An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff
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), has received Royal Assent and will be in force on January 1, 2024. The first reports under the Act are due by no later than May 31, 2024.
The purpose of the Act is to implement Canada’s international commitment to combat forced labour and child labour by imposing reporting obligations on (i) government institutions producing, purchasing or distributing goods in Canada or elsewhere; and (ii) certain business entities producing goods in Canada or elsewhere or importing goods produced outside Canada.
ENTITIES AND GOVERNMENT INSTITUTIONS:
The terms “entity” and “government institution” are both defined in the Act.
An “entity” is a corporation, trust, partnership or other unincorporated organization that:
- is listed on stock exchange in Canada; or
- has a place of business in Canada, does business in Canada or has assets in Canada and (based on its consolidated financial statements) meets at least 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.
The term “government institution” (which has the same meaning as in the federal Access to Information Act) means (i) any department or ministry of state of the Government of Canada; (ii) any body or office listed in Schedule 1 to the Access to Information Act; and (iii) Crown corporations and their wholly owned subsidiaries.
CONTENT OF REPORTS AND DELIVERY OBLIGATIONS:
The Act requires that on or before May 31 of each year, government institutions and entities report to the Minister of Public Safety and Emergency Preparedness on the steps taken during the previous financial year to prevent and reduce the risk that forced labour or child labour is used (i) in the case of government institutions, at any step of the production of goods produced, purchased or distributed by the government institution; and (ii) in the case of entities, at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.
The report must also include information about the government institution’s or entity’s:
- structure, activities and supply chains;
- policies and due diligence processes in relation to forced and child labour;
- activities 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 forced or child labour;
- measures taken 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 from 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 activities and supply chains.
The minister must maintain an electronic registry of all submitted reports, and the registry must be made available to the public on the Department of Public Safety and Emergency Preparedness website. The minister also has the discretion to impose specifications on the form and manner in which reports are to be provided.
CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE:
For entities, the report must be approved by its governing body. In the case of a corporation, we would expect this to be the board of directors in most instances. Both entities and government institutions must make their reports available to the public, including by publishing them in a prominent place on their websites.
A corporation incorporated under the Canada Business Corporations Act is also required to deliver its report to each shareholder, along with its annual financial statements.
ENFORCEMENT:
The Act gives significant investigative powers to persons designated by the minister and the minister has broad power to require an entity to take any measures that the minister considers necessary to ensure compliance.
Every person or entity that fails to comply with the Act (including by failing to prepare a report or make a report publicly available, by failing to assist in an investigation, by obstructing an investigation or by failing to comply with a corrective order), is guilty of an offence punishable on summary conviction and liable to a fine of more than $250,000. Every person or entity that knowingly makes any false or misleading information or knowingly provides false or misleading information to the minister or one of the minister’s designates is also guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000.
In addition, if a person or entity commits an offence under the Act, any director, officer or agent or mandatory of the person or entity who directed, authorized, assented to, acquiesced in or participated in its commission is also guilty of the offence and liable on conviction to the punishment provided for the offence, whether or not the person or entity has been prosecuted or convicted.
CUSTOMS TARIFF AMENDMENT:
The Act also amends the Customs Tariff by including child labour in the prohibition against importing goods into Canada that are mined, manufactured or produced wholly or in part by forced labour, and by importing the definitions of the terms “forced labour” and “child labour” from the Act into the Customs Tariff prohibition.
Customs Tariff
An amendment to Canada’s Customs Tariff, which came into force on July 1, 2020, as part of the enactment of the Canada-United States-Mexico Agreement Implementation Act, prohibits the importation of goods that are mined, manufactured or produced by forced labour. As noted above, the Act has added “child labour” to this prohibition and has incorporated the Act’s definitions for “child labour” and “forced labour”.
In Canada, Canada Border Services Agency officers are responsible for making classification decisions at the border under the Customs Tariff on whether goods imported into Canada are prohibited under the forced labour prohibition. These determinations are to be made pursuant to the guidelines set out in the Canada Border Services Agency Memorandum D9-1-6 – Goods Manufactured or Produced by Prison or Forced Labour.
