Commercial

While the world is focused on how the tariff war is affecting various products, it may be overlooking the risks the war is posing to information technology. Yet, many businesses rely on artificial intelligence to provide their services, and many of these technologies are powered by large language models, such as the widely-used ChatGPT. It is relevant to ask whether businesses should rely on purely US-based technology service providers. There is talk of using Chinese alternatives, such as DeepSeek, but their use raises questions about data security and the associated control over information. Back in 2023, Professor Teresa Scassa wrote that, when it comes to artificial intelligence, sovereignty can take on many forms, such as state sovereignty, community sovereignty over data and individual sovereignty.1 Others have even suggested that AI will force the recalibration of international interests.2 In our current context, how can businesses protect themselves from the volatility caused by the actions of foreign governments? We believe that it’s precisely by exercising a certain degree of sovereignty over their own affairs that businesses can guard against such volatility. A few tips: Understand Intellectual property issues: Large language models underlying the majority of artificial intelligence technologies are sometimes offered under open-source licenses, but certain technologies are distributed under restrictive commercial licenses. It is important to understand the limits imposed by the licenses under which these technologies are offered. Some language model owners reserve the right to alter or restrict the technology’s functionality without notice. Conversely, permissive open-source licenses allow a language model to be used without time restrictions. From a strategic standpoint, businesses should keep intellectual property rights over their data compilations that can be integrated into artificial intelligence solutions. Consider other options: Whenever technology is used to process personal information, a privacy impact assessment is required by law before such technology is acquired, developed or redesigned.[3] Even if a privacy impact assessment is not legally required, it is prudent to assess the risks associated with technological choices. If you are dealing with a technology that your service provider integrates, check whether there are alternatives. Would you be able to quickly migrate to one of these if you faced issues? If you are dealing with custom solution, check whether it is limited to a single large language model. Adopt a modular approach: When a business chooses an external service provider to provide a large language model, it is often because the provider offers a solution that is integrated to other applications that the business already uses, or because it provides an application programming interface developed specifically for the business. In making such a choice, you should determine whether the service provider can replace the language model or application if problems were to arise. If the technology in question is a fully integrated solution from a service provider, find out whether the provider offers sufficient guarantees that it could replace a language model if it were no longer available. If it is a custom solution, find out whether the service provider can, right from the design stage, provide for the possibility of replacing one language model with another. Make a proportionate choice: Not all applications require the most powerful language models. If your technological objective is middle-of-the-road, you can consider more possibilities, including solutions hosted on local servers that use open-source language models. As a bonus, if you choose a language model proportionate to your needs, you are helping to reduce the environmental footprint of these technologies in terms of energy consumption.  These tips each require different steps to be put into practice. Remember to take legal considerations, in addition to technological constraints, into account. Licenses, intellectual property, privacy impact assessments and limited liability clauses imposed by certain service providers are all aspects that need to be considered before making any changes. This isn’t just about being prudent—it’s about taking advantage of the opportunity our businesses have to show they are technologically innovative and exercise greater control over their futures. Scassa, T. 2023. “Sovereignty and the governance of artificial intelligence.” 71 UCLA L. Rev. Disc. 214. Xu, W., Wang, S., & Zuo, X. 2025. “Whose victory? A perspective on shifts in US-China cross-border data flow rules in the AI era.” The Pacific Review, 1–27. See in particular the Act respecting the protection of personal information in the private sector, CQLR c. P-39.1, s. 3.3.

