01/19/2015 04:12 EST | Updated 03/21/2015 05:59 EDT

'Buy America' Rules On Canadian Soil Unacceptable, Tories Say

OTTAWA — The Canadian government is threatening to block a U.S. construction project in British Columbia after the state of Alaska rejected Ottawa's demands that it ditch the project's Buy America restrictions.

International Trade Minister Ed Fast says an order was signed today under the Foreign Extraterritorial Measures Act regarding Alaska's plan to build a new ferry terminal in Prince Rupert exclusively with American iron and steel.

Fast says Alaska's decision to apply protectionist U.S. policy on Canadian soil is unacceptable, and is calling on the state to seek a waiver that would remove the barrier.

The law says Ottawa can prevent anyone in Canada from complying with policies such as Buy America on the grounds they adversely affect Canadian interests.

If the bidding process moves forward with the Buy America policy, the Canadian government's order could be exercised against the winning contractor and could lead to a police investigation.

The Alaska Marine Highway has operated the ferry terminal for more than 50 years and the project's call for tenders is scheduled to close Wednesday.

The tendering document states the roughly US$15 million project must only use U.S.-manufactured iron and steel, as per Buy America legislation.

An official for the Alaska Marine Highway has said the contract must comply with Buy America provisions because the funding comes from the U.S. Federal Highway Administration.

In a statement, Fast said the federal government was ready to exercise the order and called the application of Buy America in Canada an "affront to Canadian sovereignty."

"Buy America provisions deny both countries' companies and communities the clear benefits that arise from our integrated supply chain and our commitment to freer and more open trade," he said.

A spokesman in Fast's office says the only other time the federal government used the Foreign Extraterritorial Measures Act was in 1992, after the U.S. tried to restrict trade between Cuba and U.S.-owned subsidiaries based in Canada.

The Prince Rupert dispute comes after another Buy America controversy over a bridge in Morrison, Colo.

The U.S. government reversed a decision in October that would have forced the small town of Morrison to dismantle a bridge constructed with a small amount of American steel manufactured in a Canadian plant.

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