Is your business ready? The Fighting Against Forced Labour and Child Labour in Supply Chains Act comes into force January 1, 2024
On May 3, 2023, nearly a year and a half after it had been introduced in the Canadian Senate, Bill S-211, which enacts the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”), passed its final reading in the House. The Act and the other amendments in Bill S-211 will come into force on January 1, 2024,and will implement reporting requirements related to forced and child labour for entities that produce, sell, or distribute goods anywhere, or import goods into Canada. Bill S-211 also expands the prohibition against the importation and distribution in Canada of goods made from forced labour to those made in whole or in part from child labour. The Act’s implementation will bring Canada one step closer to its international counterparts, including the United Kingdom, with regards to reporting requirements in relation to forced labour.
After Canada’s implementation of a prohibition on the importation of goods that are mined, manufactured or produced wholly or in part by forced labour in 2020, several legislative initiatives were proposed to further address forced labour in the international supply chains of Canadian companies. One of these was Bill S-216, An Act to enact the Modern Slavery Act and to amend the Customs Tariff. Bill S-216 proposed reporting obligations and import prohibitions similar to Bill S-211, but was halted in the Senate Committee Stage and never passed due to the federal election in 2021. Bill S-211 was introduced shortly after parliament resumed following the 2021 election.
Details on several other recent legislative initiatives relating to forced labour and modern slavery are provided here. There have also been indications by the Canadian government that they will be seeking even more robust measures to combat modern slavery, potentially adding to the obligations that have just been passed in the Act.
Content of the Act
The purpose of the Act is to implement Canada’s international commitment to contribute to the elimination of forced labour and child labour throughout supply chains, by imposing reporting obligations on government institutions and entities.
The Act applies broadly to any entity that produces, sells, or distributes goods in Canada or elsewhere, to any entity that imports into Canada goods produced outside Canada, and to any entity that controls another entity engaged in such production, sale, distribution, or importation. "Control" in this context can be either direct or indirect (e.g. through a subsidiary). Parent companies of “entities” (as that term is defined in the Act) that produce, sell, or distribute goods in Canada or elsewhere are therefore also captured.
An “entity” is defined as any business that is listed on a Canadian stock exchange or has a connection to Canada (defined as having a place of business in Canada, doing business in Canada, or having assets in Canada), and also meets at least two of the following three conditions for a minimum of one of its two most recent financial years:
- the entity has at least $20 million in assets;
- the entity has generated at least $40 million in revenue; or
- the entity employs an average of at least 250 employees.
The key obligation contemplated by the Act is the annual publication of a report on diligence processes implemented by entities subject to the legislation that are aimed at “[preventing and reducing] the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.” Parallel reporting obligations are also mandated for government institutions.
Each entity’s annual report is required to be submitted to the Minister of Public Safety and Emergency Preparedness on or before May 31 of each year, and is also to be published in a prominent place on the entity’s website. The first report would therefore be due on May 31, 2024. It is possible for multiple entities, including parent and subsidiary companies, to submit a joint report. Each annual report must be approved by the entity’s governing body or, in the case of a joint report, by the governing body of each entity included in the report, or by the governing body of the entity that controls each entity included in the report. Where an entity is incorporated under the Canada Business Corporations Act or any other Act of Parliament, it must provide the report to each shareholder along with its annual financial statements.
In terms of content, each entity subject to the Act will be required to include the following in the report:
- the steps the entity has taken during its previous financial year to prevent and reduce the risk that forced labour or child labour is used at any stage in the production of goods in Canada or elsewhere by the entity, or in the production of goods imported into Canada by the entity;
- the entity’s structure, activities and supply chains;
- the entity’s policies and its due diligence processes in relation to forced labour and child labour;
- the parts of the entity’s business and supply chains that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;
- any measures taken to remediate any forced labour or child labour;
- any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains;
- the training provided to employees on forced labour and child labour; and
- how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.
Reporting entities that fail to comply with the Act are guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000, as are persons who knowingly make a false or misleading statement or knowingly provide false or misleading information to the Minister or to persons designated by the Minister.