In an already troubled global economic context, the Trump administration’s reimposition of additional tariffs on Canadian exports to the United States has shaken the foundations of international trade for Canadian and Quebec companies. These protectionist measures, intended to limit access to the U.S. market, represent a major challenge for Canadian businesses, which find themselves caught up in an unprecedented trade war. The governments of Quebec and Canada reacted swiftly and decisively to the threat, implementing a series of bold measures to protect our economy, support our businesses and preserve jobs. These measures are part of a broader plan to enhance resilience and diversification. They not only seek to lessen the immediate effects of tariffs, but also to bolster the competitive edge of Canadian and Quebec businesses on the global market. By supporting innovation, improving productivity and opening new markets, Quebec and Canada are sending a clear message to their businesses and to the world at large, saying “We will not be deterred by protectionist measures and will persist in building a robust, competitive economy.” Measures taken by the Quebec government The Quebec government has implemented a number of measures to support businesses affected by the United States’ imposition of these additional tariffs. Here is a summary of the main initiatives. 1- Investissement Québec’s FRONTIÈRE program Purpose: Support Quebec manufacturing or primary sector exporters needing short-term liquidity to adapt their business models or supply chains because their sales are significantly affected by additional U.S. tariffs. Details: The program offers fast financial aid of up to $50 million per company in the form of loans with a maximum term of 7 years and a deferral on the repayment of principal up to 24 months. It is intended for businesses in the manufacturing or primary sector whose sales are significantly affected by the new U.S. tariffs. 2- Investissement Québec’s ESSOR program and productivity component Purpose: Enhance the productivity of businesses to make them more visible to major buying organizations, diversify their markets and fuel their growth. Details: The program offers flexible and advantageous financial assistance, including interest-free loans and non-repayable contributions for investment projects exceeding $10 million. It aims to reduce manufacturing costs and advantageously position businesses in new markets. 3- Investissement Québec’s Panorama financing and support program Purpose: Provide working capital for projects aimed at expanding or diversifying sales in Canada and internationally (excluding the U.S.). Details: With its $200-million budget, the initiative is designed to help companies diversify their exports and boost their competitiveness in new markets through financing and support services. It provides financing in the form of term loans ranging from $250,000 to $1,000,000, with a deferral on the repayment of principal of up to 24 months and no requirement for collateral or a corporate or personal guarantee. Support services can include, for example, strategic guidance on diversification, business intelligence on the selection and attractiveness of target markets, identification of business opportunities, including public tenders, or the facilitation of connections with potential customers. 4- Investissement Québec’s Grand V initiative Purpose: Stimulate business investment and accelerate the shift to innovation and sustainable productivity to drive growth. Details: The program was in place before the U.S. decided to impose additional tariffs on Canadian exports to the U.S. It is therefore not a direct response to the tariffs. It provides a blend of flexible financing with a possible deferral on the repayment of principal of up to 48 months, with no impact on the interest rate. Additionally, qualifying companies can access up to 1,000 hours of technological support from Investissement Québec’s innovation experts. 5- Commission des partenaires du marché du travail’s (CPMT) call for projects entitled “Formation pour la résilience et la compétitivité en emploi” [training for employment resilience and competitiveness] Purpose: Help businesses affected by additional U.S. tariffs to develop their employees’ skills. Details: This program aims to improve the skills of employees to better face current and future economic challenges. Training should make it possible for businesses to keep their workforce employed in the short term while they address the issues caused by the United States’ implementation of additional tariffs. The Commission des partenaires du marché du travail (CPMT) is issuing a call for projects from collective promoters wishing to help companies affected by the introduction of these tariffs. Collective promoters can be employers’ or workers’ associations, joint committees, sector-based labour committees, buying organizations with certified training departments, franchisors operating under their own brands, training mutuals recognized by the CPMT and Indigenous employment readiness and skills development organizations. 6- Caisse de dépôt et placement du Québec’s Program for Québec businesses Purpose: Help businesses launch new projects to boost productivity or strategically enter new markets. Details: The program provides access to flexible financing that complements the solutions offered by banks and financial markets to encourage companies to undertake projects aimed at increasing productivity; support for technological transformation—automation, robotics, business process digitization and artificial intelligence applications; and access to increased support from the CDPQ team. It is intended for all businesses looking to explore new markets to diversify their customer or supplier base or their operations. The CDPQ has announced that it will finance the most promising technological transformation projects following a call for projects to be launched in the coming weeks. 