On May 3, 2023, the Canadian Parliament passed Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (Act). The Act is expected to receive royal assent shortly and will take effect on January 1, 2024, imposing significant reporting obligations on Canadian businesses and importers.
Businesses that meet certain thresholds will be required to file detailed public reports on measures they have taken to identify, address and prevent forced labour, prison labour and child labour in their supply chains. The first report will be required to be filed on or before May 31, 2024.
WHAT ENTITIES WILL BE REQUIRED TO FILE REPORTS?
Reporting obligations will apply to any private-sector entity (defined below) that is:
Producing, selling or distributing goods in Canada or elsewhere
Importing into Canada goods produced outside Canada, or
Controlling an entity engaged in either of the above activities
An “entity” is defined as a corporation or a trust, partnership or other unincorporated organization that:
Is listed on a stock exchange in Canada
Has a place of business in Canada, does business in Canada or has assets in Canada and, based on its consolidated financial statements, has met at least two of the following three conditions in at least one of its last two financial years:
Had at least C$20-million in assets
Generated at least C$40-million in revenue
Employed an average of at least 250 employees, or
- Is prescribed by regulations (although no such regulations have yet been promulgated)
Similar entity thresholds are already used to impose payment reporting requirements on oil, gas and mineral companies under the Extractive Sector Transparency Measures Act.
Notably, the thresholds for a reporting entity are based on consolidated financial statements. This means the obligations in the Act extend to corporate groups that collectively meet the thresholds, even if individual corporations do not. The Act also extends its reach to international businesses by capturing foreign entities that have some presence in Canada or do business in Canada.
Reporting obligations will also apply to all federal government institutions, ministries and departments, including Crown corporations and wholly owned subsidiaries, that are producing, purchasing or distributing goods in Canada or elsewhere.
WHAT MUST BUSINESSES INCLUDE IN ANNUAL REPORTS?
Every entity to which the Act applies must, before May 31 of each year (starting in 2024), submit an annual report to the Minister of Public Safety and Emergency Preparedness (Minister). The report will detail the steps the entity has taken to prevent and reduce the risk that forced or child labour was used at any step of the production of goods that were produced or imported into Canada by the entity. The report must also include supplementary information on each entity subject to the report, including:
Its structure, activities and supply chains
Its policies and due diligence processes in relation to forced and child labour
The parts of its business and supply chains that carry a risk of forced or child labour being used and the steps it has taken to assess and manage that risk
Any measures taken to remediate any forced or child labour
Any measures taken to remediate the loss of income to the most vulnerable families that results from its measures taken to eliminate the use of forced or child labour
The training provided to employees on forced and child labour
How the entity assesses its effectiveness in ensuring that forced and child labour are not being used in its business and supply chains
The annual report must be made publicly available, with the entity publishing each report in a prominent place on its website. Federal corporations must also provide a copy of their annual reports to their shareholders together with their annual financial statements. Every filed annual report will be posted on an online registry maintained by the Minister.
WHAT ARE THE ENFORCEMENT PROVISIONS IN THE ACT?
To verify compliance with the reporting obligations, the Act empowers designated officials to enter into and search an entity’s property and remove anything for the purpose of examination. The official does not require a warrant unless the property is a dwelling-house. Similar warrantless search powers exist under the Customs Act and the Export and Import Permits Act but generally do not include the power to remove material without a warrant.
An entity or individual that fails to submit a satisfactory annual report or make it public, obstructs a designated official or fails to comply with an order from the Minister is guilty of a summary offence and liable to a fine of up to C$250,000. Every director or officer who directed, authorized, assented to, acquiesced or participated in any of these offences will also be personally liable for the offence.
The Act does not include a positive requirement to take specific measures to combat forced or child labour goods. In part, this is because the importation of such goods falls under existing federal offences:
The Customs Tariff currently prohibits the import of goods that are produced, wholly or in part, by forced labour or prison labour.
The Customs Act makes it a criminal offence to possess, exchange, acquire, sell or dispose of goods that are prohibited for import under the Customs Tariff. Unlawfully imported goods can be investigated and seized by the RCMP and Canada Borders Services Agency.
Bill S-211 expands the scope of these offences by amending the prohibition in the Customs Tariff to include the term “child labour” and a new definition of “forced labour.” These definitions incorporate and go beyond the definitions of those terms found in the Forced Labour Convention, 1930 and Worst Forms of Child Labour Convention, 1999. Among other things, Bill S-211 defines child labour as including any labour that interferes with a child’s schooling or is mentally, physically, socially or morally dangerous to them.
WHAT SHOULD COMPANIES BE DOING NOW TO PREPARE?
Entities with reporting obligations should begin preparing in anticipation of providing a report by May 31, 2024. The Act does not set out specific measures that an entity must undertake in preparing the report. At this time, there may still be regulations or government guidance forthcoming that will provide direction with respect to form and content of reporting. As of right now, the form and content of reporting remains discretionary so long as the content requirements are met.
To be able to make a meaningful report that accords with an entity’s overall approach to environmental, social and governance (ESG) matters, as of this year, companies should begin preparing by taking steps such as:
Conducting a risk assessment of its supply chain
Understanding the parts of its supply chain that may carry a risk of forced labour being used, which may, for example, be based on factors such as the general sectors, industries, types of products or countries that are involved
Reviewing and updating or developing and implementing policies and practices related to forced or child labour and the remediation of such
Developing training and education for employees on forced and child labour
For further information, please contact:
Michael Dixon +1-403-260-9786
Zvi Halpern-Shavim +1-416-863-2355
Brady Gordon +1-604-631-5255
Roy Millen +1-604-631-4220
Gina K. Murray +1-403-260-9754
or any member of our International Trade group.
Blakes and Blakes Business Class communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired.
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