Canadian and US businesses (with virtually any Canadian nexus) with over CAD $20M in assets or CAD $40M in revenues are potentially caught by Canada’s proposed “child and forced labour” rules and could risk upwards of CAD $250,000 in fines for non-compliance!
Bill S-211 is Canada’s answer to increased political pressure to combat child and forced labour in supply chains and is currently making its way through Parliament. Upon receiving Royal Assent, it will enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Forced Labour Act” or “FLA” for short). Among other things, the FLA will create new annual reporting rules for large Canadian and US businesses, and really any other business, even those with a minimal connection to Canada.
More specifically, the new law would require Annual Reports to be filed by businesses that meet both “size” and “nexus” (i.e., connection to Canada) tests. The “size” test is passed if any two of the following thresholds are met: (1) $20M in assets; (2) $40M annual revenue; or (3) at least 250 employees. The “nexus” test is passed if any of the following conditions are met: the business (1) distributes goods in Canada; (2) imports goods into Canada; (3) carries on business in Canada; or (4) its place of business is in Canada.
Failure to meet the Annual Report requirements (which requires, among other things, details on steps taken to “prevent and reduce the risk” that child and forced labour is used “at any step of the production of goods”) will make the corporation, directors, officers, and/or agents authorizing or “acquiescing” to the non-compliance liable for fines reaching $250,000.
Somewhat alarmingly, the new FLA will also includes extensive search and seizure powers allowing government agents to enter offices and search and seize without a warrant! (Whether this is constitutional is yet to be seen.)
The FLA will also prohibit goods produced in child or other forced labour conditions from import to Canada. (Another bill currently in process, Bill S-204, will directly prohibit imports from the Xinjiang region in China.)
All Canadian large corporations and any US large corporations with this sort of Canadian nexus need to prepare for these new rules. The FLA could potentially come into effect as early as January 1, 2024!
This is an excerpt from the Customs and Trade Report by Millar Kreklewetz.