7- Local investment fund payment deferrals Purpose: Provide companies with a six-month deferral on repayment (principal and interest) of financing granted through local investment funds to help businesses cope with the disruptions caused by additional U.S. tariffs. Details: Regional county municipalities (MRCs), which manage local investment funds, will be entitled to offer businesses a six-month grace period on the repayment of loans received. The deferral period can be added to what is already allowed through these MRCs’ existing investment policies. Local investment and solidarity funds can also jointly grant payment deferrals for projects that receive funding from both types of funds. 8- Penalties for U.S. companies Purpose: Disadvantage American companies in Quebec’s public calls for tenders. Details: American companies participating in public calls for tenders will be imposed penalties of up to 25% on their tenders if they don’t have establishments or trading partners in Quebec. The Quebec government has authorized municipalities to impose this penalty as well. The measure aims to promote the growth of Quebec companies and spur economic prosperity in Quebec. Measures taken by the Canadian federal government The Canadian government took several steps in response to the United States’ unprecedented tariffs. 1- Retaliatory tariffs Purpose: Respond to the United States’ unjustified tariffs. Details: Canada has imposed a 25% tariff on $30 billion worth of American products. These tariffs immediately apply to a list of specific goods. Additionally, tariffs of 25% on a list of separate goods valued at $125 billion were to be imposed after a 21-day consultation period beginning on March 4, 2025. The imposition of tariffs on this list of products was put on hold on March 6, 2025, after President Trump decided to suspend the imposition of additional U.S. tariffs on most products that qualify as products of Canada under the Canada-United States-Mexico Agreement (CUSMA) rules of origin. In addition, in response to the introduction of an additional 25% tariff on all U.S. steel and aluminum imports on March 12, 2025, Canadian retaliatory measures on most steel and aluminum products imported from the U.S. and certain other U.S. goods came into effect on March 13, 2025. 2- Customs duty relief Purpose: Lessen the impact of Canadian countermeasures to additional U.S. tariffs on Canadian companies. Details: The government has established a procedure to evaluate exceptional requests for exemptions from tariffs imposed as part of its response to additional U.S. tariffs. The government has also indicated that existing duty drawback programs will be available for Canadian paid or payable surtaxes. 3- Trade Impact Program Purpose: Support Canadian companies in their efforts to diversify their export markets. Details: This $5-billion program is designed to help companies explore new markets and reduce their reliance on the U.S. market. It also helps them navigate the economic hurdles caused by the tariffs, including losses from non-payment, currency fluctuations, lack of access to cash flows and barriers to expansion. 4- Employment Insurance: Work-Sharing Program Purpose: Avoid layoffs when there is a temporary decrease in the normal level of business activity beyond the employer’s control. Details: The government is temporarily making this existing program more flexible to make it more accessible and extend the maximum duration of agreements. Employment Insurance may cover a portion of employees’ wages if they agree to reduce their working hours and share the remaining work in the period needed for the business to recover, when the amount of work available is reduced because of a temporary slowdown in normal business beyond the employer’s control. The employer, its employees (and union, if applicable) and Service Canada must all enter into a work-sharing agreement. Workers unions have called for additional support measures under the Employment Insurance program, and although the government appears open to introducing such measures, they have not yet been formally announced. 5- Preferred-rate loans from BDC Purpose: Provide financial support to businesses affected by additional U.S. tariffs. Details: The Business Development Bank of Canada (BDC) is offering up to $500 million in preferred-rate loans available to help companies in sectors directly affected by tariffs and companies in their supply chains. 6- Farm Credit Canada lending Purpose: Support Canada’s agricultural industry. Details: Lending totalling 1 billion is being provided through the Farm Credit Canada to help farmers deal with the consequences of additional U.S. tariffs and maintain their competitiveness on international markets. Conclusion Quebec and Ottawa have put robust measures in place to help businesses and workers in the wake of the United States’ imposition of additional tariffs. These initiatives are aimed at enhancing competitiveness, diversifying export markets and protecting jobs. Both levels of government are collaborating closely to minimize economic repercussions and defend Canada’s interests on the global stage.

