Forced labour tariff hearings close in Washington today, and Canada now waits to learn whether its case spares exporters a new 10 per cent duty
WASHINGTON, July 9, 2026
Three days of public hearings on the most consequential American tariff proposal of the year wrap up in Washington today, and when the final witness steps away from the table at the U.S. International Trade Commission, Canada’s fate will rest in the hands of the U.S. Trade Representative.
The proceedings, which began Tuesday and drew roughly 60 witnesses and more than 1,500 written submissions, are the last procedural step before the Trump administration decides whether to impose new Section 301 duties of 10 per cent on Canada and roughly a dozen other trading partners, and 12.5 per cent on dozens more, over what Washington calls a collective failure to keep goods made with forced labour out of global commerce.
For Ottawa, the stakes could hardly be higher. The Canadian government used its written submission, filed Monday and reported this week by The Canadian Press, to argue that there is no case against Canada at all. “In light of Canada’s existing prohibition, complementary supply chain transparency measures, newly introduced standalone forced labour import legislation and continued commitment to Canada-U.S. co-operation, Canada respectfully submits that there is no basis for the imposition of additional Section 301 duties on Canadian goods,” the government wrote, adding that it “remains committed to working closely with the United States to eradicate forced labour from global supply chains.”
The decision that follows this week’s testimony will determine whether a fresh layer of duties lands on top of a commercial relationship already strained by American tariffs on Canadian steel, aluminum, automobiles and cabinetry, and it will land within weeks of a hard deadline that gives the White House every reason to move fast.
Three days of testimony, sixty economies in the dock
The hearings at the trade commission’s headquarters a few blocks from the Capitol have unfolded on a scale rarely seen in a Section 301 proceeding. The docket of more than 1,500 written submissions from governments, industry associations, human rights organizations and companies is among the largest in the statute’s history, a measure of how much of world trade is caught in the proposal’s net.
The opening panel on Tuesday featured government representatives from Chile, Ecuador, Guatemala, Guyana, Honduras, Mexico and Peru, with later sessions including officials from South Korea, Sri Lanka, South Africa and Vietnam, according to the hearing schedule published by USTR and reporting from trade press outlets covering the proceedings. Human rights advocates testified alongside industry witnesses, addressing both the reality of forced labour in global supply chains and the sharper question of whether country-wide tariffs are an effective remedy for it.
Governments facing the higher 12.5 per cent tier pressed their own defences through the week. Pakistan’s representative, for example, was expected to argue that the proposed duties are disproportionate given the absence of evidence of forced labour in Pakistani export goods and the country’s enactment of an import prohibition of its own.
The record assembled this week gives the U.S. Trade Representative what it needs to finalize the action, including any changes to the proposed rates, the scope of product exemptions and the treatment of goods covered by trade agreements. No deadline has been announced for a final determination, but the calendar is doing the announcing on its own.
How the proposal came to be
The proposed duties grow out of Section 301 investigations launched on March 12, 2026, covering 60 economies. U.S. Trade Representative Jamieson Greer announced at the time that his office would examine whether trading partners were failing to prohibit, or failing to enforce prohibitions on, the importation of goods produced with forced labour, and whether those failures burden American commerce.
On June 2, USTR issued its determination, concluding that the practices of all 60 investigated economies are unreasonable and burden or restrict U.S. commerce. According to a summary of the findings published by trade lawyers at Thompson Hine, the underlying report found that 54 economies have failed to impose any legal prohibition on importing goods made wholly or in part with forced labour, while six economies, Canada among them, have a prohibition on the books but are failing to enforce it effectively.
While acknowledging that some partners “have taken initial steps to prevent the importation of forced labor goods, including through USMCA and commitments in Agreements on Reciprocal Trade,” Greer said each trading partner “must do more to ensure that trade does not perversely encourage and entrench forced labor globally.”
The remedy on the table is a two-tier tariff. Economies that maintain a forced labour import prohibition, have committed to one through a reciprocal trade agreement with the United States, or operate a partial regime would face an additional 10 per cent duty. Canada, Mexico and the United Kingdom fall into this group. All other investigated economies would face 12.5 per cent.
USTR’s notice sets out four reasons the agency considers weak enforcement unreasonable: it undermines the universal aim of eliminating forced labour; it permits firms that use forced labour to produce goods at lower cost, distorting market conditions; it undermines the profitability of firms that do not use forced labour; and it contributes to the circumvention of existing forced labour import bans, including the American one.
The proposal also includes a lengthy annex of suggested exemptions. Goods already subject to Section 232 national security tariffs would be spared, as would raw materials whose taxation could choke off domestic supply, products that cannot be grown or produced in sufficient quantities in the United States, informational materials such as books, donations and accompanied baggage. Trade counsel have also noted that, as drafted, the proposed duty on Canadian goods would not apply to products that qualify for preferential treatment under the Canada-United States-Mexico Agreement, an exemption Canadian industry spent this week fighting to preserve.
