The laws are for Canadians, James Moore told a Senate committee Thursday.
"The idea Canada would act as a customs agent for the United States is, frankly, not something that's on the table," Moore said.
"The scope of this is protecting Canadians and the Canadian domestic market."
Bill C-8, the Combating Counterfeit Products Act, is aimed at stopping the estimated $38 million worth of fake goods flowing into the Canadian market every year by beefing up the powers border agents have to stop them, among other things.
But the law only allows them to stop parcels intended for sale or distribution in Canada — not those just passing through.
That's what has the U.S. upset.
It was one of the first things raised by U.S. Ambassador Bruce Heyman when he took up his post this past spring.
"Given our highly integrated supply and production chain, a dangerously substandard counterfeit airliner part or car airbag in either of our countries is a threat to the citizens of both," said Heyman during his first public speech in Canada in June, according to published remarks.
"We therefore believe it is in the best interest of the U.S. AND Canada to expand this legislation to include in-transit goods. We should have laws and procedures stopping these illegal goods at our shared perimeter."
A spokesman from the embassy wasn't available for comment Thursday as the embassy was closed for American Thanksgiving.
Moore told the committee there are procedures under existing laws such as food and consumer safety rules that would stop dangerous goods from reaching the U.S.
He has discussed the issue with both Heyman and the U.S. Secretary of Commerce Penny Pritzker, Moore said.
"We don't have a customs union and it's a bit of a stretch for someone in the American administration — I made this clear to them — to ask the government of Canada, Canadian taxpayers to act as a border filter for all goods that are destined for the U.S. market," he said.
The issue of stopping fakes from getting across the border is broader than keeping knock-offs out of the market.
Stronger protections for intellectual property are also a key part of broader international trade and treaty negotiations, among them the Canada-E.U. Free Trade Agreement and the Trans Pacific Partnership.
Moore said C-8 has helped Canada's international position for those deals.
"The scope of this bill, C-8, was what was requested, frankly, of the government of Canada in order for us to have a seat at table for the Trans Pacific Partnership," he said.
Canada is among 12 Asia Pacific nations currently negotiating the broad free trade deal known as the TPP, which has attracted criticism for its broad scope and the fact that it is being negotiated largely behind closed doors.
Law professor Michael Geist, who appeared before the Commons' committee on the bill, said Moore's admission that C-8 was a criteria for Canada to participate is notable.
"It is the first explicit acknowledgment from the government that the US set specific intellectual property law demands on Canada to enter the TPP negotiations," he said in an e-mail.
"This is particularly striking since it meant that the US required us to confirm legislative reforms before even negotiating the TPP."
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