A Renewed Effort to Introduce Legislation to Combat Modern Slavery in Corporate Supply Chains

December 02, 2020

Written By Sharon Singh, Sabrina A. Bandali, Radha Curpen, Darrel Pearson and Jadeney Wong

Following two previous efforts (one of which Bennett Jones previously discussed), Parliament is again considering legislation to address modern slavery in corporate supply chains. Bill S-216: An Act to enact the Modern Slavery Act and to amend the Customs Tariff is currently at second reading in the Senate after its introduction by Senator Miville-Dechêne.

If passed into law, the Bill will require certain entities to publicly report the measures they have taken to prevent and reduce the risk that child labour or forced labour was used at any step in the production of goods within Canada or elsewhere in the entities' supply chain for imported goods. The Bill will also restrict trade in imports of any goods manufactured or produced, in whole or in part, by child labour, adding to the prohibition on importing goods made with forced labour introduced earlier this year.

Modern forms of slavery are prevalent in many international supply chains. The 2018 Global Slavery Index found that Canada imports approximately US$14.6 billion of consumer goods (for example laptops, computers, and mobile phones; clothing apparel and accessories; gold; fish; and sugarcane products) with production supply chains that use modern slavery practices. The Bill reinforces the importance of businesses continuing to review, identify and address their practices, processes, and exposure to forced labour and child labour, including confirming that such practices (i) are not already present, and (ii) will not go undetected if they were to emerge in the future.

While the term "modern slavery" encompasses a broad range of exploitative practices from debt bondage to human trafficking, Canada's Bill S-216 addresses two specific forms of modern slavery: child labour or forced labour.

Overview of Bill S-216

1. What Is Modern Slavery?

The Bill defines:

• Child labour as labour or service provided or offered to be provided, in Canada, by persons under the age of 18 years under circumstances that: (a) are or would be contrary to the laws applicable in Canada; or (b) constitute the worst forms of child labour as defined in article 3 of the Worst Forms of Child Labour Convention, 1999.
• Forced labour as labour or service provided or offered to be provided by a person under circumstances that: (a) could reasonably be expected to cause the person to believe their safety or the safety of a person known to them would be threatened if they failed to provide or offer to provide the labour or service; or (b) constitute forced or compulsory labour as defined in article 2 of the Forced Labour Convention, 1930, adopted in Geneva on June 28, 1930.

2. What Will the Bill Do?

The Bill proposes using two sets of legal tools: (i) import restrictions, adding to Canada's recently-introduced import restrictions for goods produced using forced labour; and (ii) a public mandatory reporting regime for certain entities.

(i) Import Restrictions

The prohibition on importing goods "mined, manufactured or produced wholly or in part by forced labour" was introduced by the implementing legislation for the new North American Free Trade Agreement, the Canada-United States-Mexico Agreement (CUSMA, also known as the USMCA, or T-MEC), which came into force on July 1, 2020. Although this prohibition (and its potential criminal consequences under the Customs Act) has been in force since July, as of December 2, 2020, the federal government has yet to publicize its enforcement and administrative policies. For example, there is neither a clear definition of "forced labour" nor a clarified standard of knowledge that is required when determining whether or not imported goods are prohibited.

The Bill solves this legislative gap by defining forced labour (noted above), including by reference to Canada’s existing international commitments. While importing goods that are manufactured or produced, in whole or in part, with forced labour is already prohibited, the Bill would amend the Customs Tariff to also prohibit importations of goods made using child labour. Wilfully importing goods made with forced or child labour may engage several criminal offences set out in the Customs Act.

Essentially, the import restriction regime—first introduced by the CUSMA and amplified by the Bill—would apply to any importers of goods that are found to be mined, manufactured or produced wholly or in part by forced labour or child labour. This trade enforcement provision differentiates Canada's proposed Bill from modern slavery legislation in other international jurisdictions, such as the United Kingdom or Australia.

(ii) Reporting Obligations, Inspection Powers and Enforcement

As with the previous proposed bills, Bill S-216 provides that every entity under the Act must annually report to the Minister of Public Safety and Emergency Preparedness the steps it has taken to prevent and reduce the risk of its usage of child or forced labour throughout its supply chain. These annual reports would be made available to the public on the entity's own website as well as through the Department of Public Safety and Emergency Preparedness' central electronic registry.

The Bill also creates an inspection regime and grants the Minister the power to require an entity to provide certain information about its manufacturing, production, growth, extraction and production processes as well as its child and forced labour policies. Unlike the previous bills on modern slavery, the Bill's mandatory annual reporting date is now no later than 180 days after the end of each financial year, aligning with corporations' own fiscal year-ends.

In terms of enforcing reporting obligations, entities that that fail to comply with the reporting, publishing, and/or assistance in inspection obligations set out respectively in Sections 7, 8, 11(4), or 13 of the proposed Bill, would be subject to a summary conviction offence with a fine up to $250,000. This penalty would also apply to entities that knowingly make false or misleading statements in their reports. The Minister also has the power to order an entity to make any corrective measures deemed necessary to comply with the reporting and publishing obligations.

3.To Whom Will the Bill Apply?

The import restrictions introduced by the Bill have general application; no importer may import prohibited goods. The reporting requirement applies to entities, as defined. Under the Bill an "entity" is a corporation, trust, partnership, or other unincorporated organization that:

1. is listed on a stock exchange in Canada;
2. has a place of business in Canada, does business in Canada or has assets in Canada and that, 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:
   1. has at least $20 million in assets,
   2. has generated at least $40 million in revenue,
   3. employs an average of at least 250 employees; or
3. is prescribed by regulations.

Of these defined entities, the Bill would only apply to those that:

1. produce or sell goods in Canada or elsewhere;
2. import into Canada goods produced outside Canada; or
3. control an entity engaged in any activity described in paragraphs (a) or (b).

Consequently, the Bill applies a similar test as the Extractive Sector Transparency Measures Act, targeting larger entities that operate with global production lines, including corporations and their subsidiaries. The Bill also contemplates that future regulations may expand the scope of qualification of an entity. While the Bill does not focus on any specific industries, the application captures entities across a variety of industries, including but not limited to: mining, oil and gas, apparel, and electronic sectors.

Moving Forward

The heightened risk of facing trade prohibitions and penalties, in addition to increased public pressure to expose violations of human rights and modern slavery practices, necessitates continuous assessment and action. As this is an opportune time for private sector action, Canadian companies must address risks of modern slavery practices within their production supply chains.

Entities must review and audit not only their own risk exposure, but also those of their current and prospective supply chains. They will also need to establish systems and practices for monitoring and auditing their supply chain, whistleblowing, proper public reporting, and ensuring that the necessary contractual clauses are in place to appropriately allocate the risks and responsibilities to the relevant parties in the supply chain.

The risks extend beyond those related to exposure under current domestic law. For instance, the Senator first proposed Bill S-211 around the same time as the Supreme Court of Canada's 2020 Nevsun Resources Ltd v Araya decision, which held that corporations operating with forced labour practices abroad are not excluded from liability in Canada for their international human rights violations or breaches to universal norms of international law (see our blog on the decision).

Before becoming law, Bill S-216 must pass second and third readings in the Senate, as well as three readings in the House of Commons, and then receive Royal Assent. As currently drafted, the Modern Slavery Act and amendments to the Customs Tariff will come into force on January 1 the year after the Bill receives Royal Assent.

Contact a member of the Bennett Jones International Trade & Investment or ESG practice group to discuss methods to implement robust governance measures and compliant practices, including developing policies and training programs, to manage risk and evaluate exposure against claims related to child labour or forced.

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