On November 15, 2024, Public Safety Canada updated its Guidance for entities regarding the Fighting Against Forced Labour and Child Labour in Supply Chains Act, SC 2023, c 9 (the “Act”).
The Act came in to force on January 1, 2024. It requires entities that satisfy certain business presence and financial criteria to submit an annual report regarding their supply chains that is focused on reducing forced and child labour.
The recent update revises and elaborates on several issues regarding whether and how an entity is required to submit a report. As discussed below, the recent guidance is particularly noteworthy for clarifying whether transportation and logistics companies have a reporting obligation under the Act.
Entities that Only Sell or Distribute are not Expected to Report
Section 9(a) of the act states that an entity “producing, selling or distributing goods in Canada or elsewhere”, that meets the business presence and financial criteria must file an annual report regarding its supply chain activities.
As indicated in our previous blog, the Act does not define the scope of “distributing goods” or provide specific guidance regarding transportation and logistics companies’ reporting obligations.
In its recent guidance, Public Safety Canada indicates that “entities solely involved in distributing and selling are not expected to report under the Act.” For the purpose of section 9(a) of the Act, only entities directly engaged in the production of goods are required to submit a report.
While seemingly at odds with the language of the Act, the updated guidance confirms that “Public Safety Canada will not seek enforcement action” for entities who only sell or distribute, but do not produce or import goods.
Therefore, unless they are otherwise involved in producing or importing goods or control an entity that does so, most transportation and logistics companies are not required to submit a supply chain report under Public Safety Canada’s current guidance.
Clarified Definition of Importer
Public Safety Canada’s previous guidance was that the entity responsible for accounting for goods under the Customs Act was considered to be an importer for the purposes of the Act. That presumably included logistics companies that acted as customs brokers.
The updated guidance takes a more functional approach. An entity is now only considered to be importing goods if it is “the true importer that, in reality, caused the goods to be brought into Canada” and is generally the entity that pays the import duties.
Further, the updated guidance expressly states that customs brokers and similar entities are not importers under the Act:
An entity is importing goods if the entity is the true importer that, in reality, caused the goods to be brought into Canada. This is generally the entity that accounts for, or pays the duties on the goods being imported. Note that 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 (i.e., because they will usually not be the person that, in reality, caused the goods to be imported).
Very Minor Dealings
Public Safety Canada’s recent guidance reiterates that “very minor dealings” involving the production or import of goods does not trigger a reporting obligation. The recent guidance adds that the meaning of very minor dealings “may be interpreted in accordance with generally accepted principles of de minimis and evaluated within the context of each entity’s business.”
While somewhat vague, this exception may be useful for entities that are sporadically involved in producing or importing goods. Those activities will have to be analyzed in light of the entity’s overall business to determine whether they create a reporting obligation.
Guidance Subject to Change
Public Safety Canada’s guidance does not change the language of the Act and there are currently no regulations under the Act. Therefore, while this guidance is helpful, it is subject to change at any time and may evolve with Public Safety Canada’s priorities in administering and enforcing the Act.
Please contact Ian Breneman if you have any questions regarding the Fighting Against Forced Labour and Child Labour in Supply Chains Act.
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