Nearly four years after the Canada-United States-Mexico Agreement (the “CUSMA” or the “Agreement”) came into force, U.S. President-elect Donald Trump announced on November 25, 2024, that he would impose 25% tariffs on all products entering the U.S. from Canada and Mexico, starting on the first day of his presidency, that is, January 20, 2025. Mr. Trump added that the tariffs would remain in effect until Canada and Mexico strengthened their border policies, which he blames for the increase in illegal immigration and the trafficking of devastating drugs in the United States. As a reminder, under the current provisions of the CUSMA, most products made in Quebec and Canada can be sold on U.S. markets without tariffs applying. President Trump has repeated his intention to implement such customs tariffs on several occasions since his announcement at the end of November. However, no real measure has yet been taken to impose these customs tariffs. Still, should he choose to go ahead with his threat, there appears to be several legislative provisions on which his administration could rely to implement these tariffs. His administration could invoke the CUSMA’s essential security exception, which allows a party to the Agreement to apply any measure deemed necessary to protect its essential security interests, the national security exception in the Trade Expansion Act of 1962, which President Trump’s first administration used in 2018 to introduce tariffs on U.S. imports of certain steel and aluminum products, or the provisions of the National Emergencies Act. Needless to say, the announcement sent shockwaves through the political and business communities in Canada and Quebec what with the close commercial ties that the U.S. has with Canada, including with Quebec. In the first quarter of 2024 alone, Quebec’s merchandise exports to the U.S. reached CAN$21.2 billion, which accounts for nearly 74.6% of the province’s international merchandise exports and makes the U.S. Quebec’s main trading partner on the world stage. The imposition of 25% tariffs would therefore significantly affect Quebec businesses. It would make them less competitive on the U.S. market, on which they rely heavily to export their products. The measure could be particularly detrimental to the Canadian forestry industry, which is already severely affected by tariffs of nearly 15% on lumber. The U.S. economy would also be considerably affected by such protectionist tariffs. While in the short term, tariffs could benefit certain domestic manufacturers and producers, in the longer term, they are likely to harm the U.S. economy as a whole. Many U.S. manufacturers would face higher costs of inputs, and established supply chains would be disrupted, in particular in the automotive and steel industries. To continue to make profits, many U.S. companies could be forced to pass on the additional costs to their end consumers by raising the prices of their products, which would undoubtedly result in another wave of inflation. Worth mentioning also are the retaliatory measures that the Canadian government may want to implement in response to such tariffs, which could affect certain parts of the U.S. economy. Although the CUSMA provides for dispute resolution mechanisms, they are unlikely to lessen the impact of the measures that the Trump administration is considering in the short term, as a final decision under these mechanisms could take a long time to be issued. The new U.S. administration could use the announcement made on November 25 as leverage in future CUSMA renewal negotiations, the preparatory discussions for which are slated to begin next year, or in negotiations for a separate trade agreement between the U.S. and Canada that would exclude Mexico. Canadian businesses would do well to encourage their various trade associations to take steps to lobby both American decision-makers and their corporate customers in the U.S. and remind them of the harmful effects that the announced tariffs may have on American businesses. While we wait for a more detailed announcement with information concerning specific tariff exemptions in particular, we suggest that businesses choose their future trading partners with great care. In an increasingly protectionist global economic context, a strategy involving the diversification of trading partners is the best way for businesses to offset the risks associated with a particular country’s tariff policies. The Comprehensive Economic and Trade Agreement signed by Canada and the European Union in 2017, which our firm helped to negotiate, may prove to be an interesting solution in this respect. Our team of commercial law and tax professionals is available to help you find solutions to the issues arising from this announcement. With our expertise, we can assist you in your commercial negotiations and help you develop strategies to mitigate the impact that the announced tariff increase may have on your business.

