Elbows up: “Buy Canadian” in federal government contracting

As Canadian businesses deal with tariff uncertainty and trade protectionism, the federal government has announced its intention to introduce rules promoting domestic goods and services in government contracting by most federal departments and agencies. 

Earlier this year, the federal government introduced an Interim Policy on Reciprocal Procurement that maintains a preference for Canadian suppliers and those from countries with whom Canada has trade agreements. On September 5, the Government of Canada announced the Interim Policy will be replaced in November 2025 by a “Buy Canadian” policy that will include new requirements as to when the federal government should source from Canadian suppliers or require local content.

The interim policy on Canadian suppliers

In response to recent trade tension, the Canadian federal government introduced, effective July 14, 2025, the Policy on Reciprocal Procurement (the Interim Policy). The purpose of the Interim Policy is to limit access to federal procurements to suppliers from Canada and from trading partners that provide reciprocal procurement market access to Canadian suppliers. This is a shift away from the federal government’s default approach for the last few decades by which it has generally allowed suppliers from all jurisdictions to compete for federal contracts, absent national security concerns. 

Under the Interim Policy:

• Countries that do not provide Canadian goods, services, and suppliers with a similar level of reciprocal market access do not have access to Canada's federal procurement market. Suppliers from jurisdictions that do not have public procurement agreements with Canada applicable to the procurement in question will no longer be eligible to compete for or be awarded the contract in question, subject to certain exceptions. 
• Suppliers from countries that have a trade agreement with Canada that includes government procurement will continue to have access to Canada’s federal procurement market, but only to the extent allowed by the specific terms of that agreement.  
• Canadian suppliers will continue to have access to federal procurement opportunities, subject to other federal policies or programs.¹

Federal departments and agencies may exclude procurements from the Interim Policy on a case-by-case basis if the good or service is not available or not available in sufficient quantity or quality from Canadian suppliers or trading partner suppliers, or if applying the Interim Policy would result in unreasonable pricing or would be inconsistent with the public interest.

For the purposes of the Interim Policy, a supplier’s nationality is based on its place of business. A “Canadian supplier” includes a supplier that has a place of business in Canada where it permanently conducts activities that is clearly identified by name and accessible during normal business hours. A “Supplier of an applicable trading partner” includes a supplier that has a place of business in a country that is a party to one of the trade agreements that applies to procurement, where the supplier conducts activities permanently that is clearly identified by name and accessible during normal business hours.

The government also made complementary amendments to the Canadian International Trade Tribunal Procurement Inquiry Regulations (the Procurement Inquiry Regulations) to specify who can bring a procurement complaint before the Tribunal – the body with primary responsibility for hearing complaints concerning federal procurements. Pursuant to the change, a bidder or prospective bidder is a potential supplier with standing to bring a complaint only if it is from Canada or from a country or territory that is a party to a trade agreement that applies to the designated contract.

The upcoming “Buy Canadian” policy 

Buying from Canadian Suppliers 

As part of the new “Buy Canadian” policy, the government has committed to introducing measures by November 2025 to “make sure that Canadian suppliers, and their products are prioritized in all federal spending.” 

A new Policy on Prioritizing Canadian Materials in Federal Procurement will require domestic and foreign suppliers contracting with the federal government to source key materials from Canadian companies in defence and construction procurements exceeding a certain threshold. The new policy will initially apply to Canadian steel and softwood lumber – which seems at odds with the policy’s reference to “all federal spending” – but will allow the government to expand its application to additional materials. How and if this aspect of the policy will respect Canada’s trade agreement obligations remains to be seen. 

Requiring Local Content

In addition, the government has signalled its intention to implement new local content requirements so “strategic” procurements that cannot be completed by Canadian suppliers (because there is no domestic capacity for the good/service in issue, for example) will still require the use of Canadian content. This will ensure Canadian goods or services are purchased as inputs, for example. According to the government, these local content requirements will ensure Canadians benefit from federal spending, even when foreign suppliers are involved. 

It is unclear what the reference to “strategic” procurements includes, but at least some defence procurements will likely be captured. Canada often excludes sensitive defence procurements from the scope of the trade agreements – which otherwise generally prohibit the use of local/Canadian content requirements – by invoking the national security exception. 

A Policy on Reciprocal Procurement will also be implemented by spring 2026 to ensure non-defence procurements are limited to Canadian goods and services as well as those originating from Canada’s trading partners. Under this new policy, supplier eligibility will be based on the origin of goods and services being offered, rather than the location of the bidder’s head office, for example. 

This is consistent with other recent changes to the Procurement Inquiry Regulations that introduce a new condition for an inquiry to be accepted by the Canadian International Trade Tribunal. The new condition stipulates that, for an inquiry to be accepted, if the solicitation restricts the origin of goods or services to be supplied, the potential supplier would have supplied only goods and services originating in one or more countries that are parties to trade agreements that apply to the contract in question.

Other Aspects of the Policy

According to the September 5 press release, the policy will also extend the Buy Canada obligations to infrastructure spending, grants, contributions, loans and other federal funding streams. In addition to departments and other federal public service organizations, the policy will apply to federal agencies and Crown corporations, which are responsible for billions of dollars of federal spending. 

The government also intends to cut red tape and streamline its processes to ensure businesses can access federal procurement opportunities easily and will establish programs to help small and medium-sized enterprises. Finally, the federal government has indicated the policy can be used as a roadmap for similar Canadian content policies to be adopted by provinces, territories, and municipalities.

Takeaways

The government has not indicated an express intention to release a consultation version of the details of the new policy. As a result, suppliers should examine what steps are necessary to take now to comply with the upcoming policy once it is implemented. While time is limited, suppliers that are significantly adversely impacted should also consider communication strategies to help shape the details of the policy.