In late 2021, the federal government announced it stopped its first shipment of goods imported from China which were identified as being produced with forced labour.[3] The shipment was subsequently released. This was the first and only announced seizure of its kind since the import ban came into force in 2020. This stands in contrast to the United States, where more than three thousand (3,000) shipments have been stopped.
The Canadian government announced that Canadian companies that are (1) sourcing from Xinjiang or from entities relying on Uyghur labour (directly or indirectly), (2) established in Xinjiang or (3) seeking to engage in the Xinjiang market, will be required to sign a declaration when engaging with the Trade Commissioner Service, in addition to receiving a briefing on the relevant risks. Among other things, the declaration will require the entity to acknowledge that it will abide by all relevant Canadian and international laws respecting human rights and that it will meet or exceed the Organisation for Economic Co-operation and Development Guiding Principles for Business and Human Rights.
Extractive sector transparency legislation
The federal Export and Import of Rough Diamonds Act provides for controls on the export, import or transit across Canada of rough diamonds and for a certification scheme for the export of rough diamonds in order to meet Canada’s obligations under the Kimberley Process. The controls establish minimum requirements with a view to breaking the link between armed conflict and the trade in rough diamonds.
In addition to the foregoing, Canada also implemented the Extractive Sector Transparency Measures Act to solidify Canada’s international commitments to participate in the fight against corruption through the imposition of measures applicable to the extractive sector, including measures that enhance transparency and measures that impose reporting obligations with respect to payments made by entities. These measures are designed to deter and detect corruption including any forms of corruption under any of sections 119 – 121 and 341 of the Criminal Code and sections 3 and 4 of the Corruption of Foreign Public Officials Act.
Human trafficking
Canada’s federal government has also introduced its National Strategy to Combat Human Trafficking 2019-2024, which includes “measures to increase public awareness, education and capacity-building to prevent the victimization of vulnerable and marginalized populations; strengthen the ability to identify and protect victims of human trafficking; improve criminal justice system experiences for victims and survivors; and improve domestic and international partnerships”.[1] The purpose of the strategy is to protect individuals from all forms of human trafficking. Further, the Criminal Code and the Immigration and Refugee Protection Act both have specific provisions that address human trafficking.
These include measures to: increase public awareness, education, and capacity-building to prevent the victimization of vulnerable and marginalized populations; strengthen the ability to identify and protect victims of human trafficking; improve criminal justice system experiences for victims and survivors; and improve domestic and international partnerships to bolster our collective response.
In Winter 2021, Canada also launched a formal risk assessment on its procurement supply chains with respect to human trafficking, forced labour and child labour. In Summer of 2021, Canada also updated its Code of Conduct for Procurement to include new content on human and labour rights to promote awareness and to mitigate risks in supply chains. Notably, Canada has emphasized that this is an incremental approach – meaning further changes can be anticipated in the future.
Canada also updated its standard procurement contract clauses for vendors and suppliers with respect to forced labour and human trafficking in Summer of 2022, including:[2]
- an obligation on the contractor to not deliver or sell goods to Canada manufactured wholly or in part by forced labour;
- a new option to terminate a contract if the Canada Border Services Agency has classified the goods pursuant to the Customs Tariff as prohibited;
- a new option to terminate the contract if there are reasonable grounds to believe that the good has been produced in whole or in part with the use of forced labour; and
- a new option to terminate a contract if the contractor has been convicted of a human trafficking offence in Canada or abroad.
We similarly expect such types of clauses to become increasingly popular in contracts between private parties.
Canadian Ombudsperson for Responsible Enterprise (CORE)
The CORE was established in 2019 as an impartial body that operates at arm’s length from the federal government and has a mandate to review human rights complaints arising from conduct by Canadian companies abroad in the mining, oil and gas and garment sectors. In 2020, the CORE published its draft operating procedures (Procedures) and began public consultations with respect to those Procedures. In 2021, the Procedures were finalized and the online complaint system was launched. While the CORE does not currently possess investigatory powers, the CORE is empowered to both review allegations of human rights abuse following a complaint and initiate its own review.