The deadline behind the deadline
The reason Washington is expected to move quickly after today’s closing testimony sits in an entirely different statute.
In February, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act does not authorize the president to impose tariffs, striking down the instrument President Donald Trump had used for his so-called Liberation Day duties and for the fentanyl-related tariffs applied to Canada, Mexico and China. The administration responded within hours: Trump invoked Section 122 of the Trade Act of 1974, a rarely used balance-of-payments authority, to impose a flat 10 per cent worldwide surcharge.
But Section 122 carries a hard statutory limit. The tariffs expire after 150 days unless Congress votes to extend them, and that clock runs out at the end of July. A U.S. trade court decision in May cast further doubt on the surcharge, striking it down in a ruling whose ultimate fate remains uncertain on appeal.
Against that backdrop, Section 301 has emerged as the administration’s preferred replacement architecture. Unlike the emergency powers the Supreme Court rejected, Section 301 is a process-heavy statute with decades of litigation history behind it, most notably the China tariffs that have survived years of court challenges. The forced labour file gives the administration a legally sturdier foundation on which to rebuild its global tariff wall before the temporary surcharge lapses, which is why trade watchers expect a final determination within weeks of this afternoon’s adjournment rather than months.
For Canada, the timing compounds an existing burden. The duties that have done the most damage to Canadian industry, the Section 232 tariffs on steel, aluminum, automobiles and cabinetry, were untouched by the Supreme Court ruling and continue to apply regardless of what happens next.
Canada’s answer: a tougher import ban, tabled just in time
Canada’s core argument to the hearing record is that the enforcement gap USTR identified is real but is already being closed.
Canada first banned the importation of goods made with forced labour in July 2020, when it amended the Customs Tariff to implement a labour commitment made in the CUSMA negotiations. On January 1, 2024, the Fighting Against Forced Labour and Child Labour in Supply Chains Act, commonly known as S-211, came into force, requiring larger companies and government institutions to report annually on the steps they take to keep forced labour out of their supply chains.
But S-211 is a transparency statute, not an enforcement tool, and Canada’s border record has been thin. According to reporting cited by McMillan LLP, the Canada Border Services Agency has intercepted and detained roughly 50 shipments on forced labour grounds since 2020, and only two of them, one involving textiles and another containing frozen seafood, were ultimately found to have been produced with forced labour. Prime Minister Mark Carney has publicly acknowledged that Canada has not been effective in fully enforcing its forced labour framework.
That is the gap Bill C-35 is designed to fill. Tabled in the House of Commons on June 12, the Ban on Importing Goods Made with Forced Labour Act would replace the existing Customs Tariff prohibition with a standalone statute built for enforcement. The bill authorizes the Minister of Foreign Affairs to maintain a public list of goods suspected of being produced, in whole or in part, with forced labour, informed by intelligence gathered through Canadian embassies and other official channels. Specific countries and regions of origin can be named on the list.
The bill’s most consequential feature is a reverse onus on importers. Where goods fall within the scope of the list, the importer can be required to provide evidence demonstrating that the products were not made with forced labour. Failure to provide the required information would itself render the goods prohibited from importation, a sharp departure from the current regime, in which the border agency must generally establish that goods were produced with forced labour before blocking them. The agency would be able to detain suspect goods for 90 days or longer while it makes a determination, with importers on the hook for detention, storage, transportation and disposal costs.
Whether the bill satisfies Washington is the open question hanging over today’s adjournment. It received first reading in June and must still pass second reading, committee study and the Senate before becoming law. McMillan’s trade group, in a client bulletin, observed that the bill is aimed squarely at the enforcement concerns raised by USTR but cautioned that “whether it will be sufficient to influence the elimination of the new additional tariff remains to be seen.”
Business pushback on both sides of the border
Canadian industry filed its own submissions in parallel with Ottawa’s, and the through line is a plea for targeted enforcement over blanket duties.
The Canadian Chamber of Commerce urged the U.S. trade office to treat Canada as a special case. “We urge USTR to assess Canada separately under Section 301, suspend consideration of the proposed 10 per cent tariff while Canada’s enforcement reforms are implemented and evaluated, and prioritize targeted bilateral enforcement co-operation over broad country-level measures,” the Chamber’s vice-president, Matthew Holmes, wrote in the organization’s submission, as reported by The Canadian Press.
Agriculture groups warned about collateral damage in one of the most integrated food systems in the world. Keith Currie, president of the Canadian Federation of Agriculture, wrote that there is “serious concern” the tariffs could expand to goods that comply with the continental trade pact, which would carry “serious and unintended consequences.”
