Canadian industries seek extension on country's human-rights supply chain law

[August 11, 2023]  By Divya Rajagopal

TORONTO (Reuters) - Canadian industries are pushing back against the country's planned January launch date of the Modern Slavery Act, intended to fight forced labor and child labor in supply chains, as mining and apparel trade groups say the government has failed to spell out the details of the law's requirements.

The act, passed in May, seeks to push corporations to provide greater transparency about their supply chains in order to avoid abetting what critics say amounts to modern slavery. The new measure takes effect on Jan. 1, 2024.

However, lobby groups including mining companies and apparel manufacturers are warning that a perceived lack of clarity about the rules could lead to unwanted penalties and prevent critical goods from entering Canada.

Canada's mining industry was originally among the first supporters of the government's initiative, which seeks to bring Canada on a par with Australia and the United Kingdom which established similar laws in 2017 and 2015, respectively.

"We are not arguing or disputing the principle of what this bill is trying to achieve, or the specifics of what this bill is including," Ben Chalmers, vice-president of the Mining Association of Canada, said in a recent interview.

"We just want time to be able to do a better job when we start reporting, that is why we are seeking a one-year extension."

Under the new law, companies found to be in violation face penalties of up to C$250,000 ($186,372), reflecting an increasing emphasis by global investors on ethical and social governance issues.

A survey released by consulting firm KPMG in December 2022 of 200 Canadian companies on their ESG performance showed that only 50% of the companies disclose management's approach and performance regarding respect for human rights. Automobile, energy and transport companies were the most transparent in terms of disclosing their standards on human-rights issues.

A spokesperson for Canada's newly appointed public safety minister said the ministry "has been working expeditiously" to implement the law by January and that the companies must do their first reporting on or before May 31, 2024. Changes to that deadline are not anticipated at this point, the spokesperson said.

A Canadian flag flies in front of the Peace Tower on Parliament Hill in Ottawa, Ontario, Canada, March 22, 2017. REUTERS/Chris Wattie/File Photo

Bob Kirke, executive director of the Canadian Apparel Federation, told Reuters that an extension was in the interest of everyone as there is no clarity on what exactly those "rules" are.

The law also amends Canada's customs act to ban goods made with child labor, yet there is no clarity on how this will be implemented, Kirke added.

'REAL ANXIETY'

John McKay, the Canadian Liberal member of parliament who moved the bill, also expressed concerns about implementation.

"It's incumbent upon the federal government to be ready to receive their filings and to give advice as to what the filing should contain", McKay told Reuters. "I don't think the government is ready yet."

McKay said there was a lack of reporting and procedural guidelines, which he said were signs that the government was not prepared to meet the January launch date. But he expects most Canadian companies affected by the law to abide by the new rules.

In May, Canada's corporate ethics watchdog initiated an investigation of Nike and Dynasty Gold Corp on allegations that the companies benefitted from forced labor from the Xinjian province in China in their supply chains.

Both the companies denied they were using forced labor in their supply chains. The government probe is still ongoing.

Law firms have started advising their clients to get their paperwork ready regarding their sourcing of goods from various parts of the world, but are also sensing anxiety from clients about the government's expectations.

"The real anxiety right now is about getting guidance from the Canadian government about what are their expectations (related to the bill) and what's going to be sufficient in terms of how detailed or high level things are," said Sabrina Bandali, an international trade and investment partner at Toronto law firm Bennett Jones.

($1 = 1.3414 Canadian dollars)

(Reporting by Divya Rajagopal in Toronto; Editing by Denny Thomas and Matthew Lewis)

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