Public Safety Canada Releases Updated Guidance on Forced and Child Labour Reporting Rules

Public Safety Canada (“PSC”) recently published updated guidance on the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”), which clarifies the interpretation and implementation of the Act (the “Updated Guidance”). By way of reminder, the entities under the Act that need to submit a report include those entities that:

1. Are listed on a stock exchange in Canada; OR
2. Have a place of business in Canada, do business in Canada, or have assets in Canada, AND meet two of the following three criteria for at least one of its two most recent financial years on a consolidated basis (i.e., including any subsidiaries):
   1. $20 million in assets;
   2. $40 million in revenue;
   3. an average of 250 or more employees.

Under the Act, an entity was formerly considered to have reporting obligations if it met either a) or b) above AND it produced goods in Canada or elsewhere, or it imported goods produced outside of Canada. However, the Updated Guidance has now clarified certain key aspects of the reporting process and the reporting requirements for 2025 and beyond. A summary of the most important takeaways from the Updated Guidance are as follows:

The definition of “goods”

Previously, “goods” was to be understood in the ordinary sense of the word. Under the Updated Guidance, however, the definition of “goods” has been clarified to mean tangible physical property that is the subject of trade and commerce. Significantly, real property, electricity, software services, financial services, and insurance plans have been explicitly excluded from this definition, and any business that is involved solely in such aforementioned activity is not required to submit a report in 2025.

What it means to “distribute or sell goods”

While the Act states that certain entities may be required to submit a report if they engage in a business activity, one of which is the production, sale, or distribution of goods in Canada or elsewhere, the Updated Guidance now clarifies that only entities that are directly involved in the production of goods, or control an entity which does, will be required to submit a report. Notably, entities solely engaged in distributing and/or selling are not expected to submit a report in 2025. For example, transportation companies that are only involved in the sale and distribution of goods and do not engage in any other applicable business activities referenced under the Act will not be required to submit a report.

What it means to “import goods into Canada”

Previously, entities were deemed to be “importing goods” if they were considered to be an “importer” of the Customs Act. However, the Updated Guidance now specifies that an entity is only supposed to be “importing goods” if it is directly involved in the importation of goods and specifically caused such goods to be brought into Canada by either paying the duties on or accounting for such imported goods. Additionally, the updated guidance has clarified that trade consultants, customs brokers, express couriers, and other third parties authorized to transact business on behalf of an importer will not be considered an “importer” for the Act.

What it means to “have assets in Canada”

While the Act notes that entities that have assets in Canada may be required to submit a report, the Updated Guidance now specifically clarifies that having assets in Canada refers solely to tangible property in Canada and should not include intangible things like intellectual property, securities, and goodwill. More specifically, entities that have a Canadian subsidiary but no other property in Canada (e.g., equipment or real estate) will not be required to submit a report in the future.

The definition of “control”

Under the Act, the definition of “control” is open-ended. More specifically, under the Act, an entity may (i) directly engage in producing goods in Canada or elsewhere, or (ii) import goods produced outside of Canada, or (iii) control, directly or indirectly, another entity that engages in these activities. Under the Updated Guidance, however, PSC has specified that certain accounting standards (e.g., International Financial Reporting Standards or Generally Accepted Accounting Principles) may be used as the basis for determining “control”. The Updated Guidance also makes specific reference to the guidance offered by the Office of the Superintendent of Financial Institutions as it concerns “control,” which provides information on elements that need to be determined when one entity has “control in fact” over another entity. As it concerns franchisees, the Updated Guidance notes that whether a franchisor needs to report depends on whether it controls, in the corporate sense, any entities that produce goods in Canada or elsewhere or that import goods into Canada.

Reporting Obligations in Other Jurisdictions

PSC was previously of the view that the requirement to report under the Act was its own standalone obligation. However, the Updated Guidance now explicitly recognizes that many entities operating internationally are subject to reporting requirements under supply chain legislation in multiple jurisdictions, such as the United Kingdom’s Modern Slavery Act 2015 and Australia’s Modern Slavery Act 2018. Further, the Updated Guidance has now specifically confirmed that entities may use the same report produced for other jurisdictions so long as all reporting requirements of the Act are included and it covers the appropriate reporting period dictated by the Act. 

The Online Questionnaire’s Purpose

The Updated Guidance now provides that entities may use the online questionnaire as a resource when developing their annual report. While there have not been any new substantive requirements for specific measures to be implemented, the Updated Guidance notes that some aspects of the online questionnaire may limit an entity’s or government institution’s ability to elaborate on complex information or provide nuance in their responses. As such, the Updated Guidance now encourages entities to provide more detailed information and supplementary content (e.g., graphs or charts) that go beyond the basic requirements.

Timelines for Report Submission

Although the next reporting deadline in May 31, 2025, the Updated Guidance has clarified that some entities will have different reporting dates depending on their financial year end. More specifically, while reports must reference the activities undertaken during the previous financial year, reports may be submitted on or before May 31. As such, the submission date of the report will determine which financial year is being reported. For example:

• If your financial year follows the calendar year and the report is submitted on May 31, 2025, then the report would cover activities undertaken from January 1, 2024 to December 31, 2024;
• If your financial year is April 1 to March 31, then a report submitted on February 1, 2025 would cover activities undertaken from April 1, 2023 to March 31, 2024; or
• If your financial year is from April 1 to March 31, then a report submitted on May 31, 2025, would cover activities undertaken from April 1, 2024 to March 31, 2025.

Conclusion

As you and your team prepare for the next round of reporting, it is essential to thoroughly review and understand the Updated Guidance. You may find that the Updated Guidance will impact your organization’s decision regarding whether or not you have to file a report. Your review should be done early to allow for the preparation of a fulsome report if necessary. It remains worth noting that failure to comply with the Act will still result in a $250,000 fine for individuals, such as directors, officers, or employees. The federal government has not yet indicated what level of noncompliance will result in such a fine.

Our team has successfully advised a wide range of high-profile clients across diverse industries, consistently delivering exceptional outcomes. We have a proven track record of helping organizations develop robust strategies to not only ensure compliance with modern slavery regulations but also streamline their entire supply chain management. More specifically, here is a glimpse of the elite services we provide:

• Analyzing how the Updated Guidance impacts your organization and crafting tailored solutions to drive compliance.
• Leading the drafting of your report, ensuring it is both comprehensive and strategically aligned with your goals.
• Creating customized questionnaires to be sent to your suppliers, ensuring clarity and precision in the data you collect.
• Handling complex questionnaires received from your clients, making sure your responses are thorough and meet all required standards.
• Drafting a comprehensive supplier code of conduct, alongside any critical documentation to enhance your supply chain integrity and compliance.

If you have any questions on the above or anything related to it, please get in touch with the head of the Dickinson Wright S-211 team, Wendy Hulton at WHulton@dickinsonwright.com who gratefully acknowledges the authors of this update: Griffin Peloso and Helen Schweitzer, and articling student, Vivienne Stern. 

This communication is intended for informational purposes only and does not constitute legal advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations upon request.