On 3 May 2023, Canada’s House of Commons 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 (the Act), which will implement Canada’s international commitments to fight against forced and child labour in supply chains. It does so by imposing reporting requirements for entities that produce, sell, or distribute goods anywhere, or import goods into Canada. The Act also expands the prohibition against the importation and distribution of goods made from forced labour into Canada to also include goods made in whole or in part from child labour.
The Act will come into force on 1 January 2024 with the first initial report due in May 2024.
The Act applies to both entities and government institutions. An ‘entity’ includes any business that is listed on the Canadian stock exchange or has a connection to Canada, which is defined as any business that has a place of business in Canada, does business in Canada, or has assets in Canada. The business must also meet two of the following conditions for at least one of its two most recent financial years:
- Has at least $20 million in assets;
- Has generated at least $40 million in revenue; or
- Employs an average of at least 250 employees.
This also applies to any entity that “controls” another entity engaged in this activity, which includes parent companies whose subsidiaries might be the ones engaging with the goods in Canada.
A ‘government institution’ includes any department or ministry of state of the Government of Canada, any body or office listed in Schedule 1 of the Access to Information Act, and Crown corporations and their wholly owned subsidiaries.
Key provisions and implications
- Reporting requirements:
One of the core components of the Act is the introduction of reporting requirements for these entities. These businesses and government institutions that fall under the scope of the Act are obligated to assess and disclose information about the risks of forced and child labour in their supply chains. This includes conducting regular audits, identifying areas of concern, and identifying the current measures in place to mitigate these risks.
The entity must submit an annual report on or before May 31 of each year to the Minister of Public Safety and Emergency Preparedness and on its own website. It is also key that the report must be approved by the entity’s board of directors and any entity that is incorporated under the Canada Business Corporations Act or another federal statute is required to provide an annual report to their shareholders. The report is required to include the following information about the entity or government institution’s:
- structure, activities, and supply chains;
- policies and its due diligence processes in relation to forced and child labour;
- 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;
- measures taken to remediate any forced or child labour;
- measures take to remediate the loss of income incurred by the most vulnerable families that results from any measure taken to eliminate the use of forced or child labour in its activities and supply chains;
- training provided to employees on forced and child labour; and
- process for assessing its effectiveness in ensuring that forced and child labour are not being used in its business and supply chains.
If a person or entity fails to comply with the Act, they can be found guilty of an offence punishable on summary conviction and liable to a fine of more than $250,000. The same punishment can also be given to any person who knowingly makes a false or misleading statement or knowingly provides false or misleading information to the minister or to people designated by the minister. Further, any directors, officers, and agents of the entity who authorized, directed, assented to, acquiesced in or participated in its commission can also be found guilty and liable of the conviction.
3. Amendment to the Customs Tariff
This Act also amends the Customs Tariff by prohibiting the importation of goods that are mined, manufactured, or produced wholly or in part by forced labour or child labour into Canada. Prior to this amendment, the Customs Tariff only prohibited forced labour.
What does this mean for business?
This Act covers a broad range of businesses and as a result these businesses should carefully evaluate if they are required to act under these new measures. If so, the first report is due in May 2024 and businesses should begin preparing now.
While many businesses may already be engaged in due diligence and reporting practices, the Act will likely apply to many more businesses that have not previously considered these issues or impose stricter reporting requirements on those who already practice. Businesses must assess whether they are currently able to obtain accurate information for these reporting requirements.
Key considerations for businesses:
- Due diligence assessment: Businesses that will be required to report should conduct thorough due diligence assessments of their supply chains to identify and evaluate the risk of forced and child labour.
- Compliance and reporting: Businesses will need to develop robust reporting mechanisms and processes, which should involve publicly disclosing information related to efforts in combatting forced and child labour in supply chains, to ensure compliance with the Act’s provisions.
- Supplier engagement and management: Businesses should engage with their suppliers to ensure shared responsibility in addressing labour exploitation.
- Risk mitigation: Businesses should develop risk mitigation strategies to address any identified risks within their supply chains.
- Grievance mechanism: Businesses should implement a grievance mechanism to help them detect and manage risks in the supply chain.
Businesses should proactively assess their supply chains, align their practices with the requirements of the Fighting Against Forced Labour and Child Labour in Supply Chains Act, and prioritize responsible sourcing to mitigate the risks of forced and child labour. Government institutions under this Act are faced with the same challenges and considerations and should therefore be undertaking similar steps. By embracing these considerations, businesses and government institutions can contribute to a more ethical and sustainable global supply chain ecosystem while minimizing legal and reputational risks.
How Can Ardea International help?
Ardea International understands that businesses have to ensure that they establish robust due diligence procedures. We support our clients by helping them identify how to manage human rights impacts and risks, ensuring they meet legal compliance obligations and integrate best practices into their policies and procedures.
Ardea International has developed a number of effective compliance solutions, including a human rights and environmental disclosure legal register. The legal compliance due diligence register allows businesses to track incoming legislation as well as current laws they may be subject to. We can also assess your business’s compliance with human rights regulations, including preparedness to comply with new legislation. In addition, Ardea can examine your business’ due diligence procedures and provide priority steps to improve performance.
We have an upcoming workshop on Developing an environmental and human rights mandatory due diligence framework. This course will equip you with an understanding of the key legislative developments and how to develop a due diligence framework to implement in the business.
We also have a range of free and paid resources on our website and we hope that you will enjoy browsing!
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