The Japanese delegation to the World Trade Organization filed a request this week for bilateral talks with Canada, the first step in a formal challenge.
The Fit program, created under the province’s Green Energy Act, offers above-market guaranteed prices to renewable energy producers.
In order to qualify projects must meet a minimum percentage of their project costs using local goods and labour. The made-in-Ontario requirement starts at 25% and increases to 50% by 2012 for wind projects, while for larger solar projects the current 50% minimum jumps to 60% next year.
The Ontario government included the content rules as a way to fashion a home-grown green energy industry and bolster the province’s faltering manufacturing sector. But the Japanese argue the law unfairly shuts them out of the market.
In its complaint, Japan argued that the provision violates longstanding rules of the Geneva-based WTO prohibiting subsidies that are contingent on the use of domestic over imported goods.
Brad Duguid, Ontario's energy minister, said in a statement that "Ontario's view is that the Green Energy Act is consistent with Canada's international trade obligations under the WTO."
The program has attracted several large foreign companies to the province, most notably South Korea's Samsung C&T Corporation.