On December 20, 2023, Public Safety Canada launched its online filing portal and issued guidance with respect to the novel annual supply chain transparency reporting requirement pursuant to the Fighting against Forced Labour and Child Labour in Supply Chains Act (the Act), which comes into force on January 1, 2024 (Guidance). The Guidance provides information on the format and filing process for the annual report, the substance of the annual report and the interpretation of the Act. The first reports are due to be filed by reporting entities before or on May 31, 2024.
Our previous article, which includes information on how to determine whether an entity is a “reporting entity” under the Act, and a reporting entity’s statutory obligations can be found here.
Formating Requirements and Filing Process:
- A reporting entity’s annual report must be in PDF format (100MB max in size) and is recommended not exceed 10 pages in length (or 20 pages for reports provided in both of Canada’s official languages, French and English).
- Public Safety Canada recommends that the annual report be prepared in both of Canada’s official languages, (French and English) and puts reporting entities on notice that they may receive translation requests from the public, should the initial report not be bilingual.
- The attestation required under section 11(5) of the Act must be included in the PDF version of the report. The attestation “should” take the following form:
In accordance with the requirements of the Act, and in particular section 11 thereof, I attest that I have reviewed the information contained in the report for the entity or entities listed above. Based on my knowledge, and having exercised reasonable diligence, I attest that the information in the report is true, accurate and complete in all material respects for the purposes of the Act, for the reporting year listed above.”
Signature, accompanied by the statement “I have the authority to bind ‘Name of Entity.
- Reports will be filed on an online portal hosted on Public Safety Canada’s website, which is accessible here.
- In order to file, reporting entities must submit their annual report and complete an online questionniare (Questionnaire), which contains both mandatory and voluntary questions. The mandatory questions collect identifying information and address the reporting elements under the Act. The voluntary questions provide reporting entities with an opportunity to further comment on their compliance with the Act and their human rights due diligence efforts. Mandatory informational questions include: Reporting entity’s legal name; Financial reporting year; Identification of a revised report; Business number(s) (issued by the CRA, if applicable); Identification of a joint report; Identification of reporting obligations in other jurisdictions; Entity categorization according to the Act (importer, distributor, seller, manufacturer); Sector/industry; and Location.
- Notably, reporting entities may submit a revised report at any time within one year of the applicable reporting deadline to address deficiencies or changes to the information provided. This option will provide companies with a grace period following the May 31 deadline to address the Canadian specific requirements.
- Reporting entities without websites should be prepared to provide copies of their report to the public upon request.
- Reporting entities filing the same supply chain report in multiple jurisdictions should indicate that they are reporting under multiple jurisdictions, and should name those jurisdictions. Public Safety Canada has cautioned reporting entites to ensure that the information submitted in any multi-jurisdictional report is also relevant to Canada.
- Joint reports must identify each entity covered by the report. Reporting entities should only rely on joint reports if the information being reported applies to all entities being covered by the report. Public Safety Canada cautions that a joint report should not be submitted if entities have different risk profiles and different policies and practices.
- A complete report must include responses that are consistent with the information provided in the Questionnaire and must include the above noted signed attestation.
- There is no prescribed level of detail. Reporting entities must use their judgment to respond to the mandatory reporting elements in light of the size and length requirements.
- Reporting entities may include hyperlinks to action plans, codes of conduct or policies in their report.
- Activities described in the report should focus on the previous financial year; however, entities can refer to work that spans multiple financial years, or future action plans. Public Safety Canada cautions that the report is not a plan or a mission statement.
- Reports are not required to contain proprietary commercially sensitive information. Reporting entities do not need to reference specific instances, persons or groups when addressing remediation measures.
- The Guidance provides Public Safety Canada’s expectations with respect to each of the required reporting elements as outlined in section 11(3) of the Act. Note that the Questionnaire (noted above) also poses questions on each of these elements. For example, the Questionnaire will pose a list of means for reporting entities to assess their effectiveness in ensuring forced and child labour are not used in their supply chain and ask entities to respond as to which measures are in place.
Application and Interptation of the Act:
- The test for determining whether a company has a “business presense in Canada”, should use the criteria applied by the Canada Revenue Agency. Whether a company “does business” in Canada is not determined merely by having a place of business in Canda, but is dependent on a list of relevant factors.
- The calculation of assets, revenues and employees to determine whether a company is a “reporting entity” should be calculated on a global basis, including any revenues, assets and employees of subsidiares. However, the revenues, assets and employees of a reporting entity’s parent is not factored into the threshold test.
- Clarifying that the definition of “goods” under the Act refers to goods subject to trade and commerce, implying that “goods” under the Act does not capture services.
- Clarifying that importing means acting as the importer of record as understood under the Customs Act (e.g. a company is not a reporting entity if it is purchasing goods from a third party manufacturer in a foreign country, where that manufacturer is the importer of record).
- Use of the terms “selling, distributing and importing” in the Act “are not intended to capture services that solely support the production, sale, distribution or importation of goods (e.g., marketing, administrative services, financial services and software services).”
- Control may be determined in accordance with accounting principles (e.g. IFRS or GAAP); however Public Safety Canada has advised that control should be considered “in substance over form”. Franchisors may be reporting entities if they “control” entities engaged in reportable activities and franchisees maybe reporting entities if they are engaged in reportable activities.
Companies that have established that they have a statutory reporting obligation under the Act should review the Guidance (available here), as it provides new requirements which may impact how companies approach their filings. In particular, companies should pay attention to: (i) the mandated formatting requirements; and (ii) Public Safety Canada’s expectations for reporting entities in addressing the 7 reporting elements outlined in section 11(3) of the Act.
Companies that have not yet established whether they are a reporting entity should assess their activities and the employee and financial thresholds articulated in the Act and further discussed in the Guidance as soon as possible. Baker McKenzie’s international trade and customs team is poised and ready to assist companies in determining whether they are reporting entities under the Act and in reviewing and assessing draft reports.