Baker McKenzie’s Canadian worldwide commerce and customs staff is publishing a collection of articles reviewing 2024 commerce and customs compliance developments and waiting for 2025’s burgeoning points. This text focuses on Canadian legislative and enforcement developments in combatting pressured and youngster labour.
Earlier than we dive into Canada’s commitments to combatting pressured and youngster labour, right here is an outline of the present state of politics in Canada, which features a dialogue of the legislative powers that stay whereas Canadian Parliament is prorogued till March 24, 2025.
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2024 marked the primary reporting 12 months underneath Canada’s Combating In opposition to Pressured Labour and Baby Labour in Provide Chains Act (the “Provide Chains Act“), the primary stories of enforcement of Canada’s import prohibition on items mined/manufactured with pressured or youngster labour pursuant to the Customs Tariff, and the primary conclusions, terminations, and withdrawals of complaints to the Canadian Ombudsperson for Accountable Enterprise (“CORE“). The 12 months ended with formidable statements by the governing Liberal Get together on proposed laws to eradicate pressured and youngster labour in Canadian provide chains.
In 2025, we count on that legislative developments and enforcement of present laws concerning the eradication of pressured and youngster labour in Canadian provide chains will largely rely upon the end result of the Parliamentary pause (till March 24, 2024) and whether or not the Liberal Get together will win a potential spring election. It stays unclear whether or not the Liberal Get together’s present ambitions to ascertain provide chain due diligence laws, ramp up enforcement of the import prohibition, and supply legislative authority for a rebuttable presumption on items being manufactured with pressured or youngster labour would stay a precedence for Parliament with a unique governing get together.
Regardless of this uncertainty Canadian companies can put together for developments in provide chain regulation as follows:
- Benefit from submitting consolidated international stories in jurisdictions the place provide chain reporting necessities are in drive. This can enable reporting entities to align and streamline public statements concerning provide chain compliance efforts throughout jurisdictions.
- Be aware of the interaction between different areas of regulation, similar to worldwide sanctions, with human rights. We count on that Canada will proceed to impose sanctions on nationals of nations going through allegations of human rights abuses, like pressured and youngster labour.
- Comply with elected officers’ statements concerning the introduction of proposed optimistic due diligence laws, or maybe the introduction of laws underneath present laws. If the introduction of the Provide Chains Act is a worthy precedent, there are more likely to be many questions on the applying of any future regulation to Canadian and international organizations.
- Importers ought to keep attuned as to whether Invoice S-204, the Xinjiang Manufactured Items Importation Prohibition Act, is reintroduced or reinstated throughout a brand new session of Parliament, or whether or not there can be proposed legislative amendments to the Customs Tariff launched within the subsequent federal finances implementation invoice in respect of a rebuttable presumption.
- Undertake a mock audit of customs documentation to evaluate whether or not a enterprise is ready to reply to a Discover of Detention on the idea that items are mined or manufactured with pressured or youngster labour.
Canada’s Import prohibition on items mined/manufactured with pressured or youngster labour
Since July 1, 2020, Canada has prohibited the importation of products mined or manufactured by pressured labour underneath the Customs Tariff. The import prohibition was expanded to use to items mined or manufactured by youngster labour with the approaching into drive of Invoice S-211, An Act to enact the Combating In opposition to Pressured Labour and Baby Labour in Provide Chains Act and to amend the Customs Tariff on January 1, 2024. Draft revisions to the Canada Border Providers Company (“CBSA“) coverage on the import prohibition had been circulated in Fall 2023; nevertheless, the present CBSA coverage has but to be up to date and stays underneath assessment.
Though some imports have been detained and investigated by the CBSA on the suspicion of pressured or youngster labour, the CBSA has not launched statistics concerning its enforcement of this import prohibition. Canada has drawn scrutiny concerning its scant enforcement of the import prohibition from US Members of Congress, whom haven’t solely urged cooperation underneath the pressured labour provisions of the United States-Mexico-Canada Settlement (“USMCA“), however instructed that pressured labour be mentioned throughout the USMCA joint assessment scheduled for July 2026. The feedback from US Members of Congress give attention to the reported diversion of products denied entry into the US being imported into Canada adopted by an try and re-export the identical items into the US, and the shortage of a rebuttable presumption underneath Canadian and Mexican regulation to ascertain a burden of proof on importers to show that their provide chains are freed from pressured/youngster labour.
