Canada’s long-awaited, Fighting Against Forced Labour and Child Labour in Supply Chains Act (Act) went into effect on January 1, 2024. While it is largely a disclosure law, it also makes Canada the first country in the world to ban the importation of goods made with child labor—a bold and controversial move, discussed further below. In this blog post, we provide an overview of the two key elements of the Act and then explain the Act’s limitations compared to other supply chain legislation.
What Are the Act’s Disclosure and Reporting Requirements?
The Act was designed to combat forced and child labor by imposing reporting obligations for the production, purchasing, or distribution of goods in Canada. Both government and private entities fall within the Act’s scope, and all companies listed on Canada’s stock exchange are covered by the Act. For companies not listed on Canada’s stock exchange, they are still subject to the disclosure requirements if they (1) are incorporated, do business, or have assets in Canada, and (2) based on its consolidated financial statements, meet two of the following three criteria: $20 million in assets, $40 million in revenue, or employ at least 250 employees.
The Act does not require companies to disclose the presence of forced or child labor in their supply chains—only the steps they have taken to prevent and reduce the risk of forced or child labor in any step of the production or importation of goods into Canada. Companies only have until May 31, 2024 to file their first report. This report must include information about the entities, policies, risk assessments, remediation efforts, and effectiveness in responding to any issues relating to forced and child labor in their supply chains. Failure to report or provide false or misleading statements may result in a fine of up to $250,000.
The Act arises partly from the United States-Mexico-Canada Agreement (USMCA) negotiations, and is an attempt to come into compliance with the USMCA’s prohibition on the importation of goods produced in whole or in part by forced or compulsory labor, including forced child labor. Prior to passage of the Act, Canada amended the Customs Tariff to prohibit imports produced by forced labor. However, enforcement has been underwhelming, with the import ban resulting in just one blocked shipment linked to forced labor to date. The Act’s amendments to Canada’s Customs Tariff are intended to strengthen the import ban on goods produced using forced labor.
How Effective Are the Disclosure Requirements?
The Act’s disclosure requirements do very little to ensure companies' supply chains are clean, with no requirement for companies to guarantee that their supply chains are free of forced or child labor. Canada’s lawmakers have called for reforms to strengthen the Act through mandatory human rights due diligence legislation (mHRDD). Due diligence laws, like the new EU Corporate Sustainability Due Diligence Directive (CSDDD), could make the Act more effective because instead of companies merely reporting, they would be required to implement steps to remediate or prevent forced labor. However, as Canadian NGO Above Ground has argued, effective enforcement of such provisions requires the inclusion of civil liability provisions, which the Act fails to include. Above Ground argues that courts should have the authority to “scrutinize companies’ efforts to prevent or remedy abuse, and rule on whether those efforts are appropriate and sufficient, considering the particular circumstances of each case.”
The Act mirrors other disclosure laws like the much-criticized UK Modern Slavery Act, in which companies only need to publish a statement describing their efforts to counter forced labor. One upside is that the Canadian Act applies to a broader range of organizations – those employing at least 250 employees – compared to Germany’s Supply Chain Due Diligence Act, which limits its mandate to companies with at least 1,000 employees. Like Germany’s Supply Chain Act, Canada’s Act requires companies to post the reports on their websites, but Canada’s Act additionally requires a limited number of companies to provide the reports to their investors.
Critics of the Act have argued that the lack of mitigation or prevention requirements will mean that the Act does very little to prevent modern slavery. One scholar noted, “[Companies] can... satisfy their obligations under the bill by simply reporting that they have taken no action whatsoever to mitigate or prevent human rights abuses.” Like the Modern Slavery Act, companies can satisfy the Act’s requirements by reporting, regardless of whether they have taken steps to address forced and child labor. The Act attempts to respond to this criticism by providing broad authority to the Minister of Public Safety and Emergency Preparedness to inspect any place where there is reason to believe the entity is not in compliance with the Act and may require measures be taken to ensure compliance.
How Does the Canadian Import Ban Compare to the U.S. Tariff Act?
Thus far, the track record of Canada’s Customs Tariff stands in stark contrast with the U.S. import ban, Section 307 of the Tariff Act, in which U.S. Customs and Border Protection (CBP) prevents the entry of products “manufactured wholly or in part in any foreign country by convict labor or/and forced labor,” into the United States. Under Section 307, CBP is monitoring over 50 active Withhold Release Orders, banning importation of goods from over a dozen countries produced with forced and/or prison labor, including such diverse products as fish, cotton, tobacco, gold, diamonds, rugs and human hair. The United States has an additional, more recent, statute, the Uyghur Forced Labor Prevention Act, which creates a rebuttable presumption of a Section 307 violation for goods produced in the Xinjiang Uyghur Autonomous Region (the Uyghur Region), as well as for goods produced by companies on a special entities list compiled by an interagency task force known as the Forced Labor Enforcement Task Force (FLETF). For these purposes, the FLETF is focused on addressing such practices as the use of Uyghur forced labor by companies located outside of the XUAR.