In 2021, the Subcommittee on International Human Rights of the House of Commons Standing Committee on Foreign Affairs and International Development carried out a study of the CORE, hearing from seventeen witnesses from a variety of backgrounds. The Subcommittee’s recommendation was for the Canadian government to enact due diligence legislation to identify, prevent, mitigate and account for potential human rights, environmental and gendered impacts Canadian companies may cause in their supply chains. The Subcommittee also suggested that the Governor in Council appoint the CORE as a commissioner under the Inquiries Act pending the enactment of legislation that grants the CORE the power to compel witnesses and documents. The federal government has not yet provided a response to this report.
The CORE published its study of “Child Labour and Child Rights in the Operations Abroad of Canadian Garment Companies” in February 2023 on the efforts of Canadian apparel companies (excluding footwear) to address the risk of child labour in the overseas operations and supply chains to identify emerging best practices and explore the challenges of ensuring transparency and undertaking appropriate due diligence.[3] The data for the study was collected from interviews with ten Canadian garment companies and interviews with five civil society organizations. The report found that for the first time in twenty years, more underage children are working than in school. The report highlights the following key insights:
- Canadian garment companies have a limited understanding of responsible business conduct key concepts;
- Canadian garment companies have trouble tracing garments from origin to consumer;
- Canadian garment companies have a limited understanding of how to integrate human rights due diligence across their operations;
- Canadian garment companies have a limited awareness of child labour risks and impacts, despite operating in high-risk areas;
- Limited supply chain transparency is likely to blame for low-reporting of child labour by Canadian garment companies
- Canadian garment companies have an overreliance on monitoring tools to identify and address child labour rather than on maintaining relationships with suppliers and implementing training programs to mitigate child labour risk; and,
- Canadian garment companies have a tendency towards a zero-tolerance approach to child labour remediation, which does not align with best practices.
The CORE’s most recent quarterly report provided that of the sixteen active complaints that the CORE has on its caseload, thirteen are related to the garment sector, and three are related to mining.[4]
Provincial Legislation
All jurisdictions in Canada have human rights and anti-discrimination legislation, and rules with respect to the employment of minors, with which businesses need to comply.
Anti-Trafficking Legislation from Alberta, Saskatchewan, Manitoba and Ontario
Several provinces in Canada has enacted legislation to prevent human trafficking.
In 2020, Alberta passed the Protecting Survivors of Human Trafficking Act which enables courts and magistrates to make “human trafficking protection orders” against any “person” found to have engaged in or who may engage in human trafficking. Human trafficking is defined as the recruitment, transportation, transfer, holding, concealing, harbouring or receipt of a person by a variety of means including the threat or use of force or coercion, provision of controlled substances, and the giving or receiving of payments for the purpose of taking advantage or exploiting that person.
In 2021, Saskatchewan a passed a substantially similar law, The Protection from Human Trafficking Act.
The Child Sexual Exploitation and Human Trafficking Act in Manitoba creates a tort of human trafficking and also provides for authorities to apply for a protection order to protect a child or person subjected to human trafficking.
Ontario also enacted human trafficking legislation in 2021 with the Combating Human Trafficking Act, 2021, which enacts, amends, and repeals several other acts, including enacting the Anti-Human Trafficking Strategy Act, 2021. This law differs in its structure and substance from the human trafficking laws in Alberta, Manitoba and Saskatchewan as it does not contemplate protection orders nor establish a tort of human trafficking. Rather, this legislation requires the Ontario government to maintain an anti-human trafficking strategy and gives the Lieutenant Governor in Council the authority to make regulations including requiring the dissemination of information about human trafficking, the provision of training on human trafficking, and the reporting of suspected instances of human trafficking. The regulation-making powers under the Act have not yet come into force. It remains to be seen whether courts will interpret these provincial laws as capable of applying to legal – as well as natural – persons.
Case Law
Canada continues to be seen as a friendly forum for business and human rights complaints. There were a few case law developments in recent years.