Significantly, directors, officers, and agents of entities who directed, authorized, assented to, acquiesced in or participated in the commission of an offence under the Act can also be found guilty of the offence and liable on conviction to the same penalties.
New Prohibition Against Importing Goods Made From Child Labour
Bill S-211 also amends the Customs Tariff to prohibit the importation of goods into Canada that are “mined, manufactured or produced” wholly or in part by forced labour or child labour. As noted above, a similar prohibition currently exists in the Customs Tariff for goods made from forced labour, but Bill S-211 operates to expand that prohibition to cover child labour and align the Customs Tariff’s definition of “forced labour” and “child labour” with the definitions found in the Act.
Specifically, Bill S-211 defines forced labour as “labour or service provided or offered to be provided by a person under circumstances that could reasonably be expected to cause the person to believe their safety or the safety of a person known to them would be threatened if they failed to provide or offer to provide the labour or service”, as well as circumstances of forced or compulsory labour as defined in article 2 of the Forced Labour Convention, 1930, adopted in Geneva on June 28, 1930.
Bill S-211 defines child labour as labour or services provided or offered to be provided by persons under the age of 18 years that:
- are provided or offered to be provided in Canada under circumstances that are contrary to the laws applicable in Canada;
- are provided or offered to be provided under circumstances that are mentally, physically, socially, or morally dangerous to the child;
- interfere with the child’s schooling by depriving them of the opportunity to attend school, obligating them to leave school prematurely, or requiring them to attempt to combine school attendance with excessively long and heavy work; or
- constitute the worst forms of child labour as defined in article 3 of the Worst Forms of Child Labour Convention, 1999, adopted at Geneva on June 17, 1999.
Given the broad range of entities that are covered under the obligations of the Act, businesses should carefully review these new measures to determine if these obligations apply to them and, if so, take action to prepare for the initial reports that are due in May 2024.
These steps should include reviewing their internal supply chain policies and ensuring that their due diligence processes are up-to-date. This should also include updating training for employees of both parent companies and subsidiaries, as well as increasing communication and transparency with suppliers all the way through the supply chain continuum. Businesses that operate in the textile, apparel, mining, or manufacturing industries should be especially cognizant of the impact of the Act given the prevalence of issues around forced and child labour in those supply chains.
In many cases, businesses may already publish ongoing reports that address human rights issues, including modern slavery, particularly where they are required for compliance with similar laws in other jurisdictions. In such instances, these businesses should consider seeking legal advice to assess whether and to what extent their existing reporting structures can be expanded to satisfy the requirements of the Act. Notably, unlike other reporting regimes, such as that of the Extractive Sector Transparency Measures Act, as of yet there is no “substitution determination” mechanism that would enable the submission of a report prepared under the modern slavery legislation of another jurisdiction.
Additionally, businesses should keep watching for developments in this space. As noted above, the federal government appears motivated to build on the obligations in Bill S-211, and will likely introduce additional requirements for businesses to address possible forced labour or child labour in their supply chains. This could include the imposition of mandatory supply chain due diligence regimes as enacted by other jurisdictions, including France and Germany. McCarthy Tétrault’s International Trade and Investment Group has advised numerous clients in a variety of industries on how to respond to Bill S-211 and will continue to monitor developments in this space.
For more information on forced labour in supply chains and Canada’s response, including guidance on what companies should be doing now to prepare for the coming into force of these obligations, please refer to our four part series on the subject from 2021 and 2022.
- Mitigating Risk Exposure to Forced Labour in the Supply Chain: Part I - The Forced Labour Crisis (October 2021)
- Mitigating Risk Exposure to Forced Labour in the Supply Chain: Part II - Canada’s Response to Forced Labour (November 2021)
- Mitigating Risk Exposure to Forced Labour in the Supply Chain: Part III - What Companies Should be Doing Now (November 2021)
- Forced Labour and Modern Slavery Update – Canadian Firms Now Facing Greater Scrutiny of Their Supply Chains (October 2022)
 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 [the “Bill”], was introduced back on November 24, 2021 by the Honourable Julie Miville-Dechêne.
 An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff [the “Act”], s 28.
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