Incredibly, in the four years since Canada’s forced labor import ban went into effect, Canada has not rejected a single shipment of goods.
To create better policy alignment, the United States has called upon Canadian authorities to cooperate with banning imports from the Uyghur Region, including goods already banned by the United States. Of course, the argument for Canada banning goods from the Uyghur Region applies with equal force to all forced labor produced goods, whether originating in China or elsewhere. When those goods are rejected by U.S. Customs pursuant to an existing WRO under Section 307 they could be, and in some cases likely have been, re-exported to Canada or other countries.
In an ideal world, both Canada and the United States would have a strong import ban with robust enforcement and a practice of collaborating to ensure that WROs issued in one country are respected in the neighboring country. Perhaps Canada would not defer entirely to U.S. Customs determinations, and vice versa, but the existence of a WRO in one jurisdiction should be considered by the neighbor jurisdiction’s customs authorities to be a strong indication of the presence of forced labor in a supply chain. In theory, as long as Canada’s Labour Program can vet this information, Canada’s Border Services Agency (CBSA), should be able to rely on U.S. determinations of forced labor to detain those same goods. This would be efficient, effective, and create a stronger deterrent than that created by any one country acting alone.
Given that the previous version of the Canadian forced labor import ban was hardly enforced, one might hope for a more robust enforcement mechanism from the Act. The Act does expand the scope of the Tariff Act by including definitions for forced and child labor within the import ban. Yet, there has been very little guidance on how the Tariff Act is enforced. The CBSA has largely limited its enforcement of the import ban to conducting post-importation audits, in which they merely request information from companies to verify they comply with import requirements.
How effective is the Inclusion of a Child Labor Ban?
As previously noted, the Act amends the Customs Tariff to include prohibiting imports produced with child labor. This is the most striking, and controversial, aspect of the legislation. Under the U.S. Tariff Act, child labor that is not forced is not covered by the ban. Many advocates believe that import bans are an improper tool to address child labor. This argument is particularly powerful when applied to family-based child labor, which is largely a result of socio-economic circumstances rather than an unscrupulous or abusive employer. An import ban targeting family-based child labor runs the risk of harming already poor families without addressing the root causes that led to the children needing to work in the first place. CAL, however, maintains that, rather than entirely excluding child labor or family-based child labor from import bans, enforcement officials should be given flexibility to deal with these kinds of practices in a manner that is sensitive to the socio-economic context.
Moreover, an appropriately crafted child labor import ban can fill a gap in an existing forced labor import ban regime. As CAL has experienced in numerous field investigations in West Africa, proving that a particular child engaged in hazardous child labor is, in fact, engaged in forced labor can be very difficult from an evidentiary standpoint. The common practice of trafficking children from Mali and Burkina Faso into Cote d’Ivoire to work on cocoa farms has been well-documented. Circumstantial evidence (for example: the child does not speak the local language, has no apparent connection to the farmer or local community, and/or the child is being severely mistreated or doing age-inappropriate dangerous work) may suggest that the child is in a condition of forced labor. Yet, most children found doing this work will claim that a nearby adult is a relative. In many cases, these children are quite vulnerable and are rarely at liberty to respond to questions by investigators, making it virtually impossible to gather sufficient evidence to demonstrate the two elements of forced labor: involuntariness and menace of penalty. As a result, trafficked children are often mistaken for family-based child laborers, making interventions on their behalf more difficult.
Accordingly, Canada’s inclusion of child labor in their import ban may offer opportunities to address the types of child trafficking that are difficult to adequately evidence. However, if applied too broadly, it could create significant unintended consequences for low-income families in countries of production across the globe. We are hopeful that the CBSA uses its discretion when it receives child labor allegations and only utilizes its import ban authority in cases of non-family based, hazardous child labor.
Conclusion
While it remains too early to fully assess the impact of the Act, our initial read is that the Act does not go far enough to curb corporate misbehavior and is largely out of step with global efforts to bring companies into compliance with emerging international norms like the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. As the EU moves toward a due diligence regime, and the United States improves its forced labor enforcement under Section 307, this Act barely keeps Canada in the conversation. It is no surprise, then, that the Canadian Network on Corporate Accountability opposed passage of the Act absent sweeping changes—changes which did not occur. Rather than continuing to pass toothless disclosure laws like the UK Modern Slavery Act, the California Transparency in Supply Chains Act, and now the Canadian Act discussed here, legislatures should look to create alignment across jurisdictions on effective due diligence and well-resourced import bans to address the most egregious harms, as well as creating civil liability provisions that allow those harmed by corporate abuse to be compensated.
Michelle Barrera-Valenzuela is a student at DePaul Law School and a Legal Intern at Corporate Accountability Lab.
