With the official declaration of the Canada- U.S. tariff war, Canadian consumer behavior has undergone a significant shift, sparking a renewed sense of patriotism and a robust “buy Canadian” movement. As tariffs are expected to drive up the cost of imported goods, Canadians are increasingly turning to domestically-produced products. To meet this growing demand, many companies are emphasizing the Canadian origin of their products through labeling and product claims. However, businesses must navigate important requirements regarding Canadian origin claims to ensure compliance while catering to the rising demand for locally-produced items.
Regulatory Framework
As consumer demand for Canadian-made products surges, companies are increasingly using various Canadian origin claims on their products, such as “Product of Canada” and “Made in Canada”. Understanding what qualifies as a Canadian product is crucial for both businesses and consumers. Several regulatory agencies, including the Canadian Competition Bureau and the Canadian Food Inspection Agency (“CFIA“), and Ad Standards (an industry self-regulatory body), have published guidance regarding claims that can be made about a product originating in Canada.
Enforcement guidelines from the Competition Bureau outline the requirements for making valid product origin claims relating to non-food consumer goods (whether under the deceptive marketing practices provisions of the Canadian Competition Act, or the Consumer Packaging and Labelling Act and the Textile Labelling Act, both of which prohibit false and misleading country of origin claims). CFIA guidance provides an overview of the requirements for making product origin claims as they pertain to food products, and in particular the production and manufacturing of the food product as opposed to its packaging. Ad Standards has also recently published advisory guidance on the meaning of “Made in Canada” and similar claims under the Canadian Code of Advertising Standards. Additionally, the Canada Border Services Agency (“CBSA“) has released guidance on the disclosure of the origins of goods, which is crucial for determining applicable tariffs and trade benefits. Finally, as it pertains to Canadian symbols, Canadian Heritage has also issued guidance with respect to the commercial usage of these symbols, including as it pertains to makes protected under the Trademarks Act.
What is a Canadian Product and When to use Canadian Product Claims?
Product of Canada & 100% Canadian
Pursuant to guidelines issued by the Competition Bureau, a consumer product may claim to be a “Product of Canada” only if (i) the last substantial transformation of the good occurred in Canada; and (ii) at least 98% of the total direct costs of producing or manufacturing the good have been incurred in Canada. Similarly, guidance issued by the CFIA only permits food products to be advertised as a “product of Canada” if all or virtually all major ingredients, processing, and labour used to make the food product are Canadian (i.e., all significant ingredients in a food product are Canadian in origin and non-Canadian material is negligible). That said, products may include very low levels (generally up to 2%) of ingredients that are not generally produced or grown in Canada.
Although the Competition Bureau’s guidance does not address “100% Canadian” claims on consumer products, to use the claim on food products, the food or ingredient to which the claim applies must be entirely Canadian rather than “all or virtually all” Canadian.
Made in Canada
To advertise a consumer product as “Made in Canada”, the Competition Bureau guidelines require that the following requirements be met: (i) the last substantial transformation of the good occurred in Canada; (ii) at least 51% of the total direct costs of producing or manufacturing the good were incurred in Canada; and (iii) the “Made in Canada” representation is accompanied by an appropriate qualifying statement (e.g., “Made in Canada with imported parts” or “Made in Canada with domestic and imported parts”). Similarly, foods that claim to be “Made in Canada” must meet the following requirements: (i) the last substantial transformation of the product occurred in Canada; and (ii) the claim is accompanied by a qualifying statement to indicate that the food product is made in Canada from imported ingredients or a combination of imported and domestic ingredients.
Canadian Symbols
Companies should also be mindful of trademark restrictions when using Canadian symbols, like the Canadian flag or the maple leaf in association with their products. The Canadian flag and the 11-point maple leaf are “prohibited marks” under the Trademarks Act. Therefore, a person or company cannot adopt, use or apply to register a mark that consists of the Canadian flag or 11-point maple leaf or a mark that closely resembles either of those Canadian symbols unless they have consent to do so. If a company wants to use the Canadian flag or 11-point maple leaf on its products, it must obtain consent from the Government of Canada by submitting a request to the Department of Canadian Heritage. In granting permission to use the Canadian flag or 11-point maple leaf, the Department will consider whether the symbol is depicted accurately and whether it communicates a misleading impression.
It is relevant to note that various other claims and symbols may imply Canadian origin and either be subject to the guidelines or at risk of being found to be misleading, and should be reviewed on a case-by-case basis.
What does this mean for compliance with Canada’s retaliatory tariffs?
Canada’s retaliatory tariffs only apply to ” U.S. origin” goods, as determined by the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations. Despite Canada relying on these regulations typically used for marking purposes, Canadian businesses must consider that determining “origin” for purposes of the application of Canada’s retaliatory tariffs involves additional legal considerations beyond those required for marking and labeling products and making claims on the Canadian nature of a product. For example, the fact that imported goods are marked as being a product of the United States does not indicate that Canada’s 25% surtax automatically applies to those imported goods.
From a customs enforcement perspective, imported goods marked as products of the United States or “made in the USA” that do not attract the application of the 25% surtax could trigger trade compliance verifications by the CBSA, focused on determining whether the good at issue is a U.S.-origin good for purposes of the surtax. This enforcement risk also applies to goods being exported from Canada into the United States that are marked or labeled as “made in Canada” or as products of Canada. Exporters of these goods must consider the domestic U.S. customs legislation used determine origin for purposes of the U.S. 25% tariff on Canadian-origin goods.
Key Takeaways
- Review Product Labels: Ensure that all product labels accurately reflect the requirements for Canadian origin claims, such as “Product of Canada” or “Made in Canada”, and comply with the specific requirements for each type of claim.
- Update Marketing Materials: Review marketing materials to ensure that if the Canadian origin of products is emphasized, any claims made are truthful and adhere to the applicable legislation and guidance issued by the Competition Bureau, the CFIA, Canadian Heritage and Ad Standards.
- Use Qualifying Statements: When making “Made in Canada” claims, include appropriate qualifying statements, such as “Made in Canada with imported parts” or “Made in Canada with domestic and imported parts,” to comply with the relevant guidelines and provide transparency to consumers.
- Leverage Canadian Symbols: If Canadian symbols are used in product advertising, ensure they are used in accordance with guidelines issued by Canadian Heritage.
- Consider Origin for Customs Purposes: Recognize that specific Canadian legislation applies to determine whether a good is U.S. origin for purposes of the application of Canada’s 25% surtax on U.S. origin goods and that specific U.S. legislation applies to determine whether a good is Canadian origin for the application of the United States’ 25% surtax on Canadian-origin goods. These rules may lead to different outcomes from those for advertising claims.
