Skip to main content
News Analysis

Washington's Forced-Labour Tariff Hearing Wraps Up: What Canadian Exporters Should Do Before a 10% Duty Decision Lands

The U.S. Trade Representative held a three-day hearing on proposed 10% tariffs tied to forced-labour enforcement, with Canada arguing Bill C-35 and its existing import ban remove any legal basis for new duties. Here's how exporters and importers should prepare while the decision is pending.

By Refdesk Team

Washington's Forced-Labour Tariff Hearing Wraps Up: What Canadian Exporters Should Do Before a 10% Duty Decision Lands

What This Means for You

If your business exports to the United States, or you work in a sector that relies on cross-border supply chains, a U.S. tariff proceeding that most Canadians have never heard of could soon add costs to your shipments. Based on our review of the U.S. Trade Representative's June 2026 findings and Canada's formal response, here's what's actually being proposed, why the exposure may be narrower than the headline number suggests, and what to do while the decision is pending.

The U.S. Trade Representative opened 60 separate Section 301 investigations on March 12, 2026, examining whether trading partners are effectively enforcing bans on importing goods made with forced labour. On June 2, 2026, USTR found Canada among six economies — alongside Mexico, the United Kingdom, the European Union, Ecuador and Pakistan — that have a forced-labour import prohibition on the books but, in USTR's assessment, are not enforcing it effectively enough. USTR proposed a 10% additional duty on Canadian goods as a result. Fifty-four other countries, including China, India and Vietnam, face a steeper proposed 12.5% duty for lacking an import ban altogether.

If You're a Canadian Exporter or Importer Handling Canada-U.S. Trade:

Immediate action this week:

  • Confirm your CUSMA (USMCA) Certificate of Origin status for every product line you ship to the U.S. According to USTR's own finding, the proposed 10% duty would exclude goods that qualify as CUSMA-originating. That means the practical exposure isn't "all Canadian exports" — it's specifically goods that don't meet CUSMA rules of origin, including re-exports, transshipped goods, or products with significant non-Canadian, non-U.S., non-Mexican content.
  • Audit your supply chain documentation now, not after a decision is announced. If any input materials, components or raw goods in your supply chain originate from regions with known forced-labour risk exposure (certain agricultural, mineral, textile or electronics supply chains are the most commonly flagged), get supplier attestations and chain-of-custody records in order. This positions you to respond quickly if Canada's new Bill C-35 information requirements or U.S. Customs and Border Protection detention orders affect your goods.
  • Talk to a customs broker or trade compliance advisor about your specific tariff classification. Section 301 duties, if implemented, apply at the Harmonized System code level. A broker can tell you within days whether your specific products would be exposed, rather than relying on generic sector-wide assumptions.

What to prepare:

  • A one-page summary for your finance team: current landed cost, cost with a potential 10% duty added, and whether your contracts allow you to pass the increase to U.S. buyers or require you to absorb it.
  • A contingency plan if you're not CUSMA-compliant today. Many smaller exporters ship without formally certifying origin because it wasn't previously cost-effective; that calculus changes if a 10% duty is only avoidable through certification. Certifying origin typically requires documented proof of where materials were sourced and processed — start gathering that now rather than under a compliance deadline.
  • Subscribe to USTR's Federal Register notifications and CBSA's trade update bulletins so you see any implementation date as soon as it's published, rather than after tariffs already apply to a shipment in transit.

Example scenario: A mid-sized Ontario furniture manufacturer exporting $2 million annually to the U.S., with roughly 30% of that volume made from imported hardware and components that don't currently qualify for CUSMA originating status, could face a 10% duty on that non-qualifying share — approximately $60,000 annually — while the CUSMA-compliant 70% of shipments would be unaffected. Based on our analysis, the single highest-leverage action for a business in that position is determining, this month, exactly which product lines fall into the non-compliant category and whether minor sourcing changes could shift them into CUSMA-qualifying status before any tariff takes effect.

If You Work in an Exposed Sector:

Canada already faces separate, existing U.S. tariffs on steel, aluminum, automobiles and cabinetry, unrelated to this forced-labour proceeding. Workers in those sectors should treat a potential new 10% duty as an additional layer of cost pressure on employers already managing tariff exposure, not an isolated one-time event. Ask your employer or union representative directly whether the company has assessed its CUSMA-origin compliance rate — a business with high compliance faces limited new exposure, while one with low compliance faces a more material risk to order volumes and, potentially, staffing levels.

For All Canadians:

Even if you don't work in trade-exposed manufacturing, sustained tariff uncertainty affects the broader economy through business investment decisions, hiring caution, and eventually consumer prices on goods that do cross the border. Watching how this proceeding resolves is a reasonable proxy for the broader trajectory of Canada-U.S. trade relations heading into CUSMA's shift to annual reviews.

The News: What Happened

According to BNN Bloomberg and Canada's National Observer, the federal government submitted a formal written statement to the U.S. Trade Representative arguing there is "no basis for the imposition of additional Section 301 duties on Canadian goods." The submission pointed to Canada's existing Customs Tariff prohibition on forced-labour goods, in place since July 2020, and to newly introduced Bill C-35, tabled in the House of Commons on June 12, 2026, which would strengthen import enforcement by requiring importers to provide supply-chain evidence for listed high-risk goods on request.

