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2021 Brings New Pressure On Canadian Businesses To Manage Supply Chain Force Labour Risks – Government, Public Sector


2021 Brings New Pressure On Canadian Businesses To Manage Supply Chain Force Labour Risks

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As part of the implementation of the Canada-United States-Mexico
Agreement (CUSMA), the Customs Tariff Act was amended on July 1,
2020, to prohibit the importation from all countries of goods
produced, in whole or in part, by forced or compulsory labour.
While the CUSMA quietly became law in Canada, Canadian businesses
paid scant attention to this new prohibition. The Canadian
government, until mid-January, was silent on enforcement of this

Canadian businesses are now quickly waking up and smelling the
(fair trade) coffee. On January 12, 2021 the Federal Minister of
Foreign Affairs issued an advisory to bring attention to human
rights violations in China affecting Uyghurs and other ethnic
minorities from the Xinjiang Uyghur Autonomous Region (XUAR). The
Minister announced that Canada would not only enforce the
CUSMA-driven ban on the importation of forced labour-made goods but
it would also  require Canadian companies seeking services
from Canada’s Trade Commissioner Service to affirm an
“integrity  declaration” that they are not knowingly
sourcing products or services from a supplier implicated in forced
labour or other human rights violations and committing to conduct
due diligence on their suppliers in China to ensure there are no
such suppliers.

The Canadian Government also warned Canadian businesses that
“In light of the risks inherent in doing business with
Xinjiang-related entities, thorough due diligence is
essential”. (See
Part 8: Now is the Time for Canadian companies to “Do
Diligence” on their Supply Chains
for information on
supply chain due diligence.)

Unlike the United States, neither the Canadian Government nor
the Canada Border Services Agency have announced any new, enhanced
or targeted measures to enforce the ban on goods produced in the
XUAR by forced labour.

On January 13,  the U.S. Government announced that its
Customs and Border Protection (CBP) will detain cotton and tomato
products produced in China’s XUAR at all U.S. ports of entry.
CBP issued a Withhold Release Order (WRO) against these two
products produced in China’s XUAR based on information it
receives that reasonably indicates the use of detainee or prison
labor and situations of forced labour. The WRO applies to cotton
and tomatoes grown in that region and to all products made in whole
or in part using this cotton or these tomatoes, regardless of where
the downstream products are produced.  This WRO follows an
advisory issued by the U.S. Government last year to caution
businesses about the reputational, financial, and legal risks of
forced labor in China’s XUAR.

Canadian businesses must be cognizant of and comply with the
restrictions on the importation into the U.S. of goods made with
forced labour. U.S. federal law 19 U.S.C. 1307 prohibits the
importation of merchandise produced, wholly or in part, by convict
labour, forced labour, and/or indentured labour, including forced
or indentured child labour. These goods are subject to exclusion
and/or seizure by CBP at the U.S. border, and may lead to criminal
investigation of the importers.

The Canadian government also recently reminded Canadian
businesses that it expects Canadian companies doing business
outside of Canada to respect human rights, operate lawfully,
conduct their activities in a responsible manner and adopt
voluntary best practices and internationally respected guidelines
such as the U.N. Guiding Principles on Business and Human Rights
and the OECD Guidelines for Multinational Enterprises –
including provisions on the elimination of forced labour in their
supply chains. Both the OECD Guidelines and the U.N. Guiding
Principles contain detailed recommendations on how businesses
should carry out supply chain due diligence.

Given the duties of Canadian boards of directors regarding
oversight of risk management, boards need to ensure that steps are
being taken to adequately assess, manage and address forced labour
supply chain risks, import/export risks, reputational risks, class
action risks and stakeholder risks.

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Originally Published by Gowling, January 2021

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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