On December 20, 2022, the federal government's Single-Use Plastics Prohibition Regulations1 (the “Regulations”) gradually came into force, with the effect, as the name suggests, of prohibiting (or restricting, in certain cases) the manufacture, import and sale of certain single-use plastics that pose a threat to the environment. In principle, it is now prohibited to manufacture, import and sell certain single-use plastic products made entirely or partially of plastic, such as foodservice ware, checkout bags and straws. On June 20, 2024, beverage ring carriers and flexible straws packaged with beverage containers have been added to this list.2 However, there are cases currently pending before the courts that have the potential to change the situation. Currently contested: the Regulations and the Order A contestation to the Regulations has been before the Federal Court since July 15, 2022, in an application for judicial review brought by Petro Plastics Corporation Ltd et al3 (the “Petro Plastics Case”).  However, the parties to this case have asked for it to be suspended pending a final judgment in another case4 brought by the Responsible Plastics Use Coalition (the “Coalition Case”).5 In the Coalition case, the validity of the order by which plastic products were added to the list of toxic substances in Schedule 1 of the Canadian Environmental Protection Act (“CEPA”)6 is called into question. The Federal Court of Appeal will soon hear this case and render a judgment that will affect the Petro Plastics case. On November 16, 2023, in the Coalition Case, the Federal Court ruled in favour of the Coalition, retroactively quashing the Order Adding a Toxic Substance to Schedule 1 to the Canadian Environmental Protection Act (the “Order”) and declaring it invalid and unlawful as of April 23, 2021.7 Essentially, the Federal Court had two main reasons for concluding that the registration was illegal. Findings of the Federal Court Order found unreasonable The Federal Court concluded that the Order was unreasonable because the evidence that the federal government had in hand did not support the conclusion that all plastic manufactured articles were toxic within the meaning of CEPA. On the contrary, the evidence showed that certain plastic manufactured articles included in the scope of the Schedule 1 list were not toxic. According to the Federal Court, the government acted outside its authority by listing the broad category of plastic manufactured articles on Schedule 1 in an unqualified manner. Order found unconstitutional The Federal Court also concluded that the Order was unconstitutional because it did not fall within the federal government’s criminal law power. Only substances that are toxic in “the real sense” can be included on the list of toxic substances. They must be substances that are harmful, dangerous to the environment or human life, and truly have the potential to cause harm. In other words, according to the Federal Court, the power to regulate the broad and exhaustive category of “single-use plastics” lies with the provinces. The Attorney General of Canada appealed this decision with the Federal Court of Appeal on December 8, 2023. The Federal Court of Appeal granted a stay of the judgment rendered on November 16, 2023, until disposition of the appeal,8 such that the Order and the Regulations remain in force, at least for the time being. If the Federal Court of Appeal upholds the decision that the Federal Court rendered on November 16, 2023, this will affect the validity of the Regulations. Under section 90 of CEPA, a substance can only be added to Schedule 1 by order if the federal government determines that it is toxic within the meaning of CEPA, and, under section 93 of CEPA, the government only has the power to regulate such a substance after it has been added to the list. The plastic items in question Subject to the outcome of the court cases discussed above, here is the exhaustive list of items that the Regulations prohibit: Single-use plastic ring carriers designed to surround beverage containers in order to carry them together.9 Single-use plastic stir sticks designed to stir or mix beverages or to prevent a beverage from spilling from the lid of its container.10 Single-use plastic foodservice ware that (a) is formed in the shape of a clamshell container, lidded container, box, cup, plate or bowl, (b) is designed to serve or transport ready-to-eat food or beverages and (c) contains certain materials.11 Single-use plastic checkout bags designed to carry purchased goods from a business and : (a) whose plastic is not a fabric,12 or (b) whose plastic is a fabric that will break or tear, as the case may be, (i) if it is used to carry 10 kg over a distance of 53 m 100 times; (ii) if it is washed in accordance with the washing procedures specified for a single domestic wash in the International Organization for Standardization standard