Public Safety Canada Updates Guidance on Forced and Child Labour Legislation

On November 15, 2024, Public Safety Canada released an update to the Guidance for entities (Updated Guidance) and government institutions (Update GI Guidance) relating to Canada’s supply chains legislation, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (Act). Reporting entities are required to complete and submit to Public Safety Canada a mandatory online questionnaire (Questionnaire) and report (Report) under the Act about the measures they have taken to prevent and reduce the risk of forced or child labour in their supply chains during the previous fiscal year.

The Updated Guidance for Entities 

The Updated Guidance for entities contains significant updates and seeks to clarify several common questions regarding the Act’s intended scope and application. Key changes and takeaways from the Updated Guidance include:

Guidance on Whether a Company is an Entity Subject to the Act

• “Assets in Canada” is now limited to tangible property. The Updated Guidance states that organizations should not include intangibles such as intellectual property, securities and goodwill when assessing whether they have “assets in Canada.” This narrowing of the definition helps clarify that owning securities in Canada is not, on its own, sufficient to bring entities within the scope of the Act. This is a reversal of the former Guidance, which expressly included intangibles.
• Businesses can exclude intangible assets from global “asset” calculations. Businesses also now have flexibility to exclude intangible assets when determining whether they meet global asset size thresholds for being deemed an “entity” subject to the Act.
• Doing business in Canada can continue to be evaluated using Canadian tax considerations. Whether an entity does business in Canada can be evaluated using the factors considered by the Canada Revenue Agency when determining if a person is “carrying on business in Canada” for GST/HST purposes, including location(s) where goods are produced, sold or distributed; employees are located; deliveries, payments, purchases or contracts are made or assets are acquired; and, assets, inventories or bank accounts are located.
• “Employee” is no longer defined by reference to Canadian common law. Full-time, part-time and temporary employees in Canada or in any other jurisdiction are included in headcount. Independent contractors are expressly excluded.

Guidance on Whether an Entity Must Report

• Public Safety Canada will not enforce the Act against entities which only “sell” or “distribute” goods. The Updated Guidance states that entities that “sell” or “distribute” goods but do not “produce” or “import” goods (or control entities which do) are not expected to report under the Act. Public Safety Canada has said that it will not take enforcement action against such entities, despite the Act itself retaining this language.
• “Goods” is now defined in the Updated Guidance as “tangible physical property.” In determining whether an entity is engaged in importing or producing “goods,” real property, electricity, software services, insurance plans and other intangibles are excluded.
• An entity is “importing” goods if it is the true importer that, in reality, caused goods to be brought into Canada. Generally, an entity “cause[s] goods to be brought into Canada” if it accounts for or pays the duties on imported goods. Customs brokers, express couriers, trade consultants and other third parties authorized to transact business on behalf of the importer or to account for goods in lieu of the importer will generally not be considered importers. The Updated Guidance also reiterates that purchasing goods produced outside Canada from a third party, where the third party is considered to be the importer, does not count as importing goods.
• Further direction is provided about the meaning of “control” of an entity. The Updated Guidance now refers entities to the Office of the Superintendent of Financial Institutions guidance on control when assessing whether entities “control” direct or indirect subsidiaries.
• Further clarification is provided about the “de minimis threshold” that is applicable to importing or producing goods. The previous Guidance stated that the Act should be understood as excluding “very minor dealings.” The Updated Guidance has expanded upon this concept, explaining that “very minor dealings” may be interpreted with generally accepted principles of de minimis and evaluated within the context of each entity’s business. This suggests that very small or trivial amounts of imports in the context of an entity’s business may be “very minor dealings,” and therefore do not give rise to a reporting obligation.

Guidance on the Requirements of the Report 

• Entities are not required to report specific instances or allegations of forced or child labour. The Updated Guidance reiterates that entities should not disclose sensitive information that could create legal risk or compromise privacy. Description of issues identified and measures taken do not need to reference specific instances, persons or groups.
• Specific responses can be anonymized. If an entity does report on specific instances, the Updated Guidance reiterates that anonymizing the details, for instance, by describing a generalized case study, is acceptable.
• A general description of how an entity assesses and manages potential risks is sufficient. The purpose of the Act is not to certify that an entity is “risk-free,” but to show that the entity has taken steps to identify and address risks if steps have been taken.
• Entities can continue to note where they are in the process of developing their response to forced or child labour, even if processes have not yet been implemented. 
• If there is evidence of forced or child labour, but no remediation or other measures have been taken, it is sufficient to state this in the report. The purpose of the Act is to encourage transparency, not to penalize reporting entities.

