Authors:Alan SarhanVasili MoshopoulosGeneviève ZingerCélina Yaïci (Student)

On June 2, 2026, the Office of the United States Trade Representative (the USTR) issued a Report under Section 301 of the Trade Act of 1974, which presented findings that Canada is not effectively enforcing its forced labour import prohibition and has thus burdened U.S. commerce. In light of the findings, the USTR proposed a ten percent tariff on a wide range of Canadian products. The proposed tariff would not apply to goods compliant under the Canada-U.S.-Mexico Agreement.

Strengthening the regime: Canada’s response

Under the Customs Tariff, Canada has prohibited the importation of goods mined, manufactured, or produced wholly or in part by forced labour since 2020. In practice, the prohibition is enforced at points of entry to Canada by the Canada Border Services Agency (CBSA), which is empowered to detain, seize, and refuse entry to goods where there are reasonable grounds to believe forced labour was involved in their production.

In the wake of the USTR report and proposed U.S. tariffs, on June 12, 2026, the Canadian government introduced Bill C-35 - An Act respecting the prohibition of the importation of goods produced by forced labour, (Bill C-35). Bill C-35 would replace the current import prohibition under the Customs Tariff and would move the Canadian regime toward a more targeted model by allowing listed goods to become subject to prescribed information requirements and by deeming those goods prohibited imports if the requirements are not satisfied.

More specifically, Bill C-35 would:

Practical implications for businesses

Taken together, the proposed measures would materially increase scrutiny of forced labour prevention in Canada. Notably, the Canadian government had already moved to address these enforcement gaps. In Budget 2025, Canada committed $617.7 million over five years to increase CBSA’s capacity to detect and intercept illicit goods, defend Canadian industries by enforcing import measures, and bolster its trade remedy capacity. If Bill C-35 is assented to, the focus is likely to shift toward distinguishing between organizations that can demonstrate proactive, verifiable compliance measures and those that cannot. As regulatory expectations become more prescriptive, organizations will need to demonstrate concrete, verifiable due diligence measures across their operations and supply chains.

Bill C-35 would also operate alongside Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act, which requires certain entities to submit annual reports to the federal government describing the steps they have taken to prevent and reduce the risk of forced labour or child labour being used in their business and supply chains. This regime requires reporting only and does not impose specific due diligence obligations on those entities. However, public disclosure raises a practical enforcement risk question: whether CBSA could use information in annual reports to inform enforcement priorities by targeting importers of listed goods with weaker supply chain compliance measures.

Moreover, Bill C‑35 may have a broader scope than importers alone, extending to supply chain participants further along the distribution chain, such as distributors and retailers who obtain imported goods for distribution and sale in Canada. The Customs Act prohibits dealings in improperly imported goods and requires any person who has reasonable grounds to believe that goods in their possession were not imported in accordance with applicable requirements to report those goods to CBSA. It further provides that no person may possess, purchase, sell, exchange, or otherwise acquire or dispose of imported goods where importation requirements have not been complied with.

In this context, the inclusion of goods from specified producers, regions or countries on Bill C‑35’s proposed list would likely, in and of itself, constitute reasonable grounds to believe that applicable import requirements were not met. Consequently, all participants in the supply chain may be subject to potential scrutiny when dealing with goods, producers, regions, or countries that appear on Bill C-35’s proposed high‑risk list.

We note that Bill C-35 is unlikely to advance to second reading until Parliament resumes after the summer recess, but we will be closely monitoring developments.

If any questions or concerns arise regarding how these developments may impact your operations, please reach out to our team.