Companies urged to consider forced labour in supply chains

A recently proposed private member’s bill amends the Customs Tariff to restrict goods manufactured by slave labour coming into Canada. John McKay, the member of parliament for Scarborough-Guildwood, introduced Bill C-423, the Modern Slavery Act in December.

Companies urged to consider forced labour in supply chains
Benedict Wray says more jurisdictions are adopting legislation about forced labour or child labour in supply-chain management.

A recently proposed private member’s bill amends the Customs Tariff to restrict goods manufactured by slave labour coming into Canada.

John McKay, the member of parliament for Scarborough-Guildwood, introduced Bill C-423, the Modern Slavery Act in December.

It requires Canadian businesses that meet specific requirements to produce annual reports about what they’ve done in the past year to “prevent and reduce the risk that forced labour or child labour is used at any step of the manufacture, production, growing, extraction, or processing of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.” Reports must be posted on the company’s website, the bill says.

Businesses that meet two of the following criteria must comply: those that have at least $20 million in assets, generate at least $40 million in revenue or employ an average of at least 250 employees.

More jurisdictions are adopting similar legislation about supply-chain management, says Benedict Wray, an associate in Norton Rose Fulbright Canada LLP’s Ottawa office.

Similar laws exist in California, the United Kingdom and Australia.

“It takes a certain amount of time to get this on to the statute books, and it takes a certain amount of time to get it up and running,” he says, estimating that usually three to four years are needed for laws like this to be passed and implementation to begin.

The bill, as proposed, sets Jan. 1, 2020 as the enforcement date.

The bill also seeks to amend the Customs Tariff to exclude goods made using child labour from coming into Canada.

More regulations would be required to determine how this part of the bill would come into force, says Wray.

“We don’t know what the precise conditions will be at this point. Speculating a little bit, I would anticipate that this will be on a product-by-product basis,” he says.

This proposed change makes this bill unique compared to other jurisdictions’ laws aimed at curbing forced or child labour, he says.

“Trade laws don’t generally allow you to discriminate against goods on the basis of how they’re made if they’re like products,” says Valerie Hughes, senior counsel in Bennett Jones LLP’s Ottawa office.

“This would allow you to discriminate between goods if they are made by labour, forced labour [or] child labour.”

Enforcing such legislation can be difficult, says Wray, noting criticisms in the United Kingdom that reporting obligations aren’t being enforced. Companies that don’t comply often face public scrutiny, he says.

“You do see market effects and you do see criticism being made very publicly of companies if, indeed, an ‘inadequate’ report is provided,” Wray says. “When things are identified but they’re not being followed up on or there’s no change, that’s something that’s attracted public criticism.”

Under Bill C-423, companies that don’t comply could face summary convictions and fines of up to $250,000.

“The criminal provisions that were introduced in this bill really provide one of the key opportunities to enforcement that I think, so far, other pieces of legislation have lacked,” Wray says.

While this is a private member’s bill, the government recently indicated it plans to consult on similar legislation. In October 2018, the standing committee on foreign affairs and international development presented a report to the federal government, “A Call to Action: Ending All the Forms of Child Labour in Supply Chains.” It recomends the government develop policies and a legislative framework that motivates businesses to eliminate child labour in supply chains. 

The government responded to the report in February.

“The Government of Canada will apply its existing platforms, networks, multilateral and bilateral tools to combat child and forced labour in supply chains involving Canada,” the response says.

“We will further seize opportunities for advocacy and programming, where possible, to contribute to the global effort to address this issue and will begin a process in 2019 to consult on supply chain legislation.”

Even if Canada doesn’t adopt such legislation, businesses should take this as an opportunity to consider their supply-chain practices, says Sander Grieve, a partner in Bennett Jones LLP’s Toronto office.

“It will encourage companies to wake up to the risks that exist within their operations and supply chains and encourage them to take steps to address them,” he says.

Similar legislation worldwide means companies should already be considering practices used in their supply chains, says Hughes.

“Even if we don’t have our own piece of legislation that prohibits the import of these products, if we’re going to be exporting to jurisdictions that have this type of legislation, we’ll have to be ready to provide the documentation required to demonstrate that the products we’re exporting are not infringing their slavery legislation or similar legislation,” says Hughes. “We will need to have mechanisms in place to allow us to respond to whatever needs, whatever requirements we have to fill out to demonstrate we don’t conflict with their laws.”

Other lawyers are considering how trade laws can be modified to address human rights issues, including the refugee crisis.

Last year, the Centre for International Governance Innovation and the World Refugee Council published “Harnessing Trade Law to Support Refugees and Host Countries.” The disussion paper by Lawrence Herman, a trade lawyer at Herman & Associates in Toronto, “recommends that a concerted effort be made to assess the validity of trade concessions and duty relief” to help refugee communities generate income and provide some economic relief to host countries.

Herman writes in the report that “the most direct, and in many respects the least complicated, trade measure would entail the reduction of import duties on selected manufactured and agricultural goods produced by refugee/immigrant communities in host countries.”

“It would be some measure of relief whereby refugee communiites that are engaged in manufacturing some products — and a lot of them are — would be given trade preference that would allow them as a community to earn money,” he told Law Times, explaining that such actions would make these goods easier to export.

The paper acknowledges significant hurdles to implementing this recommendation, notably that most-favoured nation requirements mean giving equal treatment to all imported goods from all sources. The paper says waivers can apply on a case-by-case basis in exceptional circumstances.

“The scale of most refugee crises and the enormous cost and responsibility borne by the host country could qualify as an ‘exceptional circumstance,’” the paper says.

“International trade rules are quite strict,” he told Law Times.

Herman says changing international trade law cannot solve all problems associated with the refugee crisis, such as helping refugees return to their homelands or integrating refugee communities into host countries’ economies.

“It’s not a perfect answer and it doesn’t deal with all the many, many human rights issues because trade law deals with trade,” he says.

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