Whereas there was an uptick in CBSA enforcement of the import prohibition all through 2024, the numbers stay weak as in comparison with the billions of {dollars} of products detained by america Customs and Border Safety thus far. Thus far, the CBSA has solely discovered that one cargo has violated the import prohibition. The CBSA is now going through a lawsuit in Canada’s Federal Courtroom following its detention of roughly 50 shipments of Chinese language photo voltaic modules from the identical importer, value over CAD 5 million. This lawsuit gives some perception into the CBSA’s course of for detaining and assessing items that it suspects are produced with pressured or youngster labour, regardless of the shortage of steering.
On this case, the CBSA issued Notices of Detention to the importer and requested data and paperwork from the importer to find out if the products had been manufactured or produced with pressured labour. The products had been detained from February 2024 to April 2024 and in the end granted customs clearance and had been launched between June 2024 and July 2024. The importer now alleges that the CBSA’s failure to well timed take into account their paperwork and wrongfully delay the discharge of the products induced vital monetary losses. The importer seeks damages and a declaration of wrongful conduct, together with a discovering that the CBSA violated their responsibility of care.
The CBSA final publicly addressed its enforcement course of concerning the import prohibition on items mined, manufactured or produced wholly or partly by pressured or youngster labour in Fall 2023. For extra particulars on the CBSA’s feedback to business regarding its pressured and youngster labour import prohibition plans, learn Baker McKenzie’s consumer alert right here.
Provide Chains Act enters second reporting cycle
The subsequent reporting interval underneath Canada’s provide chain transparency laws, the Provide Chains Act, is now open. New steering was issued in November 2024 by Public Security Canada that addressed interpretive points, similar to whether or not the mother or father companies of reporting entities are required to report by advantage of controlling a reporting entity. Public Security Canada clarified the next reporting necessities within the new steering: having belongings in Canada (a standards to be a reporting entity underneath the Provide Chains Act) refers to tangible property in Canada, so the Provide Chains Act doesn’t lengthen to firms producing solely intangible items, similar to software program companies and insurance coverage companies.
Consequently, Canadian shareholdings alone aren’t ample to require a global mother or father firm to report underneath the Provide Chains Act; and distribution and gross sales actions alone don’t impose a reporting obligation on an organization. Our November 2024 article particulars the important thing updates to reporting necessities contained within the steering, in addition to Public Security Canada’s first annual report on the Provide Chains Act.
The primary stories from the preliminary submitting 12 months can be found on this portal and Public Security Canada’s first report back to Parliament on the preliminary submitting 12 months underneath the Provide Chains Act is out there right here. Though Public Security Canada accepted late stories within the preliminary submitting 12 months, reporting entities might not be capable of make the most of the identical enforcement leniency for the Could 31, 2025 submitting deadline.
In 2025, we count on extra reporting entities to file “international” provide chain stories, benefiting from the efficiencies famous within the official steering, that entities might use the “similar report produced for different jurisdictions” if all reporting necessities of the Provide Chains Act are included and the report covers the right reporting interval. Nonetheless, reporting entities must also be aware that the packages and insurance policies described in a “international” report additionally apply to the reporting entity underneath the Provide Chains Act, or alternatively the “international” report ought to clarify what programmes/insurance policies apply to the Canadian reporting entity/ies.
Commitments to enact optimistic due diligence laws
The Authorities of Canada’s coverage commitments in Price range 2023 and Price range 2024 included the introduction of recent laws geared toward eradicating pressured labour from Canadian provide chains and strengthening the import ban on items produced utilizing pressured labour by the tip of 2024. The 2024 Fall Financial Assertion (the “2024 FES“) previewed that new laws would set up provide chain due diligence obligations. This regime would require authorities entities and companies to scrutinize their worldwide provide chains for potential violations and dangers to elementary labour rights, and to implement measures to handle these dangers.
The Authorities’s commitments observe established human rights due diligence laws applied in France, Germany and the quickly to observe Company Sustainability Due Diligence Directive (“CS3D“) within the EU, which can present a legislative highway map for Canada. For instance:
- France: The Responsibility of Vigilance Regulation (Loi de Vigilance) requires sure French companies to publish a vigilance plan on the human and environmental dangers of their actions, together with inside their subsidiaries, suppliers and subcontractors. It has been in drive since 2017 and has an energetic enforcement report, with the primary prosecution accomplished in 2023 (Baker McKenzie writes about it right here) offering vital take-aways on threat mapping, evaluation instruments, actions to mitigate threat, and the implementation of monitoring techniques.
