ITB’s 2x credit for small Canadian businesses, and what a prime needs from your shop

What is the ITB Policy?

The Industrial and Technological Benefits (ITB) Policy is written into Canada’s large defence contracts. The company that wins one agrees to carry out business activity in Canada equal to the value of the contract (ISED, modified 5 August 2026).

It applies to defence and Canadian Coast Guard procurements over $100 million that aren’t subject to trade agreements, or where the national security exception is invoked. Defence procurements of $25 million to $100 million are reviewed for possible application.

The winning company, the prime, meets its obligation through transactions with Canadian companies: purchases, investments, research and training. The ITB Authority approves each transaction and counts it as a credit against the obligation. Authority for the policy moved to the Defence Investment Agency on 16 July 2026; the policy pages and the model terms are still on ISED’s site.

How much ITB work is still to be placed?

ISED’s contractor progress page reports $83.8 billion of obligations: $40.1 billion completed, $20.3 billion in progress and $23.4 billion not identified. Those are the ITB Branch’s figures as of 21 April 2025.

ISED says the information is updated annually. The page was last modified on 30 July 2026 and still shows the April 2025 data, so check it for new totals before you quote them.

The breakdown by contractor goes a level down: each prime, its program, the obligation, the amount still to be identified, and a company contact with an email. For a small shop, it’s a list of who still has Canadian work to place and who to write to.

How does Canadian content value work?

Canadian content value (CCV) is the part of a product’s or service’s value that comes from Canadian costs (model terms, article 9, modified 29 July 2026). On a purchase, the prime’s credit is the CCV of what it buys (7.2). Article 9 gives two ways to count it:

• Net selling price. Start from the selling price, then take off customs duties, excise and sales taxes, and any ineligible costs.
• Cost aggregate. Used where there’s no substantiated selling price, such as in-house production. Add up Canadian costs: parts produced in Canada, materials “to the extent that they are of Canadian origin”, Canadian transport, wages of Canadians and permanent residents working in Canada, Canadian overheads, and pre-tax profit taxed in Canada.

Section 9.2 rules out government funding, imported materials, labour and services, pay to non-Canadians working on the project, and royalties paid outside Canada. For a machine shop, that puts the metal in play: imported bar or plate doesn’t count, so where it came from can move a job’s CCV.

Then comes the rule that matters most to small shops. When a purchase’s CCV is verified at 70% or more, it’s deemed 100% for reporting and verification (7.3). A part verified at 72% counts as fully Canadian; a part at 65% counts at 65%.

Who counts as a small or medium-sized business?

Section 1.1.41 defines a small and medium business (SMB) as a Canadian company with no more than 250 full-time employees, or the equivalent, on the date it enters the transaction, and no more than 500 once its affiliated entities are counted. Agents and distributors of foreign goods and services don’t qualify.

A Canadian company, under 1.1.4, is incorporated under federal, provincial or territorial law and has ongoing business activities in Canada.

The 2026 terms add a Small Mid-Cap (1.1.42): a Canadian company that isn’t an SMB, with no more than 500 full-time staff including affiliates. It can still earn the SMB multiplier if it qualified as a Small Mid-Cap within the five years before the transaction was proposed (7.3.3.2.3).

When does the 2x multiplier apply?

The double credit sits in section 7.3.3, the Canadian Company boost. A transaction qualifies when all four of these hold:

1. It’s a direct transaction: work under the defence contract itself.
2. It’s supplier development: the Canadian company isn’t an agent or distributor of foreign goods and services, or a subsidiary of the prime or one of its eligible donors.
3. The company’s product or service reaches a CCV of at least 70%.
4. It isn’t a grouped transaction, with more than one recipient.

After verification, the ITB Authority deems the CCV portion 100% (7.3.3.2.1). Where the recipient is an SMB, the credit is then multiplied by 2 (7.3.3.2.2).

Before the 2026 update, the SMB boost was capped at $1 million of transaction value. The update the Defence Investment Agency announced on 27 May 2026 removed the cap, and ISED’s ITB page lists the same change.

Here’s what that does to a $100,000 direct order, in Canadian dollars. Demo data: a worked example, not a real order.

Recipient and verified CCV (demo data)	CCV counted	Multiplier	Credit to the prime
Canadian SMB, CCV 60%	$60,000	none	$60,000
Canadian company above SMB size, CCV 72%	$100,000	none	$100,000
Canadian SMB, CCV 72%	$100,000	2	$200,000

One point to watch: the model terms are a template. They go into each contract as an annex, with the dates filled in, so the ITB terms in a prime’s own contract are the ones that count. Ask which version applies before you count on the double credit.

What does a prime’s supply-chain lead need from a small shop?

ISED’s how to get involved page (modified 29 July 2026) is direct about it: primes choose who they work with, so a shop still has to compete on price, quality and delivery. It also warns that building those relationships can take years.

Once a prime wants to claim the boost on your order, expect to be asked for:

• Proof you’re an SMB. Your incorporation, your full-time headcount or equivalent on the date of the order, and the headcount with any affiliated companies.
• Proof the work is yours. That you’re not an agent or distributor of foreign goods, and not a subsidiary of the prime or its eligible donors.
• Your CCV, with the method. Net selling price or cost aggregate figures for the part or service, showing Canadian labour, Canadian-origin material and Canadian overheads.
• A written order with a dollar value. The terms count only transactions made in writing, such as a contract or sales agreement, with an identified dollar value (1.1.46).
• Records that last. The prime keeps invoices and proof of payment until 2 years after final payment, the settlement of claims or the end of the achievement period, whichever is later, and opens them to the ITB Authority within 30 calendar days of notice (16.2 and 16.3). Keep the records behind your CCV for at least as long.
• Current certificates. ISED’s page tells companies to keep controlled goods, cyber and ISO 9000 certifications up to date.

The prime files the paperwork itself: a transaction sheet (Appendix B of the model terms) and a certificate of causality (Appendix E). Your part is the facts it signs off on.

How CanadaFab helps

• Canadian partner shops. Each job goes to shops in Canada, and each shop’s province goes on the record.
• A Canadian content record for every order. It names the shop and its province, the labour, the metal and its country of melt from the mill certificate, and the carrier on each leg.
• Facts a CCV claim can use. The record is built to give a prime’s ITB team the evidence behind a CCV figure. It doesn’t replace the prime’s own calculation or the ITB Authority’s verification.

One question is still open: the model terms don’t say how the boost applies when a platform places work with small shops. We’ll put it to the ITB Authority and publish the answer here.

This guide is general information, not legal advice. Check the ITB terms in your own contract, and ask the ITB Authority about your case.