade does not perversely encourage and entrench forced labor globally.”
Canada has prohibited the import of goods mined, manufactured or produced wholly or in part by forced labour since July 1, 2020, when amendments to the Customs Tariff came into force as part of the country’s implementation of the Canada-United States-Mexico Agreement. The Canada Border Services Agency is responsible for enforcing that prohibition at the border.
The USTR report argues that the record since then has been thin. Citing a 2025 submission from the Coalition Against Forced Labour in Trade, which in turn drew on public reporting from September 2024, the agency states that Canadian authorities have intercepted roughly fifty shipments on suspicion of forced labour involvement since the ban took effect, and that only two of those shipments were ultimately denied entry. USTR contrasts that record with its own numbers: U.S. Customs and Border Protection denied entry to more than 6,000 shipments under the Uyghur Forced Labor Prevention Act in 2024 alone.
The report also faults Canada for what it describes as transparency gaps. Because the CBSA does not publish official enforcement statistics, USTR contends, verifying Canadian compliance with its CUSMA forced labour commitments is nearly impossible. Law firm Fasken, in a client bulletin on the findings, noted that this opacity has fed American concerns that Canada is becoming a destination for forced labour goods turned away at U.S. ports.
The Post-IEEPA Architecture
The forced labour action cannot be read in isolation. It is the centrepiece of a rapid legal reconstruction of American tariff policy that began on February 20, 2026, when the U.S. Supreme Court ruled six to three in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. That decision dissolved the legal foundation beneath the administration’s sweeping 2025 tariff regime and forced a scramble for alternatives.
Less than three weeks later, USTR opened the sixty forced labour investigations, while the White House imposed the temporary Section 122 surcharge as a bridge. Section 122 authority is capped at 15 percent and limited to 150 days, a clock that runs out in late July. The forced labour tariffs are designed to be finalized before that expiry, so that no gap opens between the temporary and permanent regimes.
Trade analysts have been blunt about the significance of the pivot. In its fifty-two years, Section 301 has been used as a targeted, bilateral enforcement tool in roughly 130 cases, aimed at specific practices such as Chinese intellectual property policies or European agricultural barriers. The current action applies a single legal rationale to sixty economies at once, covering an estimated 99.4 percent of U.S. import volume. Tech Times described the move as a structural redesign of the American tariff foundation rather than a conventional trade dispute, and law firm Snell & Wilmer has already flagged that the action is likely to face a litigation challenge.
Because the World Trade Organization’s Appellate Body has been paralyzed since 2020, trading partners have no functioning multilateral forum in which to contest the duties. That leaves bilateral negotiation, and hearings like the one opening today, as the primary channels of influence.
What the Proposal Would and Would Not Touch
For Canadian businesses, the most consequential details sit in Annex A of the Federal Register notice, which sets out the exemptions. Goods that qualify as originating under CUSMA rules of origin would not face the new 10 percent duty, a carve-out consistent with the treatment Canada received under earlier tariff programs. Products already covered by Section 232 national security tariffs, including steel and aluminum, are likewise excluded, as are categories such as coffee, natural gas, electricity and many aircraft electrical components, according to analysis of the notice by McCarthy Tétrault.
Those exemptions blunt, but do not eliminate, the exposure. Goods that fail CUSMA origin tests, whether because of offshore inputs, incomplete documentation or supply chains that were never engineered around the agreement’s rules, would bear the full weight of the additional duty. Fasken has cautioned that the CUSMA carve-out itself may not be permanent, noting that U.S. officials have tied its continued availability to Canada demonstrating improved enforcement outcomes.
The proposal also includes a novel textile mechanism, not yet fully designed, under which a certain volume of apparel and textile imports from some economies could enter at a reduced Section 301 rate calibrated to those partners’ purchases of American textiles and cotton. USTR is using the hearings to gather comment on how that quota-style structure should work.
The scale of engagement with the process suggests how much is riding on the fine print. During the investigation phase, USTR heard testimony from nearly sixty witnesses and received roughly 500 comments and rebuttal submissions, and the comment window on the proposed action that closed last night drew more than 450 additional filings, according to figures published by the agency and reported by Tech Times. Companies that stayed out of the record entirely have not lost everything, but they have surrendered their best chance to argue for product-specific exclusions before the duties are set.