As reported by BNN Bloomberg, the proceeding stems from USTR's June 2, 2026 determination that Canada, Mexico, the United Kingdom, the European Union, Ecuador and Pakistan have forced-labour import bans in place but are not enforcing them effectively, justifying a proposed 10% additional duty. USTR set separate deadlines: requests to testify were due June 22, 2026, written comments were due July 6, 2026, and a public hearing in Washington opened July 7, 2026, drawing more than 1,500 written submissions from governments and industry groups, according to reporting reviewed for this analysis.

According to the Canadian Chamber of Commerce's public position, industry groups have urged USTR to assess Canada separately from countries with no forced-labour import regime at all, and have requested that any tariff be suspended while Canada's enforcement reforms, including Bill C-35, are evaluated. The U.S.-based National Foreign Trade Council separately characterized the broad, across-the-board tariff approach as "a blunt, punitive measure" unlikely to meaningfully reduce forced labour in global supply chains.

Analysis: Why This Matters

Based on our analysis of the USTR findings and Canada's response, this proceeding sits at the intersection of two separate pressures: a genuine, long-documented gap in Canada's forced-labour import enforcement, and the Trump administration's broader pattern of using Section 301 authority as a trade-leverage tool alongside sector-specific tariffs already affecting Canadian steel, aluminum, automobiles and cabinetry.

Here's why the enforcement gap matters on its own merits: Canada's forced-labour import ban has existed since 2020, largely to meet CUSMA-related commitments, but the number of shipments actually blocked under it has been low relative to comparable U.S. and European enforcement regimes. Bill C-35 is Canada's direct legislative response to that criticism, shifting to a targeted, list-based enforcement model closer to the U.S. approach. Whether USTR views Bill C-35's introduction as sufficient — given it hasn't yet passed and isn't expected to reach second reading until Parliament resumes after summer recess — is the central open question in this proceeding.

Historical Context:

The forced-labour import prohibition became a formal CUSMA commitment when the agreement was renegotiated, with Canada implementing its version through the Customs Tariff in July 2020. U.S. trade officials and human rights organizations have periodically flagged Canada's comparatively limited enforcement activity in the years since, making this proceeding a continuation of longstanding friction rather than an entirely new dispute.

What Happens Next:

  • USTR will review the written submissions and hearing testimony before issuing a final determination; no confirmed implementation date has been announced.
  • If USTR proceeds with the 10% duty, it would likely take effect through a presidential proclamation, with CUSMA-originating goods excluded based on USTR's stated framework.
  • Bill C-35's progress through Parliament, expected to resume after the summer recess, may influence whether Canada can credibly argue its enforcement gap has been substantively addressed.

Your Action Plan

Immediate (This Week):

  • Confirm CUSMA Certificate of Origin status for all U.S.-bound product lines
  • Identify which product lines, if any, don't currently qualify as CUSMA-originating
  • Contact a customs broker to check your specific Harmonized System code exposure

Short-term (This Month):

  • Audit supplier documentation for forced-labour risk in flagged sectors (textiles, electronics, minerals, agriculture)
  • Model the cost impact of a 10% duty on your non-CUSMA-compliant volume
  • Subscribe to USTR Federal Register alerts and CBSA trade bulletins

Long-term (This Year):

  • Evaluate sourcing changes that could shift more product lines into CUSMA-qualifying status
  • Track Bill C-35's progress through Parliament and prepare for new supply-chain evidence requirements
  • Reassess U.S. market exposure alongside existing steel, aluminum, auto and cabinetry tariffs already affecting your sector

Other Perspectives

Canadian Government View:

According to National Observer, the federal government maintains it "remains committed to working closely with the United States to eradicate forced labour from global supply chains," pointing to Bill C-35 as evidence of good-faith reform rather than the status quo USTR's finding assumes.

U.S. Trade Representative's View:

USTR's own June 2026 finding, as summarized in its press release, concluded Canada has imposed a forced-labour import prohibition but has failed to effectively enforce it, and that this failure has burdened U.S. commerce — the legal basis it cites for the proposed duty.

Business and Industry View:

The Canadian Chamber of Commerce has called for Canada to be assessed separately from countries with no forced-labour regime at all and for any tariff to be suspended pending evaluation of Bill C-35, while the U.S.-based National Foreign Trade Council has criticized the broad tariff approach as poorly targeted to actually reducing forced labour.

Trade and Human Rights Advocates:

Organizations that track forced-labour enforcement have long argued Canada's pre-Bill C-35 regime was under-resourced relative to comparable U.S. and European mechanisms, a critique that predates this specific tariff dispute but that USTR's finding effectively echoes.

Note: Including multiple perspectives doesn't imply all views are equally valid, but ensures readers can make informed judgments.

Corrections Policy

We strive for accuracy. If you find an error in this analysis, please email us at [email protected]. We will promptly investigate and correct any factual inaccuracies.

Updates:

  • No corrections to date (as of 2026-07-10)

Sources

Get the Daily Canadian Briefing

The news, policy changes, and money moves that matter — delivered to your inbox every morning.

We'll send a confirmation email. No spam, ever.