Public Safety Canada first published guidance in December 2023 to assist organizations in complying with the requirements of Canada’s new modern slavery legislation. The guidance was updated in March 2024. Following its review of the first reporting year, the ministry has further amended the guidance. The updates relate primarily to understanding which organizations are required to report under the Act, the scope of the reporting requirements, and addressing some common questions that arose during the first reporting year.
Canada’s new modern slavery legislation, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Act), came into force on January 1, 2024. Public Safety Canada (PSC) first published guidance on the Act’s requirements on December 20, 2023, which was first updated in March 2024. For more information about the legislative requirements and previous guidance, please see our earlier legal updates.
On November 15, 2024, the federal government published further amended guidance that clarifies some of the key interpretative questions that arose during the first reporting year. The updates relate primarily to understanding which organizations are required to report under the Act, as well as understanding the scope of the reporting requirements.
Determining whether an organization is required to report
- Business presence in Canada – Meaning of “assets”: To determine whether an organization has assets in Canada, PSC has clarified that “assets” refers to tangible property in Canada and excludes items such as intellectual property, securities and goodwill.
- Reporting entity test: Section 9 of the Act provides that entities that produce, sell or distribute goods in Canada or elsewhere or that import goods into Canada (or that control an entity engaged in one of the foregoing activities) have reporting obligations under the Act. However, the updated guidance provides that entities solely involved in distribution and selling (and not also producing or importing) are not expected to report under the Act. PSC has stated it will not seek enforcement actions against organizations solely involved in distributing or selling goods, despite the language of the Act.
- Meaning of “goods”: When determining if an entity is producing or importing goods, the updated guidance clarifies that “goods” refers to tangible physical property. Real property, electricity, software services and insurance plans are excluded from the meaning of “goods.”
- Meaning of “importing”: PSC has clarified that an entity is considered to be importing goods if it 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. While there is no prescribed minimum value of goods that an entity must import in order to be subject to the reporting obligation, there continues to be an exception for “very minor dealings,” which PSC has equated to a “de minimis” value of goods, to be evaluated in the context of each entity’s business.
Questionnaire
- Questions: The questionnaire has been modified to provide clarity regarding the scope of some of the questions. Entities may submit a revised report if they need to modify responses provided in their previously submitted questionnaires.
- Joint reports: For entities that submit a single report covering multiple entities belonging to the same corporate group, PSC has confirmed that the questionnaire only needs to be completed by the entity that submits the report on behalf of the group.
Publishing the report on the company’s website and sending it to shareholders
- Timing: PSC has confirmed that entities do not need to wait until their reports are published in the catalogue available on PSC’s website before publishing the reports on their own websites. The requirement is to publish it on the company website once it has been sent to PSC.
- Repository: While not required, PSC is encouraging entities to maintain a repository of past annual reports on their websites.
- Providing a copy to shareholders: PSC has clarified that corporations incorporated under the Canada Business Corporations Act and other federal entities, which are required to provide a copy of the report to shareholders along with their annual financial statements, may satisfy the requirement by using their “standard means of delivery.”
Confirmatory / clarification updates
- Report format: Report file names must follow an alphanumeric naming convention.
- Attestation and signature(s): PSC has clarified that an entity’s report must include some form of attestation. While PSC has provided sample attestation language on its website, the form of attestation may be modified by the reporting entity. Reports submitted without an attestation are deemed incomplete and will not be published in PSC’s online catalogue. PSC has further confirmed that both wet-ink and electronic signatures are acceptable.
- Non-December 31 year-end entities: For those entities with a December 31 year-end, reports due by May 31, 2025, will be for activities undertaken in 2024. PSC has clarified that entities with a financial year-end close to the May 31 reporting deadline may report on an earlier financial year, depending on the submission date of the report. For example, if a corporation with a March 31 year-end files its report on February 1, 2025, it will cover activities undertaken from April 1, 2023, to March 31, 2024. However, if it submits its report on May 31, 2025, it would cover activities undertaken from April 1, 2024 to March 31, 2025.
Year 2 approach
During the first reporting year, the federal government focused on compliance promotion and awareness, in alignment with its public statements that it would be taking an incremental approach to implementing the Act. PSC has stated in its latest guidance that while it recognizes certain organizations have complex supply chains that may limit their visibility over all activities, the reporting exercise aims to ensure organizations are working towards increased visibility. While PSC has not publicly stated the approach it will take during the second reporting year, we anticipate PSC may provide further details during its information session scheduled for January 15, 2025.
Stay up to date with further developments by visiting our modern slavery legislation hub.