Ottawa’s Answer: Legislate Fast
Canada’s response has unfolded on two tracks: rebuttal and reform. Prime Minister Mark Carney pushed back on the premise of the American finding, saying that “Canada has a very strong legislative regime against forced labour in supply chains” and that the country intends to use its influence to help stamp out forced labour globally.
Dominic LeBlanc, the minister responsible for Canada-U.S. trade, struck a similar balance in a statement responding to the Section 301 report, defending Canada’s existing regime while promising that the government would “soon be taking action to make it even stronger, including through the introduction of new legislation this month.”
That legislation arrived in June. The bill would replace the current Customs Tariff prohibition with a standalone forced labour import regime, a structural overhaul that trade lawyers have described as the most significant change to Canada’s approach since the ban was first enacted. Under the proposed framework, the Minister of Foreign Affairs could establish lists of high-risk goods, regions, entities or individuals where there are reasonable grounds to suspect forced labour. Importers of listed goods could be required to provide enhanced supply chain tracing information to the CBSA, and goods for which the mandatory information is not supplied could be deemed prohibited.
The design borrows conceptually from the American UFLPA playbook, shifting the practical burden of proof toward importers in flagged categories rather than requiring the government to build a case shipment by shipment. Fasken’s analysis anticipates the reforms could eventually extend to mandatory due diligence obligations, rebuttable presumptions of forced labour for high-risk regions and product categories such as seafood, coffee, cotton and textiles, and expanded CBSA powers to demand corporate records and traceability documentation.
Ottawa can also point to machinery the USTR report largely ignored. The Fighting Against Forced Labour and Child Labour in Supply Chains Act, in force since January 1, 2024, requires large companies and federal institutions to publish annual reports on forced labour risks in their supply chains. According to McCarthy Tétrault, 4,313 entities filed reports under the Act in 2025, a transparency exercise with no federal equivalent in the United States. A separate private member’s bill, Bill C-251, introduced in late 2025, would go further by creating a rebuttable presumption that goods from designated sources are produced with forced labour.
The awkward politics are unavoidable. Canadian officials must persuade Washington that the new regime is real without appearing to have rewritten domestic law at the point of a tariff threat, and they must do it in front of domestic audiences, human rights advocates and business groups who each want something different from the same bill.
A Crowded and Unforgiving Backdrop
The forced labour file lands on a Canada-U.S. trade relationship already carrying more weight than at any time in a generation. Six days ago, on July 1, the first mandatory six-year joint review of CUSMA came and went without the United States agreeing to extend the pact. Canada and Mexico had both formally signalled their desire to renew the agreement through 2042; Washington declined, leaving CUSMA in force but pushed onto a treadmill of annual reviews ahead of its scheduled 2036 expiry. Greer said the United States would keep working with Canada and Mexico to address what he characterized as the agreement’s shortcomings and persistent trade deficits.
Layered on top are the sectoral tariffs that Ottawa regards as the central irritant in the relationship: American duties on Canadian steel, aluminum, automobiles and softwood lumber that persist despite the free trade framework. Canadian negotiators have made relief from those measures their first priority in the annual review process. The forced labour proposal now gives Washington another card in that wider negotiation, and gives every unresolved complaint, from dairy market access to digital policy, a sharper edge.
Canada will also be watching how Washington treats the European Union, its companion in the 10 percent tier. The EU’s inclusion is diplomatically awkward because a new transatlantic trade agreement took effect on July 1, committing the United States to a 15 percent all-inclusive tariff ceiling on most European goods with an explicit promise of no stacking. Whether a finalized Section 301 duty would be treated as consistent with that ceiling, or as a fresh imposition layered on top of it, is an unresolved legal question that Brussels has prepared for with safeguard and suspension clauses in its implementing legislation. For Ottawa, the episode is a cautionary tale about how durable negotiated tariff assurances prove when a new statutory rationale comes along.
The economic arithmetic explains Ottawa’s urgency. More than 70 percent of Canadian merchandise exports went to the United States in 2025, according to Statistics Canada figures cited in coverage of the dispute, and U.S. goods trade with Canada ran to hundreds of billions of dollars. In an integrated North American economy where components can cross the border several times before becoming finished products, even a duty that spares CUSMA-compliant goods can ripple through supply chains via the products, inputs and suppliers that fall outside the agreement’s paperwork.
