Is the Canadian division obligated to abide by FAR/DFAR reqmts?
Yes, the FAR would apply. As stated in FAR 1.104, "[t]he FAR applies to all acquisitions as defined in Part 2 of the FAR, except where expressly excluded." There are no blanket exclusions based on country of origin of a subcontractor.
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And yes, the DFARS applies when conducting business with DoD as stated in DFARS 201.104, "the FAR and DFARS also apply to purchases and contracts by DoD contracting activities made in support of foreign military sales or North Atlantic Treaty Organization cooperative projects without regard to the nature or sources of funds obligated, unless otherwise specified in this regulation".
So unless there is a specific exception that would make a particular clause inapplicable, those clauses would flow-down to the subs.