Over the past year, Canada has implemented a significant number of measures to combat forced labour and human rights abuses. Canada has introduced these measures in concert with other international partners such as the UK, US and Australia. Although some new measures are specific to China, others target any country that is alleged to be engaged in slave labour and forced labour. 

Taken together, these measures could have an impact on transactional due diligence, representation and warranty coverage regarding the acquisition of, or partnership with, companies that do significant business in regions alleged to be engaged in forced labour or child labour. This impact can extend to distribution agreements, manufacturing agreements or purchasing agreements.

First, on March 22, 2021, Canada announced economic sanctions related to China under Canada's Special Economic Measures (People's Republic of China) Regulations. It followed the UK, the US, and the European Union in introducing these sanctions. This is the first time the Government of Canada has announced such sanctions against China. Under the new sanctions, companies or individuals in Canada cannot transact in property owned by sanctioned persons, or those acting on their behalf, or facilitate or enter into any transactions related to such transactions by third parties. Companies also cannot assist anyone else in such transactions. 

Second, since July 1, 2020, as part of the implementation of the Canada-United States-Mexico Agreement (CUSMA), Canada prohibits the importation of goods that are mined, manufactured or produced wholly or in part by forced labour. The prohibition applies to all goods, irrespective of their country of origin. The Canada Border Services Agency has a zero-tolerance policy in enforcing this prohibition. As a result, companies that import goods that are produced even in part from forced labour, may be subject to the Administrative Monetary Penalty System (AMPS) and seizure of products, as well as loss of public reputation. 

Third, the prohibition of importation of goods produced with forced labour is part of a larger set of policies that the Government of Canada is taking with respect to forced labour. In January 2021, Canada announced that companies seeking to engage in China's Xinjiang market are required to sign an Integrity Declaration on Doing Business with Xinjiang Entities prior to receiving services and support from the Trade Commissioner Service. Also, effective September 1, 2019, the Minister of Foreign Affairs has not been issuing export permits under the Export and Import Permits Act  if it is determined that there is a substantial risk that an export would result in a serious violation of human rights. This includes direct or indirect exports to buyers located in regions known or suspected of using forced labour. 

Finally, Bill S-216, An Act to enact the Modern Slavery Act and to amend the Customs Tariff  (the "Bill") has been introduced in the Senate and has been making significant movement. The Bill imposes extensive public reporting obligations on stock exchange-listed companies or those of a certain asset size that manufacture or import from abroad. Reports must indicate corporate policies adapted by the company in relation to forced labour and child labour, company activities that carry a risk of forced labour or child labour being used, and the steps taken to assess and manage that risk as well as the training provided to employees on forced labour and child labour. The Bill would appear to have broad support from Parliament. 

Taken together, these measures mean that any company in Canada that is pursuing an acquisition or seeking to engage in a joint venture with another company that is active in regions known or suspected to use forced labour, must include as part of its due diligence an analysis of that other company's investment and export profile, supply chains, and commercial and manufacturing operations.

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