Business Reaction: Compliance Becomes Strategy
Reaction from the business and legal community has focused less on the ethics of the policy, which few dispute in principle, and more on its mechanics. Andrew Wilson, deputy secretary general of the International Chamber of Commerce, warned that the American framework risks becoming a global template in ways that could damage legitimate trade, noting that the proposal’s burden-of-proof structure effectively reverses normal evidentiary assumptions once a forced labour claim is made against an importer.
The Congressional Research Service has raised a different fairness question: whether the dozens of smaller developing economies swept into the action, countries that historically received American technical assistance to build enforcement capacity rather than punitive tariffs, could realistically have stood up a U.S.-style import ban in the few months since the investigations began.
For Canadian firms, the practical takeaway is that supply chain documentation has become a tariff planning instrument. Trade advisers are urging importers and exporters to map exposure by country of origin and tariff classification against recent entry data, to model both the 10 and 12.5 percent scenarios against margins and customer pricing, and to stress-test CUSMA origin qualification before assuming the exemption applies. A supplier’s one-page assurance that its goods are clean is unlikely to satisfy either government going forward. What will matter is evidence: purchase orders, production records, bills of materials, factory locations, subcontractor lists and transport documentation reaching several tiers upstream.
That burden falls hardest on mid-sized companies without dedicated trade compliance departments. A Canadian retailer may know its direct supplier intimately and still have no visibility into the spinning mill, fishing vessel, farm or smelter buried deeper in the chain. Sectors repeatedly flagged as high risk, including apparel, seafood, agri-food, critical minerals and solar components, can expect the earliest and most intense scrutiny on both sides of the border.
There is also a defensive opportunity in the hearing process itself. USTR has explicitly invited evidence on whether the product scope is drawn correctly, whether the Annex A exclusions should be expanded, whether particular duties would create domestic supply shortages in the United States, and whether economies with stronger commitments deserve different rates. Post-hearing rebuttal comments are due within five days of the hearings’ conclusion, around July 14, which gives Canadian industry one final window to argue that Ottawa’s new legislation should be credited as meaningful progress before any duty is locked in.
The Human Stakes Behind the Legal Fight
Beneath the procedural manoeuvring sits the problem both governments claim to be solving. The International Labour Organization estimates that roughly 28 million people are trapped in forced labour worldwide, including 17.6 million in the private economy, figures cited by Public Safety Canada in its own guidance. Forced labour functions as an artificial cost advantage, letting tainted goods undercut producers who pay their workers, which is precisely the market distortion logic USTR has now imported into tariff law.
Critics counter that tariffs are a blunt instrument for a supply chain problem. A duty on all Canadian goods does nothing, by itself, to identify a single tainted shipment. Human rights advocates have long argued that outcomes depend on traceability systems, investigative capacity and international coordination rather than headline duty rates. The Canadian bill’s high-risk lists and mandatory tracing requirements are, in that sense, closer to the enforcement toolkit advocates have requested than anything a tariff can deliver.
What Happens Next
The sequence from here is compressed. Hearings run through July 9 at the International Trade Commission in Washington, beginning at 10 a.m. each day, with transcripts to be posted afterward and no livestream offered. Rebuttal comments close around July 14. A final determination is expected by approximately July 20, and the Section 122 stopgap expires days later. USTR has signalled that the administration intends to implement the new measures within months, and Treasury Secretary Scott Bessent has said publicly that Washington aims to keep overall tariff revenue at the levels reached before the Supreme Court’s February ruling.
Several outcomes remain open. USTR could finalize the 10 percent rate as proposed, narrow it, delay it, or adjust the exemption architecture in response to the record built this week. Canada could earn a reprieve if its June legislation moves quickly and visibly through Parliament, or find the CUSMA carve-out itself under review if Washington judges the reforms cosmetic. And the entire structure faces probable court challenges over whether a forced labour rationale can lawfully support tariffs of this breadth.
What is already settled is the direction of travel. The United States has fused market access to forced labour enforcement, and it is grading its partners on results rather than statutes. For Canadian exporters and importers, the border is becoming a documentation-heavy place, and the companies that map their supply chains before a shipment is challenged will fare better than those that start after one is stopped. The safest assumption for Canadian business, as the hearing gavel falls this morning, is that this pressure is not a passing squall but the new climate.