New Procurement Restriction Policy: Ontario Responds to U.S. Tariffs

Background 

On April 4, 2025, the Ontario Government released a Procurement Restriction Policy (Policy) under the authority of the Management Board of Cabinet Act and the Broader Public Sector Accountability Act, 2010. The Policy restricts United States (U.S.) businesses from accessing Ontario public-sector procurements and was released in response to U.S. tariffs on Canadian products and services. The Ontario Government has communicated that the Policy will be re-assessed if the tariffs are lifted.

Implementation

Retroactive to March 4, 2025, Ontario public-sector organizations are not permitted to enter into new contracts with U.S. businesses, except when a U.S. business is the only viable source for the good or service and the procurement cannot be delayed.

Application

The Policy applies to all new procurements of goods and services (consulting and non-consulting) at any value regardless of the method of procurement (invitational, open competitive or non-competitive). The Policy does not apply when public sector entities use existing Vendor of Record arrangements or other similar pre-existing arrangements available to public entities.

Existing procurement direction continues to apply. This includes the Building Ontario Businesses Initiative, the Ontario Public Sector (OPS) Procurement Directive and the Broader Public Sector (BPS) Procurement Directive. In the event of any conflict or inconsistency between the Policy and applicable procurement directives, the Policy prevails to the extent of the conflict or inconsistency. The Policy does not prevail over legislation.

Who Must Comply?

The Policy applies to government entities and designated BPS organizations, defined in the Policy as follows:

• Government entities: Government entities include all ministries and provincial agencies (including “Other Included Entities” under the OPS Procurement Directive), Ontario Power Generation and the Independent Electricity System Operator
• Designated BPS organizations: Designated BPS organizations include hospitals, school boards, universities and colleges, children’s aid societies, shared services and group purchasing organizations, and publicly-funded organizations that received at least C$10-million in the previous fiscal year 

What Is a U.S. Business?

A U.S. business is defined as a supplier, manufacturer or distributor of any business structure (sole proprietorship, partnership, corporation or other business structure) that:

• Has its headquarters or main office located in the U.S. and
  • Note: If a bidder or vendor is a subsidiary of another corporation, this requirement is met if the bidder or vendor is controlled by a corporation that has its headquarters or main office located in the U.S
• Has fewer than 250 full-time employees in Canada at the time of the applicable procurement process

There are no exemptions for U.S. businesses under the Policy and a public-sector entity is permitted to rely on a business’ representation that it does not meet the definition of a U.S. business.

Approval Requirements

Except where the OPS Procurement Directive requires a level of approval higher than deputy minister, a government entity must obtain deputy minister or CEO approval, as appropriate, to procure from a U.S. business, regardless of value. Designated BPS organizations must require a similar level of approval.

Key Takeaways

In general, eligibility restrictions for awarding government contracts based on the jurisdiction of a supplier challenge longstanding procurement principles of open, fair and transparent procurement, free from discrimination on the basis of geography. These principles are derived from multilateral trade agreements such as the World Trade Organization Agreement on Government Procurement (WTO-AGP) and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), as well as domestic trade agreements, including the Canadian Free Trade Agreement (CFTA). Under such agreements, parties have agreed that they will treat suppliers of another party no less favourably than the suppliers of their own jurisdiction and that they will not treat a locally established supplier less favourably than another locally established supplier on the basis of the degree of foreign affiliation or ownership.

Procuring authorities and suppliers alike will want to educate themselves on the Policy and its potential interaction with governing procurement policies and trade agreements.

Our team is closely monitoring developments, and we will provide updates when more details are made available.

For more information, please contact the authors or any other member of our Procurement group.