Guidance on Filing a Report

• The Updated Guidance confirms that entities can continue to file modern slavery reports used in other jurisdictions, so long as the entities ensure that they meet the requirements of the Canadian Act.
• Public Safety Canada’s form of attestation is no longer mandatory. The Updated Guidance clarifies that the form of attestation in the prior and Updated Guidance is an “example,” allowing flexibility in drafting less onerous attestations so long as they meet the requirements of the Act.
• The Updated Guidance clarifies that the governing body of an entity does not have to approve the Questionnaire, but approval of the Report by the entity’s governing body is still required.
• It is up to the reporting entity to decide who will complete the Questionnaire. Anyone authorized by the entity can fill out the Questionnaire on its behalf, though that person may be contacted by Public Safety Canada in the event of any questions.
• The Updated Guidance confirms that attestations can include electronic and conformed signatures, however typing “signed” in the signature block does not constitute a signature of attestation.
• Entities incorporated under the Canada Business Corporations Act (CBCA) can provide the Report to shareholders along with its annual financial statements using their “standard means of delivery.” A standard means of delivery for many companies accepted under the CBCA includes notice and access means.
• Entities are encouraged to retain a repository of their annual reports, even if the Act only requires the publication of the current annual report on their website.

The Updated Guidance for Government Institutions

The Updated GI Guidance was less significant than the update for entities, and primarily sought to streamline the prior guidance for government institutions. In addition to reinforcing the need for government institutions to report in both official languages and that a Report and Questionnaire are both mandatory, the Updated GI Guidance contained three key points:

• Provincial and municipal governments are not subject to the reporting requirements as government institutions. Regardless, some provincial Crown corporations and other provincial or municipal government bodies may fall under the definition of an entity. 
• Only those organizations that meet the definition of “government institution” as set out in the Act should be reporting as government institutions. Other public organizations, such as publicly funded universities and hospitals, do not meet the definition of government institution under the Act. These organizations should assess whether they meet the definition of “entity” under the Act and determine whether they are subject to the reporting obligations.
• The Updated GI Guidance clarified the “de minimis threshold” for producing, purchasing or distributing by a government institution. Like the Updated Guidance for entities, the Updated GI Guidance clarified the intended meaning of “very minor dealings.” However, the Updated GI Guidance expressly excluded goods purchased using an acquisition card from the scope of the reporting obligation.

Key Takeaways

The Updated Guidance is an opportunity for businesses to assess the applicability of the Act’s reporting requirements ahead of the May 31, 2025 (or earlier for certain CBCA companies) deadline for reports about the current fiscal year.

Consistent with the prior Guidance, the Updated Guidance highlights that entities are expected to approach reporting by providing concrete descriptions of actions they have taken to address risks of forced or child labour, rather than purely aspirational statements. It, however, also encourages entities to note where they are in the process of developing their response to forced labour and child labour, even if those responses are not fully implemented. Accordingly, as the 2024 calendar year draws to a close, companies should also take this opportunity to revisit commitments or processes described in their inaugural Reports to ensure that they are fulfilling any commitments made in those Reports while there is still time to further their implementation, as well as put in motion any steps that will form part of the 2025 Report.

To learn more about the developments surrounding Canada’s forced labour and modern slavery legislation, see our previous May 2023 Blakes Bulletin: Parliament Passes Bill S-211: The New Forced Labour and Supply Chain Reporting Law, October 2023 Blakes Bulletin: Complying With Canada’s Forced and Child Labour in Supply Chains Act: Are You Ready?, December 2023 Blakes Bulletin: Part I: Canada Unveils Long-Awaited Guidance on Act Fighting Forced Labour and Child Labour in Supply Chains, January 2024 Part II: Significant Implications Arising From Guidance on Modern Slavery Act, and November 2024, From Challenges to Compliance: A Look at the Inaugural Reporting Period Under Canada’s Forced and Child Labour Legislation.

For further information about any aspect of this bulletin, please contact the authors of this bulletin or any member of our International Trade group.