Consultations on Canada’s Automotive Remission Framework

Current status: Open

Canada is consulting vehicle assemblers, importers, parts producers, workers' associations, unions and any other interested parties to obtain their views and feedback on potential changes to Canda's automotive remission framework in respect of counter-tariffs applicable on certain imports from the United States (U.S.). The government has outlined specific questions below but welcomes feedback on any aspect of the automotive remission framework.

The government invites submissions, which can be sent to autos.consultations@fin.gc.ca. Comments can be submitted until April 13, 2026.

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Background

Canada's automotive sector supports over 500,000 workers, including 125,000 direct jobs, contributes over $16 billion annually to Canada's GDP, and is one of the country's largest export industries. In 2025, Canada produced over 1.2 million passenger vehicles.

For decades, Canada's automotive industry, as well as those of the U.S. and Mexico, benefited from free and open trade and an integrated North American auto sector. Recently, however, the Canadian automotive industry has been significantly impacted by U.S. trade policy with more than 90 per cent of Canadian-made vehicles currently exported to the U.S. and subject to U.S. tariffs of 25 per cent.

In response, on February 5, 2026, the Prime Minister launched a new strategy to transform Canada's auto industry by rewarding the production of made-in-Canada vehicles and harnessing Canada's world-class capabilities to build the cars of the future. As part of the automotive strategy, the government announced its intent to consult on potential changes to the automotive remission framework in respect of counter-tariffs applicable on certain imports from the U.S., to better align trade policy with Canada's industrial and workforce objectives.

The existing remission framework has acted as an important incentive to encourage companies to maintain their manufacturing base in Canada in a changing trade environment. The automotive remission framework could be strengthened to further incentivize domestic production by rewarding those that produce the most in Canada, attract new investment, and ultimately enhance the long‑term competitiveness of Canada's automotive sector.

These consultations seek views on the ways that Canada could more effectively leverage the automotive remission framework to align with the broader goals outlined in Canada's automotive strategy.

Canada's Counter-Tariffs on U.S.-Made Autos and Automotive Remission Framework

In April 2025, the U.S. imposed Section 232 tariffs of 25 per cent on Canadian-made light vehicles, with a carve-out for the American content in vehicles compliant with the Canada-U.S.-Mexico Agreement (CUSMA). CUSMA-compliant auto parts remain eligible for tariff-free treatment.

In order to protect Canadian interests, the government implemented counter-tariffs on U.S.-made light vehicles, with CUSMA-compliant imports receiving a carve-out for their Canadian and Mexican content. These counter-tariffs continue to protect Canadian production and competitiveness in the domestic market. Canada's counter-tariffs will remain in place to safeguard the domestic automotive industry as long as U.S. tariffs are maintained.

At the same time, the government announced that it would provide remission (i.e., a waiver) of these counter-tariffs to companies with automotive production in Canada. The current auto remission framework provides a counter-tariff-free import quota to automakers that produce vehicles in Canada, which allows them to continue importing U.S.-made vehicles at historical import levels without paying Canada's counter-tariffs. Canadian-based automakers are liable for tariffs on imports of U.S.-made vehicles above their quota level. Automakers that do not produce in Canada must pay the counter-tariffs on their imports of U.S.-made vehicles.

To incentivize continued production and investment in Canada, the quota provided to each company is contingent upon maintaining Canadian production at existing levels and following through on planned investments in Canada. Companies can have their quota reduced if they do not maintain their Canadian vehicle production levels or decide not to follow through on their investments.

This framework has already proved an effective tool in demonstrating to Canadian automakers that the government will support them when they maintain their commitment to Canada, but that it will stand up for Canadian workers if they do not. In October 2025, the government reduced the import quota of Stellantis by 50 per cent as a consequence of its decision not to follow through with its plans to re-open its assembly facility in Brampton, Ontario. The government also reduced the import quota of General Motors by 24 per cent as a result of decreased Canadian production coupled with its decision to close its electric delivery van production facility in Ingersoll, Ontario.

Strengthening the Automotive Remission Framework

In ongoing discussions with the United States on the automotive trade regime, including as part of the CUSMA review process, Canada's position continues to be that the best outcome for all is a return to tariff-free automotive trade within North America.

Should it be necessary for Canada to continue applying counter-tariffs to U.S.-made automobiles, the government is considering ways to strengthen the remission framework to provide an even stronger incentive for auto producers to not only maintain their production in Canda, but to increase their production and further invest in the Canadian automotive sector. This could include changes to reward those that produce the most in Canada, and to continually incentivize greater Canadian production. The remission framework could also encourage specific objectives enumerated in Canada's automotive sector strategy. Potential changes to the remission framework are detailed below.

A Tradeable 'Production Credit' Remission Framework

The government is seeking views on the potential introduction of a production-credit based remission framework where it would allocate counter-tariff-free import credits based on each company's contribution to the domestic automotive industry. In essence, the more a company produces and invests in Canada, the more import credits it would earn.

A company could use these credits to import U.S-made vehicles into Canada without paying Canada's 25 per cent counter-tariffs. The credits would also be tradeable, at a market-determined price, allowing companies with a surplus of credits to sell them to other companies seeking to import U.S.-made vehicles into Canada.

Companies without a sufficient number of import credits would have to pay Canada's counter-tariffs when importing U.S.-made vehicles into Canada.

1. The government is seeking views on the potential impacts of a tradeable production credit remission framework on Canada's automotive industry, including automakers, auto importers, auto parts suppliers, and autoworkers in Canada.

Incentivizing More Than Just Vehicle Production

In addition to credits for vehicle production, the auto remission framework could also provide extra credit for activities consistent with Canada's broader auto sector strategy. These could include credit for: propulsion and transmission parts production; investment; Canadian content in vehicles; use of unionized labour; and production of electrified vehicles.

Credit for Propulsion and Transmission Parts Production

While U.S. tariffs and Canada's counter-tariffs are limited to finished vehicles, the government could consider providing import credits for the Canadian production of engines, batteries, and transmissions for automotive assembly. This would serve to recognize the importance of auto parts production, involving the direct employment of over 70,000 Canadians.

Providing credit for the production of engines, batteries, and transmissions for automotive assembly could help to counteract the incentives created by U.S. tariff policy, which encourages the use of U.S. parts in Canadian-made vehicles as a way to reduce the applicable U.S. tariff rate (the U.S. tariff only applies to non-U.S. content in CUSMA-compliant vehicles). This could help to anchor the Canadian parts manufacturing industry.

If Canada were to provide credit for the production of engines, batteries, and transmissions for automotive assembly under a new remission framework, a list of qualifying parts, and the value of the credit provided for their production relative to the production of a vehicle, must be determined. For example, the government could consider providing partial import credits for engines, batteries and transmissions, based on the relative value of each part within a final assembled vehicle.

2. Should the Government provide import credits for the production of engines, batteries and transmissions for vehicle assembly?

3. Which parts should qualify for import credits and what is the value that should be attached to each part relative to the value of one credit for the production of a finished automobile?

Credit for Investment in Canada

Automotive investments are key to securing the domestic manufacturing footprint and Canadian competitiveness over the medium to long term, both for vehicles and certain advanced technologies. In the last several years, automotive investments in Canada have been increasingly dedicated to emerging technologies related to zero-emission vehicle assembly and the battery supply chain, helping to position Canada to sell into the North American and global markets of the future.

As part of Canada's wider automotive strategy that seeks to lock-down and accelerate investments and provide a forward-looking orientation to Canada's industry, remission could be strengthened to offer import credits for new investments in Canada's automotive sector, including from companies that may be looking to enter the Canadian market for the first time.

Under this approach, the level of investment required to earn a given number of credits would have to be considered for vehicle assembly as well as advanced technologies. Credits awarded to an importer investing in Canada could reflect certain proportions of their most recent import needs, with greater coverage associated with higher investments. Such a system would also require that import allowances be validated in retrospect, including the possibility to impose retroactive duties where companies do not follow through on their investment commitments.

4. Should the Government provide import credits for investments and if so, should these cover both automobile assembly as well as advanced technologies (e.g., EV batteries)?

5. What should be the appropriate 'reward' for investment? Should the government consider a different allocation of credits for various investment levels or different types of investment?

Use of Canadian Content

The long-term viability and competitiveness of Canada's automobile assemblers sustain their corresponding supply networks, consisting of Canadian parts suppliers whose success depends on securing and renewing supply contracts with the automakers.

To help ensure that the relationship between Canadian parts suppliers and Canada's automakers continues, the Government could consider ways to promote Canadian content, either by allocating additional import credits to companies that increase their Canadian content in vehicles, or by taking away credits from those that reduce Canadian content. This approach could operate on the basis of accounting for Canadian value added in Canadian-made vehicles, which would require simplification and averaging of content across models. Alternatively, assemblers could account for their annual levels of Canadian part purchases.

6. Should Canada provide credits that are tied to Canadian content levels and what may be the most appropriate approach to accounting for content?

7. Are there particular Canadian inputs that should be rewarded, such as the use of Canadian steel and aluminum?

8. How should Canadian content translate into credits earned?

9. Are there alternatives the government could consider to encourage Canadian content in Canadian-made vehicles outside of the remission framework?

Use of Unionized Labour

Unionized labour is a foundational force in Canada's automotive sector that continues to drive better wages, improved benefits, and better overall conditions for workers. An updated framework could focus not just on vehicle and parts production, but could be leveraged to help support high-quality jobs and labour standards across the automotive sector. This would incentivize the maintenance and growth of Canada's skilled automotive workforce, which has been and will continue to be a crucial factor in companies' decisions to set up shop here.

One approach to rewarding the employment of unionized labour would be to provide additional import credits, or a multiplier on production credits earned, to companies to reflect their use of unionized labour.

10. Should import credits recognize auto assemblers' dependence on unionized labour?

11. What would be the most equitable manner of reflecting the use of unionized labour through credits?

Production of Electrified Vehicles

Combined with other incentives for vehicle electrification under Canada's automotive strategy, the updated remission framework offers an avenue for encouraging assemblers to prioritize their transition toward electric fleets. Such an approach would recognize and help to positively incentivize Canada's market movement towards electrified vehicles, in a manner that is flexible in allowing each assembler to take into account all other factors contributing to decisions.

The government could allocate a higher proportion of vehicle production credits for electrified vehicles compared to gasoline and diesel-powered ones.

12. Should Canada create a credit differential that provides greater rewards for electrified vehicles?

13. Should credit differ for the production of fully electric vehicles as opposed to hybrids or plug-in hybrids?

Implementation

Ensuring a Well-Functioning Credit Market

A market-based system for the trading of import credits would work best when the supply of credits is roughly equal to demand.

An over-supply of import credits would diminish their value to credit-sellers, which would be Canada's largest automotive producers.

At the same time, credit supply should take into account expected demand – if demand for credits is too low, Canada's vehicle producers would not be able to sell their surplus credits and would realize less of a benefit from the remission framework.

An option to achieve the necessary balance could be for the government to establish the overall supply of import credits and apportion them according to each company's share of production in Canada.

Import credits would only be of value to companies seeking to import U.S.-made vehicles subject to Canada's counter-tariffs. To prevent market manipulation and ensure a smooth-functioning market, the government could consider limiting participation in the tradeable import credit system.

14. How could the government best ensure an effective balance of supply and demand for import credits to create a robust market?

15. Should the government consider limiting participation in an import credit market? If so, how?

Administration

A tradable import credit system would require the government to track the number of credits that have been allocated, as well as redeemed when used to waive counter-tariffs on imports of U.S.-made autos. The government would not necessarily expect to intervene in facilitating the trading of credits between companies or negotiation of transfer payments but would need to be able to keep track of the sale of credits to ensure the framework is functioning smoothly.

To this end, the government anticipates conducting periodic reviews throughout the year to assess the functioning of the framework. Reviews would offer the opportunity to take stock of developments in Canada's automotive manufacturing landscape and address any issues that companies may raise in collaboration with policymakers and credit administrators.

While the government would need to determine implementation details with a view to ensuring an import credit system does not create overly burdensome and complex compliance requirements, the views of producers and importers could help ensure the design a more user-friendly system.

16. How could a tradable import credit system be best designed to meet the needs of the government as well as participants?

17. Are there existing programs or administrative procedures the government could leverage to implement this framework?