Imai v Canada (Minister of Foreign Affairs), 2021 FC 1479
In March 2021, Shin Imai (an Osgood Hall law professor) has claimed against the Canadian Minister of Foreign Affairs alleging that it has withheld information regarding its diplomatic interventions on behalf of Goldcorp Inc., a Canadian mining company accused of human rights abuses in Guatemala. The Federal Court ruled in the Winter of 2022 that the Canadian government was not legally required to disclose details regarding its interventions where one would reasonably anticipate that such disclosure would cause “harm to Canada’s international relations”. The Canadian Network on Corporate Accountability has responded to this case by calling for reform to public disclosure rules.
Kilgour v Canada (AG), 2022 FC 472
In the case of Kilgour v Canada (AG), 2022 FC 472, a group of individuals and organizations concerned about Uyghur forced labour in Xinjiang, China, made an application for judicial review of the Canadian government’s response to the ongoing genocide occurring in Xinjiang, China, claiming that the Canadian government “is violating its international obligations, by failing to prevent the ongoing genocide in that region, thereby contributing to the crimes committed against the Uyghur population, here and abroad” and that it has failed to uphold its duties under the Genocide Convention. The Federal Court ultimately dismissed the application, finding (among other things) that there was no evidence that Canada’s current legislative scheme is not effective in preventing goods that were mined, manufactured or produced wholly or in part by forced labour from entering Canada.
Nevsun Resources Ltd v Araya, 2020 SCC 5
The most significant business and human rights decision in Canada in recent years is Nevsun Resources Ltd v Araya, 2020 SCC 5, where the Supreme Court of Canada opened the door to international human rights torts claims. The originating claims were brought by Eritrean refugees allegedly conscripted to work at the Bisha mine partly owned by Nevsun Resources Ltd (Nevsun).
In particular, the majority held that, unlike England, the act of state doctrine is not part of Canadian common law. Accordingly, Nevsun could not use the act of state doctrine as a shield, on the basis that the claims would involve criticism of Eritrean State actions. By contrast, breaches of customary international law are fully integrated into, and form part of, Canadian domestic common law. The court therefore found that the claims under customary international law were not a bar to the claim; it was not “plain and obvious” that corporations enjoy a blanket exclusion under customary international law from direct liability for violations of “obligatory, definable, and universal norms of international law”, or indirect liability for their involvement so-called “complicity offenses”.
Nevsun follows a trend from earlier cases, including:
- Garcia v Tahoe Resources Inc, 2017 BCCA 39: The British Columbia Court of Appeal found that British Columbia was the more appropriate jurisdiction for an action brought by seven (7) Guatemala individuals claiming damages against Tahoe Resources Inc (Tahoe), a Canadian company. Tahoe manages a mine in Guatemala where the plaintiffs had been injured by a private security guard who opened fire on individuals who were protesting at the mine site.
- Caal Caal v Hudbay Minerals Inc, 2020 ONSC 415: While this case has yet to be decided on its merits, the Ontario Superior Court granted a motion by the plaintiffs to amend their statement of claim, finding that the disputed amendments disclosed a legally tenable cause of action and that it could not be concluded that the disputed amendments had no chance of success. This case involved claims from a remote indigenous farming community in Guatemala who alleged that they were sexually assaulted by private security and members of the Guatemalan police and military during forced evictions from lands owned or controlled by the mining project.
- Schuyler Farms Limited v Nesathurai, 2020 ONSC 4454: This case involves a challenge to public health measures relating to migrant workers in Ontario. In this decision, several organizations were granted leave to intervene in the litigation. The case has yet to be decided on the merits but raises a number of issues around the limitations of human rights during the pandemic.
- Canada (AG) v Kattenburg, 2020 FCA 164: This case involves a challenge to rules-of-origin labelling of wine produced in the West Bank. At first instance, the Federal Court had held that the decision of the Canadian Food Inspection Agency (CFIA) — that the wine could be labelled as a “Product of Israel” — was unreasonable. In 2021, the Federal Court of Appeal remitted the matter back to the CFIA and directed it to provide a fulsome explanation for its decision to label the wine as product of Israel. It remains to be seen whether the CFIA will ultimately succeed in justifying its decision.
The growing number of cases, and the general trend towards both retaining jurisdiction and finding the potential for tortious breaches of international law, mean that consideration of human rights norms is becoming an essential part of legal and business planning for Canadian companies, lest they risk costly litigation and potential liability in Canada.
