Ontario Retaliates Against NY Buy American Law

On March 8, the Canadian province of Ontario enacted the Fairness in Procurement Act, 2018, in response to Buy American laws adopted by states, in particular one that New York will implement on April 1. This post examines the new provincial law and how its implementation could run afoul of Canada’s international commitments.

Ontario’s premier had sought broad authority to “retaliate” against U.S. states that enact Buy American laws that could restrict participation by Canadian suppliers. She particularly singled out a New York law that requires American-made iron and steel to be used in highway and bridge projects. Texas, reportedly, has similar legislation.

The new provincial law is targeted at state or local governments that enact legislation or take measures “that may inhibit or prevent Ontario suppliers from participating or succeeding in [their] procurement”. Such actions could trigger designation of the state or local government as an “offending American jurisdiction”.

Based on an offending jurisdiction designation, Ontario could impose penalties on suppliers from the jurisdiction. According to the law, Ontario could exclude American suppliers from participating or being awarded contracts in its procurement or even apply more stringent criteria to American proposals than to other proposals.

Such sanctions could be inconsistent with Ontario’s obligations under the WTO Government Procurement Agreement (GPA) if applied to GPA-covered procurement. Ontario and its fellow provinces were brought under the GPA through a 2010 bilateral agreement in which the United States and Canada swapped state and provincial  coverage as part of an agreement to address Canada’s complaints with America’s 2009 stimulus package. The American Recovery and Reinvestment Act of 2009 imposed a Buy American requirement on infrastructure projects, except where they were covered under a trade agreement.

Under the GPA, Ontario commits to follow the GPA rules for the purchases of its ministries and a number of agencies, that exceed thresholds of $490,000 for goods and services and $7 million for construction projects. Under the GPA, Ontario is required to apply the same evaluation criteria to all suppliers participating in a procurement and cannot exclude a supplier from a GPA country just because it is from an “offending” jurisdiction.

Before Ontario can apply its new authority, it will need to develop regulations, including on how to determine when a supplier is from an American jurisdiction. The regulations can also provide for exemptions. That would enable the province to exempt procurement covered by the GPA from any sanctions to ensure its compliance with the GPA.

The New York legislation that provoked Ontario’s new procurement law is much less sweeping than the governor’s original proposal, which would have required all state agencies to give preferences to domestic products in purchases above $100,000. In its final form, the NY measure is limited to road and bridge projects for a two-year period. It excludes application of the domestic preference where a reciprocal trade agreement requires non-discriminatory treatment of foreign suppliers.

New York state procurement is covered under the GPA with the same thresholds as Ontario. However, it has a carve-out for procurement of “construction-grade steel” and federal requirements for the use of U.S.-produced iron and steel in highway projects is excluded from U.S. commitments.

Jean Heilman Grier

March 21, 2018

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