On March 12, 2026, the US Trade Representative (USTR) initiated investigations of 60 trade partners, including Canada, under Section 301 of the US Trade Act of 1974 to determine whether their failure to prevent the importation of goods produced using forced labour disadvantages US businesses.
If the USTR concludes that US businesses have been disadvantaged, it is authorized to take actions, including imposing new tariffs on Canadian origin goods imported into the US. The threat of additional tariffs and other trade restrictions may provide the US a new source of leverage to extract concessions from its trade partners, including by pushing Canada to strengthen its import ban or increase enforcement.
We provide key takeaways for Canadian businesses below.
Overview of the Investigations
Section 301 of the Trade Act of 1974 authorizes the USTR to investigate whether acts, policies, or practices of a foreign country are unreasonable or discriminatory and burden or restrict US commerce. Under the Trade Act of 1974, an act, policy, or practice is deemed to be unreasonable if it constitutes a persistent pattern of conduct that permits any form of forced or compulsory labour.
Section 301 is the principal US statute designed to address foreign unfair trade practices affecting US exports. It has previously been used by the US to target what it considers unfair trade practices (e.g., production subsidies), including to impose tariffs on China during the first Trump administration, which were expanded in scope during the Biden administration.
In this case, the USTR will investigate whether the failure of US trading partners to prohibit or enforce prohibitions on the import of goods produced with forced labour allows foreign businesses to artificially reduce their pricing to the disadvantage of US firms. The 60 countries under investigation account for the vast majority of US trade.
Section 301 investigations involve formal procedural steps, including consultations with foreign governments, requests for written comments, and public hearings. In this case, public comments are due by April 15, 2026, and hearings will begin on April 28, 2026.
If the USTR determines that Canada’s failure to enforce its importation ban has harmed US business, the USTR is authorized to:
- Impose tariffs or other import restrictions (such as an import ban).
- Withdraw or suspend trade agreement concessions.
- Enter into an agreement requiring Canada to either cease the harmful conduct or compensate the US.
There are no statutory limits on the rate of tariffs or other remedies, but they must be proportionate to the burden or restriction imposed on US businesses and may be extended by the USTR after four years.
Canada’s Record on Forced Labour
As part of its commitment made under the Canada-United States-Mexico Agreement (CUSMA), Canada amended its customs laws in 2020 to formally prohibit the importation of goods produced using forced labour. Canada later expanded its import prohibition to include child labour as part of the rollout of its supply chain reporting legislation in 2024.
However, Canada’s enforcement of its import ban has been limited, resulting in only one known seizure of shipments linked to forced labour. Additionally, commitments to strengthen Canada’s forced labour regime, such as through mandatory human rights due diligence legislation, have not materialized, as is the case with proposals to strengthen the enforcement of Canada’s import ban through measures such as publishing a list of goods at risk and requiring that importers provide supply chain “minimum traceability” documentation for goods on the list.
Canada’s import ban enforcement record will be the focus of the investigation and has been an ongoing source of tension with the US. In contrast to Canada, the US has long prohibited the importation of goods produced using forced labour and seized billions of dollars in goods suspected of being produced using forced labour, particularly since the enactment of the Uyghur Forced Labor Prevention Act (UFLPA) in 2021.
Implications for Canada
The Section 301 investigation closely follows the invalidation of the IEEPA tariffs by the US Supreme Court and the expectation that the US would pivot to new tariff authorities.
The threat of tariffs and other measures under Section 301 may therefore become a key tool for the US to enforce its trade policy agenda, supplementing the sectoral tariffs that are impacting key Canadian industries such as in the automotive, lumber, and steel/aluminum sectors.
In the context of the CUSMA joint review beginning this July, during which the US is expected to use the threat of tariffs and a potential withdrawal from the CUSMA to seek concessions from Canada, forced labour may become a key point of negotiations. This may ultimately result in Canada making new commitments with respect to enforcing its forced labour import ban or implementing new due diligence requirements, thereby significantly heightening compliance requirements and increasing the risk of goods being detained or seized at the border.
Takeaways for Canadian Businesses
Canadian businesses should consider taking steps to protect themselves from increased enforcement risk, including by:
- Supply chain mapping to identify suppliers and labour sources at all levels of the supply chain to better understand vulnerabilities.
- Increasing supply chain due diligence to be able to trace the complete supply chain of imported goods and supported by documentary evidence.
- Reviewing and revising contracts to include provisions relating to forced labour and labour standards, audit rights, and allocating seizure risk.
- Participating in the public record by providing written comments through the USTR electronic comments portal by April 15, 2026 to put evidence into the record to inform the USTR’s investigation, which can include information about the steps taken to address forced labour risks and the strengths of Canada’s existing regulatory framework.
- Continuing compliance with Canada’s forced labour legislation, for subject businesses, by filing annual supply chain reports in advance of the May 31 filing deadline.