Canadian firms face significant risks if their supply chain uses forced labour

Author: Paul Conlin, Greg Landry, Shannel Rajan and Drew Tyler

On July 1, 2020, Canada prohibited the importation of “goods mined, manufactured or produced wholly or in part by forced labour”.  “Forced labour” is not defined in the applicable legislation; however, international conventions define it as “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily” (see the International Labour Organization’s Convention Concerning Forced or Compulsory Labour, 1930 (No.29)).

Canadian firms that deal in imported goods should be familiar with labour conditions in their supply chains and establish compliance policies to prevent their dealing in goods produced using forced labour. This is particularly the case for companies that deal in goods sourced in whole or in part from the Xinjiang Uyghur Autonomous Region of China. On January 12, 2021, the Government of Canada announced it would be taking steps to defend the rights of Uyghurs in China and other ethnic minorities subjected to forced labour.[1] The announcement signals that Canada will likely begin taking steps in the immediate future to enforce the prohibition on importing and dealing in goods produced using forced labour.

Risks extend to importers, purchasers of imports and their directors and officers of imports

Enforcement and compliance measures under the Customs Act and the Customs Tariff Act can be severe.

Customs information must be true, accurate and complete. This includes properly classifying and identifying imported goods produced from forced labour. Further, it is prohibited to not only make a false statement, but to acquiesce in the making of a false statement or to willfully, in any manner, evade or attempt to evade compliance with Canada’s customs laws. Wilful blindness or a “hear no evil, see no evil” approach to compliance opens a company to risk, particularly given the obligation to amend a previous customs declaration based on a subsequent “reason to believe” that the declaration was inaccurate.

Risk does not rest only on the importer of record. It is prohibited to possess, dispose of, purchase, sell or acquire goods imported in contravention of Canada’s customs laws. Further, those in possession of imported goods, and who have a reason to believe they were imported contrary to Canada’s customs laws, are obliged to report them to the Canada Border Services Agency. Those guilty of dealing in prohibited imported goods or not reporting prohibited imported goods in their possession commit an offence under the Customs Act.

Directors and officers of companies can also face personal liability. Where a company is guilty of an offence under the Customs Act, any director, officer or agent of the company that authorized, assented to or acquiesced in the commission of the offence is a party to the offence.

The maximum penalty for an offence under the Customs Act is a fine of C$500,000 or five-years imprisonment. In addition to penalties, goods may be seized and forfeited.

Ongoing risk to importers and downstream sellers

The risks associated with importing, trading and possessing goods produced from forced labour continue beyond the sale or importation of the goods. For example, an importer may sell goods to a manufacturer or reseller and subsequently learn that those goods were produced, in part, from forced labour. Given that it is now illegal to possess or deal in those goods, business and legal consequences exist for all parties subsequently involved with those goods. If a retailer or manufacturer learns that goods in their inventory were produced from forced labour, those goods become unusable and subject to forfeiture to the government.

The goods may have been imported in good faith, but that is not enough. There is an ongoing obligation to correct customs declarations. A post-importation discovery that goods were produced using forced labour will result in those goods being classified as prohibited.

Canadian firms dealing in imported goods should take steps to ensure the integrity of their supply chains

Canadian importers and purchasers of imports should take steps to ensure that their supply chain does not include goods produced from forced labour. Firms should have policies to continually vet suppliers and supply chains and procedures to deal with the consequences of learning that goods in which they deal were produced with forced labour.

Ensuring compliance will be challenging. Many companies may not presently have the capacity to determine whether suppliers, and suppliers-to-suppliers, use forced labour. It is also not yet clear how far down the supply chain the Canada Border Services Agency will go when determining whether goods are made “in part” from forced labour. Nevertheless, a rigorous compliance regime will greatly assist in limiting potential legal exposure and supply chain disruptions.

[1] News Release, “Canada announces new measures to address human rights abuses in Xinjiang, China” (January 12, 2021) available at: