Written By Sabrina A. Bandali, Jessica Horwitz and Ethan Gordon

On May 7, 2021, the Canada Border Services Agency (CBSA) published an updated version of its policy, Memorandum D9-1-6, titled "Goods manufactured or produced wholly or in part by prison labour" (the "D-Memo"), in which the CBSA provides updated information concerning the enforcement of the recent prohibition on the importation into Canada of goods manufactured or produced by forced labour, which entered into force on July 1, 2020.

Canada committed to prohibiting the importation of "goods that are mined, manufactured or produced wholly or in part by forced labour" under the Canada-United States-Mexico Agreement (CUSMA). Despite the import prohibition being in place for almost a year, the government has released very few details explaining its administration and enforcement. Canada has not defined "forced labour" in its domestic laws or regulations,¹ explained what standard of care or due diligence will apply to importers, or elaborated on the mechanisms to be used by suppliers that wish to dispute CBSA findings. The D-Memo does not resolve these issues, but provides some insight into the internal government processes that will lead to enforcement actions and confirms that, at least at present, forced labour determinations will be treated like other tariff classification disputes. We address these issues below and conclude with recommendations for importers seeking to mitigate their supply chain risk.

Enforcement Actions May Result from ESDC-Labour Investigations

Although the CBSA is tasked with enforcing the import prohibition, it is the Labour Program of Employment and Social Development Canada (ESDC-Labour) that conducts investigations into suspected forced labour. ESDC-Labour monitors, researches and analyses cases of potentially problematic supply chains, including tips from stakeholders, media reports, or complaints. Following its investigation, ESDC-Labour will produce an internal government report which would, if warranted, provide the factual basis for enforcement action by the CBSA. We understand that at least two ESDC-Labour investigations are presently underway; their findings are expected in the coming weeks or months.

Currently, there is no publicly-available information about the status of investigations, or opportunities for stakeholders to make submissions as part of ongoing investigations. That said, ESDC-Labour invites members of the public to generally share information about the use of prohibited labour practices, including concerns about suspect global supply chains, by email to edsc.aiit.travailforce-forcedlabour.iila.esdc@labour-travail.gc.ca. This information can also be communicated to the CBSA through its Border Watch Tip Line.

Enforcement of the Import Prohibition

The CBSA may use information from the ESDC-Labour investigative report to identify and detain goods suspected of being produced by prison or forced labour (prohibited labour). If the goods have not been customs-released, an importer may abandon or export the goods from Canada in accordance with applicable export law.

If a CBSA officer determines that goods imported into Canada were produced with prohibited labour, the officer is empowered by section 59(1) of the Customs Act to redetermine the tariff classification of those goods and classify them as prohibited goods under tariff item 9897.00.00. In addition to the import prohibition itself, it is an offence under the Customs Act to purchase, sell, exchange or otherwise acquire or dispose of prohibited imported goods. A wide range of civil and criminal penalties are available under the Customs Act, including fines, seizure, consequential liability, forfeiture and ascertained forfeiture, for directors, officers and agents of a corporation who directed, authorized, assented to, acquiesced in or participated in the corporation's commission of the offence.

As with other tariff classification redeterminations, if an importer, owner, person liable to pay duties, or the person who accounted for the goods, disagrees with the CBSA officer's redetermination, they may request a review by the President of the CBSA. Notably, other participants in the supply chain—such as the producer or exporter of the goods—do not have standing under the Customs Act to request a redetermination by the President.

The President's decision can be appealed to the Canadian International Trade Tribunal, which will conduct a hearing de novo to determine the correct tariff classification of the goods, and hence whether or not their importation was prohibited.

Next Steps for Businesses Importing Into Canada

The time is ripe for Canadian and non-resident importers to take the following proactive steps to review their supply chains:

• Undertake a risk assessment to identify and understand the risks present in their supply chains. Risk assessments should be undertaken systematically and on an ongoing basis to ensure that supply chain risks are identified and addressed as they arise.
• Develop and deliver appropriate training to personnel and, as appropriate, third-party business partners/service providers, on corporate policies related to prohibited labour practices, including referring to the ILO's indicators of forced labour.
• Ensure that supply agreements, particularly those in higher-risk jurisdictions, have appropriate contractual clauses that mitigate risk, including termination clauses in the event forced labour is discovered. Where appropriate, ensure that these requirements cascade through the supply chain.
• Conduct due diligence as part of the supplier onboarding process and periodically monitor supplier compliance.
• If investing or involved in mergers and acquisitions, include questions related to prohibited labour and supply chains where relevant in due diligence checklists and processes.
• Maintain systems to securely receive tips and information about prohibited labour practices, including on a confidential and/or anonymous basis, from whistleblowers and other stakeholders.
• Establish an internal audit schedule to ensure that compliance measures are working and that supply chains are not compromised.
• Develop appropriate remediation procedures, including obtaining advice from counsel—when prohibited labour practices are suspected or uncovered.

For advice and assistance in understanding your supply chain risks and how to respond, please contact a member of the Bennett Jones International Trade and Investment group.

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1. The D-Memo does not define forced labour. Canada is a party to the International Labour Organization's Forced Labour Convention, 1930 (No 29) which defines forced labour as "all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily". The draft Modern Slavery Act, which we have written about previously, expands on the Convention definition by including circumstances that "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". Until Canadian legislation is passed, the Convention definition would likely guide Canadian authorities when investigating potential infringements of the import prohibition.