Canada's new modern slavery legislation has passed, broadening the existing import ban on goods produced using forced labour entering Canada and imposing a new reporting obligation for thousands of Canadian businesses. Bill S-211, the Fighting Against Forced Labour and Child Labour in Supply Chains Act, passed its final vote in the House of Commons on May 3, 2023.
Now that it has received Royal Assent on May 11, 2023, the new legislation will come into force on January 1, 2024. The first annual reports to the federal government on forced and child labour will be required from business entities by May 31, 2024. However, the government has publicly signaled that it may delay some or all of the new requirements of Bill S-211. Currently, it remains unclear whether the government intends to delay the new reporting requirements, changes to the import ban, or both.
Now is the time to examine your supply chain
1. To prepare for your first report to the federal government
Businesses that meet Bill S-211's reporting criteria now have a year to prepare before submitting a first report. In addition to being filed with the Minister of Public Safety and Emergency Preparedness, the report will also be expected to be published on an entity's website by May 31 each year and shared with their shareholders by the same date, if they are incorporated under the Canada Business Corporations Act.
Beginning this process early is only one of the several recommendations we listed in this April 2023 article that details what you should know about reporting under Bill S-211.
Thousands of organizations facing new reporting obligations
The private entities facing a new mandatory annual reporting obligation are corporations, partnerships, trusts or unincorporated associations dealing in goods (or controlling another entity that deals in goods), and that are either:
- Listed on a Canadian stock exchange, or
- Have a connection to Canada and meet 2/3 of:
- $20M in assets
- $40M in revenue
- Employ 250 people
Government institutions are subject to a similar reporting requirement.
Before meeting other reporting criteria
- Bill S-211-
2. To anticipate new challenges and risks in sourcing and managing imported goods
In addition to the annual reporting requirement, Bill S-211 expands the existing import ban to specifically cover and define "child labour" – whether coerced or not – and introduces a new definition of "forced labour." These changes arguably expand the scope of activity that constitutes forced or child labour and is subject to the import ban.
The new law will increase public scrutiny and policy focus on these issues, likely making the enforcement of the import ban a higher government priority in Canada. Businesses that import or use imported goods should review their operations, supplier network, and business relationships to identify and mitigate risk arising from the import ban.
Assess your supply chain risks and strategize your solutions with BLG
BLG can guide business entities through a supply chain audit or human rights impact assessment, review internal compliance policies and standard operating procedures, and provide advice on supply chain ethics so as to prepare for Bill S-211.
Canada adopted a prohibition on the importation of goods produced in whole or in part by forced labour as part of the NAFTA renegotiations. However, in the nearly three years since the import ban took effect, the government's enforcement has been weak. We expect Bill S-211 to change that by putting greater public and policy focus on the importation of goods produced by forced or child labour.
The Canada Border Services Agency (CBSA), the federal agency responsible for enforcing the import ban, has wide-ranging powers under the Customs Act to enforce the import ban. These powers apply not just when goods cross the border but also after those goods have been released and sold to intermediaries or end users in Canada. The CBSA can examine and detain goods suspected of being produced by forced labour, seize goods and evidence, destroy or dispose of goods, and implement "ascertained forfeitures" (that is, payments when the physical seizure of goods is not possible or practical). CBSA enforcement can occur both at the border and post-importation, after goods have been sold or transferred to other persons in Canada.
Canadian businesses that import goods or use imported goods may be at risk and should take steps to identify and mitigate those risks. Read more about Bill S-211's effects on the import ban and how BLG can help you navigate these evolving risks.
The new reporting requirements are not being proposed by the Canadian Securities Administrators (CSA), so they may not be top of mind for public companies. However, any corporation, trust partnership or other unincorporated organization that is listed on a stock exchange in Canada will be subject to Bill S-211, provided that such entity produces, sells, distributes or imports goods, or controls another entity that does. Since forced and child labour risks may be considered material risks to publicly listed entities in Canada, they will already be of interest to issuers, but the new focus brought on them by Bill S-211 may increase their importance.
Notably, the new annual reporting obligation will be different from public company continuous disclosure obligations as the Bill S-211 annual report will not be filed on SEDAR or with the CSA. Notwithstanding this fact, general principles applicable to continuous disclosure, including those related to selective disclosure, materiality and forward-looking information, should be considered when preparing a Bill S-211 report. BLG can assist with whether Canada's new modern slavery legislation will pose a risk to you and review your governance policies and code of conduct to ensure they adequately address the issues, preparing you for a successful first report as an issuer.
Read more about adapting to Bill S-211's requirements as a public company.
Other reporting entities
Business entities that are subject to the Bill S-211 reporting obligation need to remain aware that failure to report on forced and child labour in their supply network in accordance with the new legal requirements will constitute an offence under Bill S-211, which could attract a fine of up to $250,000 and engage directors and officers' liability.
Seeing how the risks vary by industry, geographical scope, materials and inputs, size, sophistication, existing risk management frameworks and more, many companies will likely need a bespoke solution. BLG can help in identifying key risk factors and clarifying legal implications, and work with you or your consultants to help design and integrate new policies, contractual machinery and other tools you will need into your business.
Read more about reporting on forced and child labour risks as a Canadian business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.