- Germany: The Act on Company Due Diligence Obligations in Provide Chains (Lieferkettensorgfaltspflichtengesetz) was enacted in January 2023 (Baker McKenzie writes about it right here) and requires sure firms to enact human rights and environmental due diligence obligations within the provide chain. The required measures embody the next: implementing a threat administration system, appointing a human rights officer, enterprise threat evaluation, adopting and speaking insurance policies, establishing preventative measures, participating in remedial actions the place applicable, establishing a complaints process, and risk-related due diligence measures with regard to oblique suppliers.
- EU: CS3D was provisionally agreed at a political stage in December 2023, and confirmed by the COREPER in a revised model in March 2024 (Baker McKenzie writes about it right here). Along with an EU-forced labour ban which is able to apply as of December 2027 (Baker McKenzie writes about it right here), the CS3D would require sure entities to undertake and implement efficient due diligence insurance policies for figuring out, stopping, mitigating and bringing to an finish precise and potential human rights and environmental harms in their very own operations, these of subsidiaries and of their enterprise companions referring to their “chain of actions”.
Canada may look to the enumerated topic issues for obligatory reporting underneath the Provide Chains Act (e.g. coverage implementing, coaching, remediation measures) as a information to the obligations sure entities might have underneath Canadian regulation. To be able to implement the rising give attention to the eradication of pressured and youngster labour, the Authorities proposed the creation of a brand new oversight company to make sure ongoing compliance with Canada’s pressured and youngster labour initiatives.
Foreshadowing the institution of a rebuttable presumption
The 2024 FES additionally introduced the Authorities’s intention to strengthen Canada’s import prohibition on items mined/manufactured with pressured or youngster labour by introducing legislative amendments, which would require importers to display that their provide chains are freed from pressured and youngster labour, shifting the burden of proof onto importers. This dedication straight addresses the ideas proposed by US Members of Congress on the usage of rebuttable presumptions to root out items produced with pressured or youngster labour.
Utilizing Canadian courts, public curiosity teams have tried to ascertain a presumptive willpower that items imported from sure areas are made with pressured labour, and are due to this fact prohibited from import into Canada underneath the Customs Tariff, topic to proof in any other case. Nonetheless, the Federal Courtroom held that the CBSA doesn’t have the legislative authority to impose such a presumption willpower.
Accordingly, the Authorities might search to introduce amendments to the Customs Tariff that grant the required authority to impose presumptive determinations (counting on an identical authorized customary to the rebuttable presumption within the US Uyghur Pressured Labour Prevention Act), or by championing Invoice S-204, An Act to amend the Customs Tariff (items from Xinjiang), which seeks to enact such a rebuttal presumption. Nonetheless, this Invoice has not superior in Parliament since Spring 2022 and there’s no clear indication of whether or not this can change into regulation. Provided that Parliament was prorogued by Prime Minister Justin Trudeau in early January, Invoice S-204 have to be re-introduced to Parliament or reinstated at first of the brand new session.
The Canadian Ombudsperson for Accountable Enterprise
The CORE was established in April 2019 to handle human rights abuses and moral violations by Canadian firms working overseas, significantly within the mining, oil and gasoline, and garment sectors. The CORE’s first “last report” was revealed in March 2024, which discovered misconduct by a Canadian mining firm overseas. The primary Ombud’s time period resulted in Could 2024 and a brand new interim Ombud, Masud Husain, was introduced. Thus far the CORE has not revealed a Q2 report on its ongoing operations in 2024. The final report (re Q1) was revealed on April 15, 2024, previous to Ombud Meyerhoffer’s departure. Not too long ago, the CORE has terminated a assessment and withdrawn the accompanying criticism and has closed an investigation with none really helpful follow-up.
The Authorities of Canada has indicated plans to undertake a assessment of the CORE within the close to future. The proposal within the 2024 FES for a brand new oversight company targeted on pressured labour might recommend that the CORE may both get replaced or built-in into this newly established entity. There stays an open query in regards to the destiny of unresolved circumstances at the moment underneath the CORE’s assessment. It’s unsure whether or not these circumstances could be transitioned to any new future company or if they are going to be terminated/closed by the CORE.
