Canada's new Fighting Against Forced Labour and Child Labour in Supply Chains Act requires mandatory reporting for certain businesses. The filing deadline is May 31. Non-compliance is a criminal offence and punishment can include fines of up to $250,000 and/or potential imprisonment for companies and their officers/employees. The Report filed with the Minister of Public Safety is made public, so there are also potential reputational risks for non-compliance.
What businesses are required to report?
In addition to Government Institutions, an entity (corporation, trust, partnership or other unincorporated business) will be subject to compliance obligations as a “Reporting Entity” under the Fighting Against Forced Labour and Child Labour in Supply Chains Act if it is either:
Listed on a stock exchange in Canada; or
Has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following three conditions for at least one of its two most recent financial years:
a) it has at least $20 million in assets,
b) it has generated at least $40 million in revenue, and
c) it employs an average of at least 250 employees.
Note: The thresholds above, include the revenue, assets and employees of any entities it controls (i.e., its subsidiaries/partnerships etc.).
AND: the entity either
(a) produces, sells or distributes goods in Canada or elsewhere;
(b) imports into Canada goods produced outside Canada; or
(c) controls an entity engaged in any activity described in paragraph (a) or (b).
It is important to note that this language is exceptionally broad, encompassing non-Canadian entities as well. The "control" component considers both direct and indirect control, including the businesses of subsidiaries, which may also be required to report.
Furthermore, there is no volume or value threshold attributed to the producing, selling, importing, or distributing criteria. For example, the simple importation of goods such as standard office supplies can be captured depending on the circumstances. Therefore, given the serious nature of the Act and its potentially broad application, it is crucial for entities to exercise caution.
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