“Canada-U.S. agricultural trade is highly integrated and depends on predictable, timely cross-border movement,” Currie wrote. “Even modest tariffs could disrupt supply chains, increase input costs, and reduce competitiveness, particularly as many agricultural products cross the border multiple times during processing. These impacts would place additional pressure on farmers and agri-food businesses on both sides of the border.”
American business interests made similar arguments. The National Foreign Trade Council, an association of U.S. companies, called for CUSMA exemptions to be extended to any future tariffs and wrote that “broad-based tariffs are a blunt, punitive measure that is unlikely to be an effective tool for eliminating forced labour.” A comprehensive tariff, the council added, “penalizes all goods from a country, including those from companies that have invested heavily to eliminate forced labour from their supply chains.”
The CUSMA question
Hovering over the entire proceeding is the fate of the trade agreement that has shielded most Canadian exports from the worst of the tariff wars.
July 1 was the deadline for Canada, the United States and Mexico to complete the first mandated joint review of CUSMA and decide whether to extend the pact to 2042. The deadline passed without an extension. The agreement remains in force, but it now shifts to annual reviews until its scheduled expiry in 2036, a structure that injects rolling uncertainty into every investment decision that depends on tariff-free continental trade.
Canadian submissions to the hearing record pressed hard for the preservation of CUSMA carve-outs no matter what the agency decides on forced labour. The proposed 10 per cent duty, as drafted, would not apply to Canadian goods that qualify for CUSMA preferential treatment, which is precisely why industry groups on both sides of the border are so focused on keeping that exemption intact. If it survives, the practical bite of the new tariff would fall mainly on goods that do not meet CUSMA rules of origin. If it erodes, the exposure widens dramatically.
The same week brought a tightening on the Canadian side of the border. Ottawa’s temporary remission relief for imports of U.S. steel, aluminum and automotive products expired on July 1, along with remission for goods used in public health, health care, public safety and national security applications, according to an analysis by Blakes. Businesses moving goods in both directions now face layered tariff regimes with fewer escape valves than at any point since the trade war began.
What is at stake for Canadian business
The economic logic of the forced labour tariff is different from the sectoral duties that preceded it, and in some ways more unsettling for Canadian firms.
The Section 232 tariffs hit identifiable industries: steel mills, aluminum smelters, auto assembly plants, cabinet makers. A Section 301 forced labour duty, by contrast, is a country-level measure whose incidence depends on documentation. The same product from the same factory could cross the border duty-free or face a 10 per cent charge depending on whether the exporter can substantiate a CUSMA preference claim. That puts a premium on rules-of-origin compliance, certification records and tariff classification, the unglamorous plumbing of trade that many smaller exporters historically ignored because most favoured nation rates into the United States were already at or near zero.
The compliance burden runs in both directions. Bill C-35 will, if enacted, impose new documentary obligations on Canadian importers, who may be required to prove on a shipment-by-shipment basis that listed goods were not made with forced labour. Trade counsel are advising companies to begin supply chain mapping, supplier identification, traceability record-keeping, third-party audits and labour compliance programs now, before the minister’s list takes shape. Sectors facing the highest risk of listing, based on international enforcement patterns, include textiles and apparel, seafood, agricultural products, critical minerals and solar energy components.
There is also a cash flow dimension. Detentions under the new Canadian regime could stretch past 90 days, with importers bearing storage and handling costs even when goods are ultimately released. In the United States, an importer that loses a CUSMA preference claim on audit could face retroactive duty bills covering the new Section 301 rate on top of any other applicable tariffs.
For exporters, the strategic calculus is clear. Firms that qualify goods under CUSMA insulate themselves from the proposed duty as currently structured. Firms that cannot, whether because of offshore inputs that break the rules of origin or because certification costs seemed unjustified in a zero-tariff world, face a direct price disadvantage of 10 per cent in their largest market. Trade advisors expect a fresh surge in origin qualification work in the second half of the year, mirroring the scramble that followed the first wave of tariffs in 2025.
The road ahead
Several clocks are now ticking at once. The Section 122 surcharge lapses at the end of July unless Congress acts, and the administration has every incentive to have its Section 301 architecture ready before then. USTR could publish its final forced labour determination within weeks of today’s closing testimony. Bill C-35 heads to second reading and committee study when Parliament resumes, with the government under pressure to show Washington measurable enforcement progress rather than legislative intent. And the first CUSMA annual review is already looming, with the forced labour file certain to be on the table.
The deeper question raised by this week’s hearings is whether tariffs are a credible instrument of labour rights policy at all, or simply the most convenient legal vehicle available to an administration determined to keep duties in place. Canada’s submission, and the chorus of industry filings behind it, wagers that Washington can be persuaded to distinguish between countries that are genuinely strengthening enforcement and those that have done nothing. By the end of the month, Canadian exporters should know whether that wager paid off.