ISO 6330, as amended from time to time.13 Single-use plastic cutlery that is formed in the shape of a fork, knife, spoon, spork or chopstick and that (a) contains polystyrene or polyethylene; or (b) changes its physical properties after being run through an electrically operated household dishwasher 100 times.14 Single-use plastic straws that either (a) contain polystyrene or polyethylene, or (b) change their physical properties after being run through an electrically operated household dishwasher 100 times. Exceptions Single-use flexible plastic straws Single-use flexible plastic straws, i.e., those with a corrugated section that allows the straw to bend and maintain its position at various angles,15 may be manufactured and imported.16 These flexible straws may also be sold in any of the following circumstances:17  The sale does not take place in a commercial, industrial, or institutional setting. This exception means that individuals can sell such flexible straws. The sale is between businesses in packages of at least 20 straws. The sale of a package of 20 or more straws is between a retail store and a customer if the customer requests straws and the package is not displayed in a manner that permits the customer to view the package without the help of a store employee.18 The sale of straws is between a retail store and a customer, if the straw is packaged together with a beverage container and the packaging was done at a location other than the retail store. The sale is between a care facility, such as a hospital or long-term care facility, and its patients or residents. Export of single-use plastic items All the manufactured single-use plastic items listed above may be manufactured, imported or sold for export until December 20, 2025.19 That said, any person who manufactures or imports such items for export will be required to keep a record of certain information and documents as appropriate for each type of plastic manufactured item.20 Records of the information and documents will have to be kept for at least five years in Canada.21 Conclusion: an opportunity to rethink the use of plastics In the short term, businesses will need to start thinking about how they will replace the plastic manufactured items they use. To help businesses select alternatives to single-use plastic items, the federal government has released its Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations.m22 According to this document, the aim should be to reduce plastics. Businesses may begin by considering whether a single-use plastic product should be replaced or no longer provided. Only products that perform essential functions should be replaced with non-plastic equivalents. Stir sticks and straws can be eliminated most of the time. Another way to reduce waste is to opt for reusable products and packaging. Businesses are invited to rethink their products and services to provide reusable options. Reusable container programs (i.e., offering customers the option of bringing their own reusable containers) are a reuse option that businesses may want to consider, in particular to reduce the amount of plastic foodservice ware. Only where reusable products are not feasible should businesses substitute a single-use plastic product with a recyclable single-use alternative. In such cases, businesses are encouraged to contact local recycling facilities to ensure that they can successfully recycle the products at their end of life. Ultimately, charging consumers for certain single-use alternatives (e.g., single-use wooden or moulded fibre cutlery) may also discourage their use. SOR/2022-138 Regulations, ss. 3 (2), s. 11 and ss. 13 (4) Petro Plastics Corporation Ltd et al v Canada (Attorney General), Court File No. T-1468-22. Order registered on April 23, 2021 and published in the Canada Gazette on May 12, 2021 Court File No. T-824-21 S.C. 1999, c. 33 Responsible Plastic Use Coalition v. Canada (Environment and Climate Change) 2023 FC 1511 2024 FCA 18 Regulations, s. 1 and 3 Regulations, s. 1 and 6 Regulations, s. 1 and 6 “Any material woven, knitted, crocheted, knotted, braided, felted, bonded, laminated or otherwise produced from, or in combination with, a textile fibre” as defined in section 2 of the Textile Labelling Act, RSC 1985, c. T-10 Regulations, s. 1 and 6 Regulations, s. 1 and 4 and ss. 5 (1) Regulations, s. 1 Ibid, s. 4 Regulations, ss. 5 (2)–(6) According to Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations, the goal is to ensure that people with disabilities who need flexible single-use plastic straws continue to have access to them at home and can carry them to restaurants and other premises. Regulations, ss. 2 (2), s. 10 and ss. 13 (5). Ibid., s. 8 Ibid, ss. 9 (1). https://www.canada.ca/en/environment-climate-change/services/managing-reducing-waste/consultations/proposed-single-use-plastics-prohibition-regulations-consultation-document.html