By Terrance S. Carter and Cameron A. Axford

As reported in earlier Updates (most recently in the October 2024 Charity and NFP Law Update), Canada introduced the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Supply Chains Act”) in May 2023 and brought it into force on January 1, 2024. The Supply Chains Act requires large Canadian organizations and government institutions to submit annual public reports detailing their supply chains, policies, risk management, employee training, and remediation efforts, with the aim of increasing transparency regarding the use of forced/child labour by these entities. The Supply Chains Act does not exempt charities or not-for-profit organizations. However, as reported previously, the high threshold for what constitutes an “entity” under the Act means that only large organizations with significant assets, revenues, or employees are likely to be subject to its reporting obligations.

As reported in our January 2024 Charity and NFP Law Update, Public Safety Canada introduced a guidance that month to assist organizations in complying with the new regulations. On November 15, 2024, Public Safety Canada released an update to the guidance (the “Updated Guidance”), which further clarifies requirements and the scope of the Supply Chains Act.

The Updated Guidance on the Supply Chains Act clarifies that “assets in Canada” now refer exclusively to tangible property, excluding intangibles like intellectual property or securities. This shift reverses the prior guidance, which stated that securities were considered assets under the Supply Chains Act. Businesses may also exclude intangible assets when calculating global asset thresholds to determine if they fall under the Act’s requirements. Additionally, the evaluation of whether an entity does business in Canada can align with Canadian tax considerations, using factors such as the location of operations, employees, and transactions. The definition of “employee” now includes full-time, part-time, and temporary workers globally but explicitly excludes independent contractors.

The Updated Guidance clarifies that entities involved solely in selling or distributing goods, without producing or importing them (or controlling those that do), are not expected to report under the Supply Chains Act, and enforcement will not be pursued against such entities. “Goods” are now defined as tangible physical property, excluding intangibles like real property and software services. Importing is defined as the actual act of causing goods to enter Canada, typically by paying duties, and excludes third parties like customs brokers or couriers. The Updated Guidance also refers entities to existing financial institution guidelines to assess control of subsidiaries and elaborates on the “de minimis threshold,” suggesting that minor dealings in goods may not trigger reporting obligations, depending on their significance to the entity’s overall business.

The Updated Guidance clarifies that entities are not required to report specific instances or allegations of forced or child labour, avoiding sensitive information that could create legal or privacy risks. Instead, reporting can include anonymized descriptions, such as generalized case studies, if specific instances are disclosed. Entities may provide a general overview of how they assess and manage risks, emphasizing steps taken rather than certifying a “risk-free” status. Reports can acknowledge ongoing development of processes, even if measures are not fully implemented, and if no remediation has occurred in response to evidence of forced or child labour, stating this is sufficient, as the Supply Chains Act aims to promote transparency rather than penalize entities.

The Updated Guidance allows entities to use modern slavery reports from other jurisdictions, provided they meet the requirements of the Supply Chains Act. While governing body approval of the questionnaire is not required, approval of the report by the entity’s governing body remains mandatory. Entities have discretion over who completes the questionnaire, though the individual may be contacted by Public Safety Canada for clarification. Attestations can include electronic and wet signatures, but typing “signed” does not qualify as a signature. The Updated Guidance also encourages entities to maintain a repository of annual reports, even though only the current report must be published online.

The Updated Guidance is a positive step forward in helping to clarify the obligations on reporting entities. Though very few charitable or not-for-profit organizations will be caught under the “entities” definition, those whom the Supply Chains Act applies to must ensure that they are compliant with this evolving regime.

​Read the November 2024 Charity & NFP Law Update