If you do business in Canada, you may need to file annual reports about your efforts to prevent and reduce the risk that forced or child labour is used at any step of the production of goods that you sell. The deadline to file these reports is May 31 each year.

Who needs to report?

The Fighting Against Forced Labour and Child Labour in Supply Chains Act establishes a two-part test to determine whether a business must report:

• Step 1: Is the business an entity for purposes of the Act?
• Step 2: Do the businesses engage in activities that trigger reporting obligations?

Step 1: Is the business an entity for purposes of the Act?

The Act applies to entities. An entity is defined as a corporation, trust, partnership, or other unincorporated organization that meets one of the following two requirements:

• It is listed on a stock exchange in Canada, or
• It has a place of business in Canada, does business in Canada, or has assets in Canada, and meets two of the following three size thresholds:
  • Worldwide assets worth $20 million or more
  • Worldwide revenues of $40 million or more
  • 250 employees worldwide or more

Step 2: Does the entity have reporting obligations?

An entity will have reporting obligations if it engages in any one of the following activities:

• Producing, selling, or distributing goods in Canada or elsewhere
• Importing into Canada goods produced outside of Canada

An entity that controls an entity engaged in those activities also has reporting obligations.

Goods are tangible physical property that is the subject of trade. Intangibles such as services and software are not goods or real property.

In the case of imported goods, the importer of record has reporting obligations under the Act. Customs brokers and shipping companies are not considered to be importers for purposes of the Act.

In its guidance on the Act, Public Safety Canada says that entities "solely involved in distributing and selling are not expected to report under the Act." This would seem to apply to goods produced in or imported into Canada by some other entity, presumably because that entity will have reporting obligations.

What must be in the report?

The central requirement in the Act is a report "on the steps the entity has taken during its previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity."

Entities must also include the following supplementary information:

• Structure, activities, and supply chains
• Policies and due diligence processes in relation to forced labour and child labour
• The parts of the entity's business and supply chains that carry a risk of forced labour or child labour being used, and the steps it has taken to assess and manage that risk
• Any measures taken to remediate any forced labour or child labour
• Any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains
• The training provided to employees on forced labour and child labour
• How the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains

Public Safety Canada requires that entities complete an online questionnaire as part of filing their annual report.

The report must be approved by the entity's governing body and include an attestation to that effect.

Entities subject to reporting requirements under supply chain legislation in other jurisdictions (such as the United Kingdom's Modern Slavery Act 2015) can use the report prepared for those jurisdictions so long as it includes all of the information required by Canadian legislation and covers the appropriate reporting period.

Entities can file joint reports. Typically, affiliated companies will do this. The governing body of each entity involved in a joint report must approve the report. Alternatively, a parent company can approve the report on behalf of subsidiaries that it controls.

The report must be made publicly available on the entity's website. For this reason, information that might identify individuals should not be included in the report.

Public Safety Canada states that a "complete report will contain information that responds to each of the Act's requirements," but that "there is no prescribed level of detail." Entities should "describe concrete actions they have taken to address risks of forced labour and child labour, rather than purely aspirational statements." But, where entities are still "in the process of developing their response to forced labour and child labour," they can report that. Similarly, if an entity has found evidence of forced labour or child labour in its supply chains but has not yet taken any remediation measures, it should so state.

Getting help

We would be delighted to help you determine whether you need to file a report under the Fighting Against Forced Labour and Child Labour in Supply Chains Act and assist with its preparation if needed.