Canada's new forced labour law may require supply chain assessment

THE HOUSE OF COMMONS passed Canada’s first supply chain transparency law in May.

The legislation establishes a supply chain reporting obligation for businesses, and expands prohibitions under the Customs Tariff legislation. Bill S-211, also known as Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff, will come into force on January 1, 2024.

The Bill requires Canadian companies to report annually on measures they are taking to identify and address forced labour and child labour risks found in their global supply chains, and creates a public database for consumers to review company submissions. The legislation also amends the Customs Tariff Act to prohibit the import of goods made with child labour.

Companies affected must meet at least two of the following criteria in one of the last two years: have at least $20 million in assets; have generated at least $40 million in revenue; and/or employ an average of at least 250 employees.

"The increased focus on human and labour rights violations in the context of international trade underscores the need for businesses to pay close attention to their enterprise and supply chains," said Julia Webster, a partner with law firm Baker McKenzie in Toronto.

"While Canada has not yet undertaken robust enforcement of its prohibition on importing goods manufactured with forced labour; with the passage of

Bill S-211 and the new USMCA requirements and the growing expectation of consumers, stakeholders and voters, that is sure to change."

Kevin Coon, also a partner at Baker McKenzie, believes Canadian businesses can prepare for the upcoming change in the enforcement landscape. He recommends companies take seven steps to assess the impact on their business.

First, they need to find out if they meet the reporting entity requirements under the Act. Reporting entities’ first annual reports will be due by May 31, 2024.

Second, they need to conduct due diligence on the risk within the enterprise and supply chain for violations of human and labour rights, by producing a risk assessment or matrix.

Third, they must understand the reporting and other obligations in the jurisdictions in which they do business, and determine if those various obligations can be aligned into a single report, and whether compliance can be implemented globally.

Fourth, they should review and align internal policies related to human and labour rights, supply chain, procurement and related issues to ensure they are consistent with corporate values and principles.