Recently, the Canadian Border Services Agency (“CBSA”) reported that for the first time it seized goods imported on the suspicion that the goods were “mined, manufactured or produced wholly or in part by forced labour.” The suspected goods in question were women’s and children’s clothes being imported from China.

In January 2021, Canada, acting in unison with its traditional allies such as the United Kingdom, implemented economic measures against China in response to the increasing body of “evidence and reports of human rights violations in the People’s Republic of China against members of the Uyghur ethnic minority” including “repressive surveillance, mass arbitrary detention, torture and mistreatment, forced labour within the Xinjiang Uyghur Autonomous Region (Xinjiang), and mass transfers of forced labourers from Xinjiang to provinces across China.”

Specifically, Canada implemented the following seven measures:

1. The prohibition of imports of goods procured wholly or in part by forced labour

Canada’s Customs Tariff Act contains a prohibition on the importation of goods from any country that are produced in whole or in part by forced labour and this Act provides the basis for prohibiting the importation of goods produced by forced labour originating in Xinjiang.

Canada had implemented the above prohibition to give effect to the labour obligations Canada signed on to as part of the Canada – United States – Mexico Agreement (“CUSMA”).

2. A Xinjiang Integrity Declaration for Canadian companies

Canadian companies that are either (1) sourcing directly or indirectly from Xinjiang or from entities relying on Uyghur labour, (2) established in Xinjiang, or (3) seeking to engage in the Xinjiang market must sign a declaration acknowledging that the company is (A) aware of the human rights situation in Xinjiang, (B) abides by all relevant Canadian and international laws, respects human rights, and (C) seeks to meet or exceed OECD Guidelines for Multinational Enterprises and the UN Guiding Principles for Business and Human Rights.

This declaration is meant for companies to affirm 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.

Canadian companies that fail to do so may lose trade advocacy support and future Export Development Canada financial support.

3. A Business Advisory on Xinjiang-related entities

Canada’s Global Affairs Canada (“GAC”) issued a business advisory with an aim to help Canadian firms and stakeholders understand the legal and reputational risks posed to companies whose supply chains engage with entities possibly implicated in forced labour.

4. Enhanced advice to Canadian businesses

The Canadian Trade Commissioner Service committed to working with public and private sector stakeholders with the aim to provide enhanced advice on due diligence and risk mitigation strategies related to supply chains and forced labour. This has consisted of, amongst other things, the trade Commissioner sharing new guidelines regarding specific risks that Canadian firms should be aware of when operating in Xinjiang.

5. Export controls

Canada committed to denying export permits if Canada determines there is a substantial risk the export would result in a serious violation of human rights or international human rights law. Canada will pay special attention to the exports of advanced Canadian technologies and services that could be misused or diverted towards government surveillance, repression, arbitrary detention or forced labour, in light of the evolving situation in Xinjiang.

6. Increasing awareness for Responsible Business Conduct linked to Xinjiang

GAC committed to convening meetings with business and non-governmental organizations with the intent to raise awareness about the risks of doing business in Xinjiang, with special focus paid to ensuring the integrity and legal compliance of the supply-chain.

7. A Study on forced labour and supply chain risks

GAC committed to seeking out a third-party analysis of areas of exposure to forced labour involving Uyghurs. This study is intended to contribute to the body of knowledge on these issues, with a view to providing Canadian companies with further advice on the risks of doing business in the region.

Conclusion

Canada’s economic measures targeting China are still in their relative infancy, and their full effects remain to be seen. However, this first seizure may imply that further seizures of goods from China allegedly made with forced labour is a real possibility. Importers in Canada should ensure they have appropriate due diligence programs in place to mitigate this risk.

Tereposky & DeRose has significant experience in the design and implementation of CBSA cross-border trade restrictions. They also regularly assist both Canadian and international businesses, financial institutions, and individuals with internal investigations when “red flags” appear and provide advice on compliance in these areas. Where breaches have occurred, they have worked closely with their clients in making voluntary disclosures and in engaging with the ensuing investigations conducted by the RCMP and Global Affairs Canada.