Over a year ago the Government of Canada passed the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”), requiring certain businesses and federal government institutions to report on risks of forced labour and child labour occuring in their supply chains.
The Government has provided further guidance regarding who should be reporting and how.
Who Has to Report According to Public Safety Canada
Public Safety Canada (the “PSC”) has provided some clarity around the organizations that have reporting obligations under the Act, being government institutions and “entities”.
An “entity” is a corporation, trust, partnership, or other unincorporated organization that (a) is listed on a stock exchange in Canada, or (b) has a place of business in Canada, does business in Canada or has assets in Canada, and has met at least two of the following conditions in at least one of the two most recent financial years:
has at least $20 million in assets,
has generated at least $40 million in revenue; and
employs a global average of at least 250 employees at the time the entity is reporting or assessing its reporting obligation.
The PSC has further clarified that “place of business” means any premises, facility or installation used to carry on business, whether or not it is used exclusively for that purpose. In addition, doing business in Canada does not require having a place of business in Canada and “corporation” is to be interpreted broadly to extend to other forms of businesses, including unlimited liability corporations and trusts.
Furthermore, any entity who engages in the following activities is subject to reporting obligations:
producing, selling or distributing goods in Canada or elsewhere;
importing into Canada goods produced outside Canada; or
controlling an entity engaged in either (a) or (b)
The PSC’s guidance states that “importer” means the “true importer,” or the entity that causes goods to be brought into Canada. In other words, someone who buys products from a third party who is the importer of record is not considered an entity who imports goods into Canada. The PSC has clarified that the Act is only intended to capture those entities directly engaged in the production or importation of goods. Entities whose role is only to support the production or importation of goods or who are only involved in distributing and selling are not expected to report under the Act.
Recurring Questions with The Act
One question that many entities have raised is whether the Act has a threshold that would exclude businesses who engage in only minor importing, distributing, or production activities. The PSC states that it should be interpreted to exclude “very minor dealings”. This threshold must be evaluated in the context of the entity’s business and keeping in mind the purpose of the Act.
The PSC has also confirmed that an entity with reporting obligations under another jurisdiction’s similar modern slavery legislation can use the same report when submitting to the PSC. However, the entity must make sure that such a report meets the requirements under the Act.
How the Questionnaire Offers Support
Every entity with a requirement to report must fill out a questionnaire when submitting their report to the PSC, which largely mirrors the substance already required in the report. Entities should therefore ensure that any information submitted through the questionnaire aligns with the content in their report. Entities are encouraged by The PSC to reference the questionnaire as a resource containing examples of measures that can be taken to prevent and reduce the risk of forced labour and child labour in supply chains. All data and responses provided in the questionnaire will be stored by PSC to use in their annual report to Parliament.
Next Steps for Reporting
With time to spare before the Second Annual Reporting deadline on 31 May 2025, organizations should start turning their minds to what measures they have in place, or would like to have in place, to combat possible occurrences of forced labour and child labour in their supply chain.
If you have questions about the Act or need support in reporting, reach out to Froese Law.
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