Canada: CBSA Clarifies Documentary Requirements To Establish That Imported Goods Are Not Produced With Forced Labour

On January 20, 2022, the Canada Border Services Agency (CBSA) updated its policy document, Memorandum D9-1-6, titled Goods manufactured or produced wholly or in part by prison labour (the D-Memo), to provide guidance to importers about the evidence they will be expected to produce if their goods are detained because the CBSA suspects that the goods were produced by prison or forced labour.

As we have discussed in previous posts, CBSA Updates its Guidance on the Enforcement of the Import Prohibition on Goods Produced with Forced Labour and Canada Seizes Imported Goods Alleged to be Produced with Forced Labour, Canada's prohibition on the import of goods manufactured or produced using forced labour implements its commitments under the Canada-United States-Mexico Agreement (the CUSMA). The import prohibition was enacted into Canadian law as of July 1, 2020 by way of an amendment to the Customs Tariff and its Schedules. Goods produced with forced labour or prison labour are prohibited goods, classified under tariff item 9897.00.00 upon importation into Canada. Prohibited goods cannot lawfully be imported into Canada and must be abandoned, destroyed or re-exported by the importer.

To date, the CBSA has provided limited guidance on its administration and enforcement of the import prohibition and only one seizure has been publicly reported. The D-Memo explains the enforcement process that importers should expect and the documentation that the CBSA expects importers will maintain in order to demonstrate that their goods were not produced using prison or forced labour.

New Guidance About What to Expect When a Shipment Is Detained

The D-Memo states that if the CBSA detains goods because they are suspected of having been produced with prison or forced labour, it will notify the importer and provide an opportunity for the importer to provide documentary evidence before deciding the appropriate tariff classification of the goods.

To establish that the goods at issue were not produced with prison or forced labour, an importer will be expected to have documentation in support of importers' complete supply chain, which the D-Memo describes as "the entire system of producing and delivering the goods from the initial stage of sourcing raw materials to delivery of the product in Canada." Records maintained should include documentary evidence to establish the origin, purchase and transportation of all materials (including raw materials) from suppliers involved in the mining, manufacture, or production of the good and its components.

The D-Memo also refers to the potential relevance of information about the labour practices of specific suppliers. In high-risk jurisdictions or industries, greater due diligence efforts may be warranted. Businesses with international supply chains should assess the risk of the use of prison or forced labour in their supply chains, enhance their audit/due diligence processes as required, and take steps to require suppliers to remediate their practices or find alternatives.

The updates to the D-Memo emphasize the CBSA's expectation that importers should not only be sufficiently informed about the activities of their immediate suppliers, but also on the workings of suppliers that are further upstream and involved in the production of raw materials or basic inputs. Importers should mitigate the potential risk of CBSA enforcement action by conducting meaningful supply chain due diligence and by establishing or strengthening internal procedures to gather relevant information about their supply-chain participants. Suppliers may be reluctant to share confidential operational and sourcing information with importers. While importers should still make reasonable efforts to obtain the pertinent information from their suppliers, it is also possible to have suppliers provide information directly to the CBSA on a confidential basis. Importers should ensure that suppliers operating in high-risk jurisdictions are prepared and willing to make best efforts to share relevant information directly with the CBSA should the need arise.

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