Get Ready: Canada Promises Major Overhaul to Forced Labour Regulations

Get Ready: Canada Promises Major Overhaul to Forced Labour Regulations

On December 16, 2024, the Government of Canada released its 2024 Fall Economic Statement (“the Statement”). While reiterating previous objectives and commitments to protect human rights in supply chains, the Statement announced next steps on supply chain due diligence legislation and measures that will strengthen Canada’s existing import ban.[1]

Canada currently maintains an import ban on goods made of forced and child labour, and requires certain entities to report annually on their efforts to fight forced labour in their supply chain.[2] This new legislation would go much further by requiring businesses to take active steps to combat forced labour in their supply chains – not just report on any steps they are taking

1. Supply Chain Due Diligence Legislation

The proposed supply chain due diligence legislation (“the Due Diligence Act”) would require entities operating in Canada to engage with and scrutinize their supply chains for risks to fundamental human and labour rights, and require businesses to take definitive action to address and resolve such risks where found.[3] In addition, the government proposed to introduce a new oversight agency to compliment this regime and ensure compliance.

This would build upon the current reporting regime under the Fighting Against Forced Labour and Child Labour in Supply Chains Act (“the Reporting Act”) obligating certain entities to actually implement due diligence measures, rather than merely report on existing measures.

It is likely that the Due Diligence Act will eventually subsume and replace Canada’s existing supply chains framework. Canada may follow suit with international partners in imposing a size threshold to determine to whom the Due Diligence Act applies – in the EU, for instance, companies formed within a Member State with over 1,000 employees and a net worldwide turnover of more than EUR 450,000,000 in the last financial year are obligated to comply with due diligence measures under the Directive.[4] Other countries impose similar requirements to limit the legislation’s applicability to specific enterprises.[5]

Ultimately, given the current state of change amongst governmental departments charged with such developments, we expect there to be a transition period related to the implementation of any new legislation. In addition, incorporating the lessons learned from the Reporting Act’s implementation would assist to address some of the expected uncertainties inherent in any new Due Diligence Act.

Supply Chain Due Diligence Regimes Internationally

Though no definitive drafting has been proposed, it is likely that Canada’s Due Diligence Act will reflect existing regimes across the globe. For example, the European Union, France, and Germany all have established, comprehensive due diligence regimes that require entities to closely monitor their supply chains.

The EU’s Corporate Sustainability Due Diligence Directive obligates certain entities to identify, prevent, mitigate, and account for forced labour within their operations and their supply chains as part of its broader human rights and environmental due diligence obligations.[6] Both the Duty of Vigilance Law in France and the German Act on Corporate Due Diligence Obligations in Supply Chain obligate certain businesses to establish an internal vigilance plan that covers vigilance measures relating to, among others, violations of human rights and fundamental freedoms from both the company and its subcontractors or suppliers, including through supply chain mapping mechanisms and monitoring processes to follow up with subcontractors and suppliers.[7]

If Canada follows suit, it will likely require entities doing business in Canada with global supply chains to establish more stringent supply chain mapping and communications with supplier and vendor partners.

2. Strengthening Canada’s Import Ban on Goods Made with Forced Labour

The Statement additionally proposed 25.1 million dollars over two years, beginning in 2025-26, to implement legislative amendments to strengthen Canada’s import ban on goods produced by forced labour.[8] The funds would be provided to Global Affairs Canada and the Canada Border Services Agency.

According to the Statement, the government intends to amend the existing ban to impose an onus on importers to demonstrate that their supply chains are free from forced and child labour. This may closely resemble the reverse onus in place in the United States under the Uyghur Forced Labour Prevention Act.

Next Steps

The proposed measures will integrate ESG and sustainability standards into Canada’s supply chain regime. Whilst details are not yet known, for example, size thresholds will play an important role in determining who must comply with the existing requirements, entities can still take certain steps to prepare for the eventual new Due Diligence Act. The McMillan team will report when further information becomes available.

Many entities in Canada are likely already exposed to human rights due diligence regimes globally by virtue of being subcontractors and suppliers to businesses subject to those regimes. The government’s proposed measures will likely align Canada with international partners and standards, and may help avoid future trade restrictions in jurisdictions where human rights and due diligence obligations are already in place.

Nonetheless, entities should now consider engaging in further internal supply chain tracing mechanisms and ensuring they have good visibility into their suppliers and vendors. Practically, the proposed legislation will require entities to invest into systems, training, and expertise to wholly address supply chain concerns and mitigate the risk of legal liability for non-compliance. Entities should proactively consider implementing supply chain mapping, internal policy development, training and awareness campaigns, stakeholder engagement, and supply chain monitoring mechanisms. Finally, entities should now prepare for filing their annual mandatory forced labour and child labour in supply chains reports, which are due in most cases by than May 31, 2025.

McMillan LLP advises Canadian and international entities on their obligations under Canada’s supply chains regime, and in implementing compliant ESG and human rights due diligence-based measures in businesses’ operations. Our team remains available to assist in navigating changing compliance landscapes.

[1] Department of Finance Canada, 2024 Fall Economic Statement, online.
[2] McMillan’s team has written extensively on the Act’s developments. For more information, see: New Mandatory Reporting Requirement for Businesses: Canada’s Modern Anti-Slavery Bill Becomes Law – McMillan LLP; Canadian Businesses Should Prepare for New Mandatory Reporting on Supply Chains and Forced Labour; Combatting Forced Labour in Supply Chains from a Canadian Customs Perspective
[3] See: Department of Finance Canada, Backgrounder: Protecting Jobs and Our Economy, online.
[4] European Union, Directive 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence, article 2(1)(a).
[5] See for example France’s Corporate Duty of Vigilance Law, Art. L. 225-102-4. – I.; and Germany’s Act on Corporate Due Diligence Obligations in Supply Chains of July 16, 2023, section 1(1).
[6] European Union, Directive 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence.
[7] Corporate Duty of Vigilance Law, Article 1; Act on Corporate Due Diligence Obligations in Supply Chains of July 16, 2023.
[8] See previous McMillan bulletin: Canada Proposes Stricter Supply Chain Requirements to Tackle Forced and Child Labour, October 30, 2024.

by Sharon Singh, Radha Curpen, William Pellerin, Tayler Farrell, and Brigid Martin

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2024