Mitigating Risk Exposure To Forced Labour In The Supply Chain: Part II - Canada's Response To Forced Labour

• Published date: 09 November 2021
• Subject Matter: Corporate/Commercial Law, International Law, Compliance, Corporate and Company Law, International Trade & Investment
• Law Firm: McCarthy Tétrault LLP
• Author: Terms Of Trade, John W. Boscariol, Ashley Taborda and Melina Zaccaria

In Part I of this three-part series, we provided an overview of the concerns associated with forced labour in supply chains. In doing so, we highlighted the forced labour "global crisis" affecting millions of people on any given day, as well as billions' of dollars of goods. It is increasingly being recognized that forced labour is an issue requiring a global, coordinated response. This Part II considers the role Canada is playing in this global response, including through the imposition of a ban on the importation and distribution of products made in whole or in part from forced labour (the "Import Ban"), as well as what we can expect to see going forward in the form of Canadian supply chain legislation. Part III will conclude this series by setting out a number of recommended actions that companies can (and should) be taking right now to mitigate their risk exposure to forced labour in their supply chains.

Canada is actively taking steps to address forced labour concerns

Canada has taken a variety of actions in recent years to address concerns related to forced labour and other human rights violations. At a high-level, these responses have included the imposition of economic sanctions against parties involved in or determined to be facilitating gross violations of human rights or acts of significant corruption, new export and technology transfer controls, and the issuance of advisory notices and an integrity declaration for companies sourcing from or supplying the Xinjiang region of China - details on these recent actions can be found in our previous client alerts Human Rights Due Diligence in the Supply Chain: Canada's Advisory on Doing Business With China and Canada Announces Human Rights Sanctions Against China.

Enforcement of the Import Ban

Canada has also implemented the Import Ban, which expanded upon the existing ban on goods produced by way of prison labour.¹ On July 1, 2020, the Canadian Customs Tariff was amended as part of the implementation of the Canada-United States-Mexico Agreement, to prohibit the importation of goods that are produced wholly or in part by forced labour, from any country - not just from the United States or Mexico. The Import Ban operates through subsection 136(1) of the Customs Tariff, which provides that the "importation of goods of tariff item No. 9897.00.00...is prohibited" and tariff item no. 9897.00.00, which references goods that are "mined, manufactured or produced wholly or in part by forced labour". Sections 101-102 of the Customs Act further grant customs officers the ability to detain prohibited goods and provide for their disposal.

According to one government report, the regime operates as follows:

Shipments containing goods suspected of being produced by forced labour are detained at the border for inspection by a border services officer. If in the judgement of the officer, the goods were produced by forced labour, the officer will apply the appropriate tariff classification and prohibit the goods from entering Canada. Tariff classification determinations are made on a case-by-case basis for each specific import, based on available supporting evidence and analysis.²

As of April 29, 2021, the Canada Border Services Agency ("CBSA") confirmed that it had not yet started enforcing the Import Ban,³ which delay was reportedly due to the time required to establish the legal framework for the program, including developing indicators, because "[u]nlike most other inadmissible products, there is no visual clue for a Border Services Officer to understand the labour standards by which a particular product was produced".⁴ However, in May 2021, Reuters reported on the Canadian government's ongoing investigation into allegations of forced labour by Malaysia's palm oil and glove manufacturing industries, indicating that Employment and Social Development Canada had confirmed in writing that it is "actively researching a number of forced labour allegations in different countries and sectors".⁵

Going forward, we expect to see increasing enforcement activity in respect of the Import Ban, as Canada's program is implemented, and especially if Canada is influenced by its southern neighbour. The United States has a similar ban, which prohibits the importation of merchandise produced, wholly or in part, by prison labour, forced labour, and/or indentured labour, including forced or indentured child labour. This ban allows U.S. Customs and Border Protection ("CBP") to detain shipments of goods suspected of being imported in violation of this ban. Importers of detained shipments then have the opportunity to export their shipments or demonstrate that the goods were not produced with forced labour.⁶

The United States has been active in enforcing this ban - for example, a Globe and Mail article reported that in the last two months of 2020 alone, the CBP had detained 90 shipments for suspicions of forced labour.⁷ The United States has also issued a number of "Withhold Release Orders" on imports - including on cotton, tomato products, and, most recently, solar panels - where the CBP believes such imports involve the use of forced labour.⁸ Notably, the CBSA has indicated that it is working with the CBP to discuss information sharing and best identification practices.⁹

We note that this issue is also attracting media attention, which may spur government action - CBC News (along with The Guardian and Investigative Reporting Project Italy, a non-profit media organization) is conducting a Marketplace investigation into grocery store products (tomatoes in particular)...