Bill S-211 and the impact on Canadian supply chains

Canadian supply chain professionals face a new challenge this year: the Fighting Against Forced Labour and Child Labour in Supply Chains Act. Known as Bill S-211, it came into effect on Jan. 1, bringing new reporting obligations for entities meeting two of the following conditions: at least $20 million in assets, at least $40 million in revenue, and/or an average of at least 250 employees. Canadian entities are defined as those producing, selling, or distributing goods in Canada or elsewhere, importing goods into Canada, or controlling an entity engaged in these activities. The same obligations apply to government institutions involved in these activities.

The first yearly report was due May 31 and needed to identify any risks of modern slavery within an entity’s supply chain and the steps taken to mitigate them. For smaller companies falling below the above thresholds, it is still essential to be familiar with the Act’s requirements and to prevent any products derived from forced or child labour in their supply chains—not just for ethical reasons, but also because large customers are likely to request such assurances. In a nutshell, companies need to validate their inputs with their upstream suppliers, all the way up to the first extraction and processing of raw materials. This is the new reality of compliance.

“Forced labour” is defined as labour provided by a person under circumstances that could reasonably be expected to cause the person to believe their safety would be threatened if they failed to provide the labour, or constitute forced labour as defined in the Geneva Forced Labour Convention of 1930. “Child labour” is defined as labour by persons under the age of 18 that is provided in Canada under circumstances that are against Canadian law, or under circumstances that are mentally, physically, socially, or morally dangerous to them. It is also defined as anything that interferes with their schooling by depriving them of the opportunity to attend school, obliging them to leave school prematurely, or requiring them to combine school attendance with excessively long and heavy work, as defined in the Geneva Child Labour Convention of 1999.

Now that the reports have been filed, it is a good time for reflection. There was some confusion around the applicability of the Act and the entities required to file. This is relatively normal for new regulations, although this one topped many, as its language was not always precise and left room for interpretation. Also, since the Act came into effect just five months before the first reporting deadline, many companies had a hard time figuring out whether it applied to them. No doubt, this kept lawyers busy. As a result, it’s possible that more entities than required decided to file a report, just in case. Originally, the government indicated that thousands of companies could potentially be captured by the Act, so that could mean a lot of reading for the civil servants assigned to this.

With the reporting deadline passed, Public Safety Canada will continue to accept late submissions and publish reports received past the May 31 deadline. Companies and government institutions can also submit a revised version of a previously submitted report by completing the online questionnaire a second time.

Moving forward, some questions are pending and will hopefully be answered in time for the next filing deadline in May 2025. Regarding the thresholds, the Act refers to consolidated financial statements and a firm’s total or global assets, revenues, and employees, but what about subsidiaries? Regarding covered activities, the Act refers to companies that distribute and sell goods, but what about importing and producing? And how about transport and warehousing companies? Despite the confusion surrounding the introduction of the Act, it has raised awareness around the important issues of forced and child labour in our supply chains. This is a positive development, with so many imports coming from low-wage countries that have little protection for workers.

The U.S., our most important trading partner, has taken a different approach to this topic with its Uyghur Forced Labor Prevention Act (UFLPA), specifically targeting China. Under the UFLPA, U.S. Customs and Border Protection (CBP) can detain or seize any goods made, in whole or in part, with inputs from China’s Xinjiang Uyghur region, presuming that such goods were made using forced labour. Since this applies to goods made in whole or in part, U.S. importers who source products anywhere in the world are at risk, as inputs from Xinjiang can be used to manufacture goods outside China. This also applies to non-resident importers, i.e., Canadian exporters selling in the U.S. delivery duty paid. CBP publishes a dashboard with relevant shipment statistics, as well as a list of targeted Chinese entities, which is updated regularly.

Did the arrival of your new Porsche or Bentley get delayed? This could be why: A few months ago, CBP held hundreds of these new vehicles at several U.S. ports, as they found they contained a small part that had originated from one of the named Chinese entities targeted by the UFLPA. The brand owner, Volkswagen, had no other choice but to replace that part in all these vehicles, so they could be released and sold in the U.S.

This is a good hint for Canadian companies doing business in the U.S. Make sure you’re compliant with both Canadian and U.S. laws. Even a large and well-organized company like Volkswagen can run into issues.