July 24, 2023
The Government of Canada Tackles Forced Labour Worldwide
On November 24, 2021, the Government of Canada introduced 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”). The Act received Royal Assent on May 11, 2023, and will take effect on January 1, 2024, imposing significant reporting obligations on Canadian businesses and importers. The first report will be required to be filed with the Minister on or before May 31, 2024.
The Act follows the enactment of similar legislation in Australia, France, and Germany and is designed to identify and eliminate the use of both forced and child labour in the products imported and sold in Canadian markets.
Human rights and corporate governance advocates have pushed heavily for governments to enact meaningful legislation to identify and eliminate the use of child and/or forced labour in supply chains. The topic of forced and child labour received a renewed focus after extensive media coverage of the abysmal working conditions suffered by migrant workers imported into Qatar to build the stadiums and infrastructure for the 2022 FIFA World Cup. According to UNICEF, 160 million children were involved in child labour in 2020 and these numbers are on the rise.
Modern legislation enacted to combat child and forced labour practices is one prong of a multi-pronged approach to eliminate these practices.
The Act creates a reporting scheme for all qualifying businesses, requiring them to undertake an analysis of their supply chains and determine where forced and/or child labour may be occurring,
Section 11 of the Act enumerates the topics on which each qualifying business must report in their annual report to be filed with the Minister of Public Safety and Emergency Preparedness on or before May 31 of each year (the “Annual Report”). The Annual Report must include:
the steps the entity has taken during its previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.
Additionally, the Annual Report must include the following information for each entity:
When enacted, the Act will introduce strict new reporting requirements on Canadian businesses which undertake any of the following three activities and meet the qualifying criteria set out below.
Activities
Qualifying Criteria
The reporting requirements will also apply to the following government institutions:
The Act requires that the Annual Report be approved by each entity’s governing body (i.e. board of directors), and in the case of corporations incorporated under the Canada Business Corporations Act, the entitymust also provide the Annual Report to its shareholders. Organizations subject to the Act are also required to make the Annual Report publicly available, including on their website.
Every person or entity that fails to comply with the reporting regime subsection will be guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000.
Not only can this fine be imposed on a non-compliant business organization, but also on the directors and officers of that organization, as well as other agents who direct, authorize, assent to acquiesce in or participate in the commission of an offence.
Canadian businesses which fall under the reporting requirements must leverage their internal control and reporting frameworks to implement processes to identify and analyze potential areas of concern within their supply chains, by implementing the following strategies:
Conclusion
The introduction of the Act represents a meaningful step forward in the Canadian government’s commitment to battling forced and child labour. In preparation for the first Annual Report due date those entities who will fall under the purview of the Act must take meaningful steps to prepare their businesses for the new obligations imposed upon them. Taking early action to perform the necessary risk assessment procedures, identifying potential areas of concern, and developing a process to complete the required reporting will be essential to being to comply with such new obligations. Complying with the provisions of the Act may seem burdensome at the outset, but through early implementation of a robust control process, subject entities can effectively mitigate their risk and streamline their reporting requirements into the future.
Tags: Corporate and Commercial, corporate governance, corporate law, distribution, Supply chain