Navigating Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act

Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act, SC 2023, c 9, (the “Act”) came into force on January 1, 2024. Previous versions of the Act were introduced in Parliament as the Modern Slavery Act, which is the name of similar legislation in the United Kingdom and Australia.

The Act requires certain governmental and larger private-sector entities to submit an annual report regarding their supply chains, policies relating to forced and child labour, and steps taken to reduce forced and child labour. As discussed below, certain transportation and logistics providers may be required to submit a report.

The first report is due by May 31, 2024.

Scope of the Act

The Act applies to any corporation, trust, partnership, or unincorporated organization (an “entity”) that does business or has assets in Canada, meets certain financial criteria, and is involved in supply chain-related activities.

1. Business Presence in Canada

The Government of Canada recently published guidance regarding the Act. According to that guidance, an entity can use tax and employment-related considerations to determine whether it is doing business in Canada. For example, an entity does not require a place of business in Canada to be doing business or have assets in Canada for the purposes of the Act.

2. Financial Threshold

The Act applies to any entity that is listed on a Canadian stock exchange or that meets at least two of the following conditions, for at least one of its two most recent financial years, based on its consolidated financial statements in Canadian dollars:

1. it has at least $20 million in assets,
2. it has generated at least $40 million in revenue, and
3. it employs an average of at least 250 employees.

The Act also allows the Government of Canada to make regulations deeming an organization to be an entity, although no regulations regarding the Act have yet been published for comment or prescribed.

3. Supply Chain Activities

An entity must make an annual report if it is engaged in:

1. producing, selling, or distributing goods in Canada or elsewhere;
2. importing into Canada goods produced outside Canada; or
3. controlling an entity engaged in either activity above.

The Act does not define “distributing goods” and it does not expressly include or exclude transportation and logistics companies. Before the Act was passed, at least two stakeholders asked Parliament to clarify that the Act does not apply to transportation and logistics companies[1] but it appears that Parliament did not incorporate that feedback.

The recent guidance indicates that the Act was not intended to apply to “solely support the production, sale, distribution or importation of goods. These include, for example, marketing, administrative services, financial services and software services.” Again, transportation and logistics service providers are not clearly excluded.

Given the Act’s broad definitions, and subject to further guidance or regulations, the most prudent course for transportation and logistics providers is to assume that the Act applies to transportation and logistics companies that meet the business presence and financial threshold criteria.

Regarding importing goods, the recent guidance does clarify that an “entity is considered to be importing goods into Canada if the entity is responsible for accounting for those goods under the Customs Act.”

Reporting Requirements

An entity required to report under the Act must do so annually and include information regarding:

• the entity’s structure, activities and supply chains;
• policies and due diligence processes regarding forced labour and child labour;
• the parts of their business and supply chain with a risk of forced/child labour being used and the steps taken to assess and manage these risks;
• measures taken to remediate forced labour or child labour in their own activities or their supply chain, such as rectifying the lost income of vulnerable families affected by measures taken under the Act; and
• how the company assesses its effectiveness in ensuring that forced labour and child labour aren’t being used.

Entities must make their reports publicly available by publishing the report “in a prominent place” on their website. In addition, corporations incorporated under the Canada Business Corporations Act must provide the report to shareholders together with their annual financial statements.

The Government of Canada’s recent guidance also requires entities to fill out a questionnaire, which includes mandatory and optional questions.

In certain circumstances, the recent guidance permits an entity to submit a report jointly with multiple entities belonging to the same corporate group. It also acknowledges that the information may overlap with reports to governments in other jurisdictions with similar requirements.

Enforcement

The Act gives the Minister of Public Safety and Emergency Preparedness authority to order an entity to comply with its reporting obligations. An entity, and its directors and officers, can also be fined up to $250,000 for failure to report or failure to comply with a Ministerial order.

Conclusion

Unless further guidance or regulations are published narrowing the broad intent and language of the Act, businesses that meet the financial threshold and are engaged in supply chain activities in Canada – including transportation and logistics companies – should assume that they are required to submit a report by May 31, 2024.

Please contact Ian Breneman, a member of our Transportation + Logistics Group, if you have any questions regarding the Fighting Against Forced Labour and Child Labour in Supply Chains Act.

[1] Letter, Jason McLinton (VP, Grocery Division and Regulatory Affairs, Retail Council of Canada) to The Honourable Julie Miville-Dechêne (Senator), 21 March 2022, Re: Bill S-211, Fighting Against Forced Labour and Child Labour in Supply Chains Act, <https://sencanada.ca/Content/Sen/Committee/441/RIDR/briefs/Brief_RetailCouncilofCanada_e.pdf> and Letter, Michael Harvey (VP, Policy and International, Canadian Chamber of Commerce) to The Honourable Salma Ataullahjan (Chair, Standing Senate Committee on Human Rights), 30 January 2022, Re: Bill S-211, Fighting Against Forced Labour and Child Labour in Supply Chains Act, < https://sencanada.ca/Content/Sen/Committee/441/RIDR/briefs/Brief_CanadianChamberofCommerce_e.pdf>.