The first day of debate in the House of Commons on Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff, took place on March 6, 2023. The Bill requires that each specified business is required to prepare, file and publish a supply chain risk report which must include, both its policies and its due diligence processes in relation to forced labour and child labour.
Some Canadian businesses have been diligently mapping their supply chains, conducting supply chain due diligence, assessing risks of forced labour and child labour in their supply chains, and taking other critical steps in preparation for the passage of Bill S-211. Many of those businesses are also taking those steps to comply with Canada's ban on the importation of goods mined, manufactured or produced wholly or in part by forced labour. But, it appears that many are not.
While many of our clients have been asking a wide variety of questions about Bill S-211 and its impact on their businesses, many others have been asking about the differential enforcement by the United States and Canada of their respective bans on the importation of forced labour-made goods. This article provides insight into this question.
Enforcement at the border is not equal. The gap is wide.
Canada
As part of the implementation of the Canada-United States-Mexico Agreement (CUSMA), Canada agreed to prohibit the importation of goods mined, manufactured or produced wholly or in part by forced labour. On July 1, 2020, Canada amended its Tariff Act to implement this prohibition. However, it appears that since July 1, 2020, there have been no successful seizures or detentions at the Canadian border by the Canada Border Services Agency (CBSA) of goods made in whole or in partwith forced labour. This is quite a contrast to what has transpired at the American border. It is also a striking contrast to World Vision Canada's Supply Chain Risk Report 2023: Canada's Growing Child & Forced Labour Problem, disclosing that nearly CAD$48 billion in risky goods were imported into Canada in 2021.
United States
Enforcement of the forced labour ban at the US border has been increasing over the past few years and this trend will no doubt continue given that the US Customs and Border Protection (CBP) received a US$70-million budget increase for FY23 and the authority to hire 300 more CBP personnel to support the Uyghur Forced Labor Prevention Act (UFLPA).
Section 307 of the US Tariff Act of 1930 (19 U.S.C. 1307) prohibits the importation of all goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labour or/and forced labour or/and indentured labour, including forced or indentured child labour.
When CBP has information reasonably indicating that imported goods are made by forced labour, the agency will issue a Withhold Release Order (WRO) ordering CBP personnel at US ports of entry to detain shipments of those goods, unless and until the importer establishes by satisfactory evidence that the merchandise is admissible (i.e. evidence submitted to establish admissibility must demonstrate that the imported merchandise was not produced in whole or using forced labour).
In addition to the issuance of WROs, the US is enforcing a new law that came into force last year. On June 21, 2022, the UFLPA came into force in the US. The UFLPA establishes a rebuttable presumption that the importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (XUAR) of the People's Republic of China, or produced by certain specified entities, are prohibited from entry into the US unless the Commissioner of CBP determines that the importer of record has complied with specified conditions and, by clear and convincing evidence, has proven that the goods, wares, articles, or merchandise were not produced using forced labour.
The numbers tell the story
Currently CBP has 46 active WROs and seven Findings (where CBP has conclusive evidence of the use of forced labor in the manufacturing or production of goods and has seized the goods). In 2022, CBP stopped 3,605 shipments valued at US$816.5 million (CAD$1.086 billion) at the U.S. border or forced labour concerns.
On March 14, 2023, CBP unveiled its online UFLPA Enforcement dashboard. Between June 21, 2022 an March 3, 2023 , a total of 3,237 shipments valued at US$961 million (CAD$1.278 billion) were stopped by CBP and were subjected to UFLPA reviews or enforcement actions. Among the total shipments, 424 have been denied entry, 1,090 have been released and 1,723 are pending actions by the importers or CBP.
In connection with the UFLPA, CBP has published and posted online very detailed guidance and information as to what it expects importers to be doing in terms of supply chain mapping and due diligence. CBP has intentionally set the bar at a high level. CBSA has yet to share its detailed expectations from importers That being said, the gap between the quickly expanding enforcement at the U.S. border and the lack thereof at the Canadian border continues to widen … mind the gap!
Thefact that the CBSA has not had one successful seizure of forced labour-made goods at the Canadian border does not mean that this differential enforcement gap won't close without notice in the future.Take note that Canada's Federal Budget 2023, released on March 28, 2023, announced the federal government's intention to introduce legislation by 2024 to eradicate forced labour from Canadian supply chains and to strengthen the import ban on goods produced by forced labour.
What's next?
When I have been asked "What's next?", my answer has consistently been "Enhanced supply chain transparency, compliance and reporting."
Bill S-211 is intended to bring greater transparency to supply chains. Canadian businesses importing goods into Canada that are not paying attention to the existing ban on the importation of forced labour-made goods are doing so at their peril. If passed into law, Bill S-211 will require many of those businesses to publicly identify and annually publish details of the steps they have taken to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in their supply chains. Canadian businesses must continue their efforts to prepare for enhanced supply chain transparency, compliance and reporting, as well as a new ban on the importation of child labour-made goods and a strengthened ban on the importation of forced labour-made goods.
How we can help
To find out more about how Gowling WLG can help your business with:
- Supplier codes of conduct
- Directors duties and board education/training
- Updating supply contracts
- Supply chain mapping and due diligence
- Stakeholder identification and engagement
- ESG governance and reporting
- ESG regulatory and litigation
- Class action defence
For further information, contact the author Stephen Pike at stephen.pike@gowlingwlg.com.
More in this series
For further information, watch Stephen's latest webinar on Forced Labour and Child Labour in Supply Chainsor read the first 16parts of our Guide to addressing modern slavery in your business and supply chain for Canadian directors:
- Part 1: Introduction to modern slavery issues in businesses and supply chains in Canada
- Part 2: Will Canada take legislative and regulatory action and how will it impact Canadian businesses?
- Part 3: Modern slavery and the shifting paradigm of corporate purpose and directors' duties
- Part 4: In the fight against modern slavery, COVID-19 presents a rare opportunity for Canadian businesses to get it right
- Part 5: Modern slavery rules are coming to Canada
- Part 6: Canada bans imports of forced labour goods: Now what?
- Part 7: Will the third time be the charm: modern slavery legislation introduced again in Canada's Parliament
- Part 8: Now is the time for Canadian companies to "Do Diligence" on their supply chains
- Part 9: 2021 brings new pressure on Canadian businesses to manage supply chain forced labour risks
- Part 10: Where do we start?
- Part 11: Conducting supply chain risk assessment and due diligence
- Part 12:How your Business can operationalize its commitment not to use forced labour and child labour
- Part 13: Bill S-211: Canada gets ready to join the fight against forced labour and child labour in supply chains
- Part 14: Dynamic legal changes to address forced labour and child labour in supply chains
- Part 15: ESG update for Canadian Boards of Directors: Forced labour in supply chains
- Part 16: Shining a light on forced labour and child labour in supply chains: Canada's Bill S-211 proposes new ESG reporting obligations for businesses
