On March 28, 2023, the Government of Canada tabled the 2023 Budget, A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future ("Budget 2023"). While much of the discussion surrounding the budget has focused on affordability, the environment, and taxation, Budget 2023 also contains numerous proposals with international trade implications. Indeed, Budget 2023 identifies the realignment of global trade and supply chains away from authoritarian countries towards democracies (i.e., "friendshoring") as one of the major economic shifts that Canada must contend with and to which the budget responds.

We highlight some of the proposals with international trade implications below.

Strengthening Supply Chains and Combatting Forced Labour

Budget 2023 proposes numerous initiatives to strengthen Canada's supply chain infrastructure, including:

  • Providing $27.2 million over five years, starting in 2023-24, to Transport Canada to establish a Transportation Supply Chain Office. This office would work with industry and other orders of government to respond to disruptions and better coordinate action to increase the capacity, efficiency, and reliability of Canada's transportation supply chain infrastructure;
  • Introducing amendments to the Canada Transportation Act to provide the Minister of Transport with the authority to compel data sharing by shippers accessing federally regulated transportation services; and,
  • Launching a review of the Shipping Conferences Exemption Act to improve marine shipping competition.

These measures will dovetail with Canada's National Supply Chain Strategy, which will be released later in 2023 and is informed by the National Supply Chain Task Force Report.

Budget 2023 also notes the government's intention to introduce legislation "to eradicate forced labour from Canadian supply chains." This appears to be in reference Bill S-211 (An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff), which is expected to pass shortly and will enter into force in 2024. Bill S-211 is supply chain transparency and reporting legislation that would require subject companies to file and make public annual reports about forced and child labour in their supply chains and steps taken to combat them.

However, Bill S-211 would only require companies to report on forced labour in their supply chains (and not actively eliminate it, although this may be the practical effect once discovered given the prohibitions on importing goods produced with forced or child labour). Nevertheless, the use of the term "eradicate" as well as specific reference in Budget 2023 to Canada's concerns for "human rights violations against Uyghurs and Muslim minorities in China", may indicate that the government intends to introduce or support additional forced labour legislation (such as, Bill S-204, which would ban the importation of any goods produced in China's Xinjiang region).

Strengthening Canada's Sanctions Laws

Budget 2023 highlights Canada's efforts to mobilize its sanctions laws in response to Russia's invasion of Ukraine. Although not addressed in any substantial detail, Budget 2023 proposes:

  • Amendments to the Special Economic Measures Act and Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) to support the effectiveness of the seizure, forfeiture, and disposal framework introduced in 2022 (see our previous bulletin) as a means of holding Russia accountable for the invasion of Ukraine;
  • Related amendments to the Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to require the Financial Transactions and Reports Analysis Centre of Canada ("FINTRAC") to disclose information to the Minister, presumably to address sanctions evasion. Amendments will also require the financial sector to report sanctions-related information to FINTRAC; and,
  • A review of FINTRAC's mandates to determine whether it should be expanded to counter sanctions evasion.

Customs and Import Measures

Budget 2023 also proposes multiple customs and import measures, including:

  • Amending the Customs Tariff to indefinitely extend the withdrawal of the Most-Favoured Nation ("MNF") preferential tariff treatment for Russian and Belarussian imports. The MNF tariff was withdrawn on a temporary basis in March 2022, thereby imposing a 35% tariff on imports from Russia/Belarus and leading to a 97% drop in imports to Canada;
  • Amending the Customs Tariff to renew Canada's General Preferential Tariff and Least Developed Country Tariff until the end of 2034, as well as updating these non-reciprocal tariff preference programs to align with Canada's trade agenda and simplify administrative requirements for Canadian importers; and,
  • Introducing a new General Preferential Tariff Plus that will incentivize countries to adhere to international standards on human rights, labour conditions, gender equality, and climate change.

Conclusion

The budget proposals discussed above are largely schematic and further details are expected to be made available in the coming months. We will be monitoring and reporting on these developments. What is clear, however, is that Canada is entering a period in which international trade law occupies a significant role in Canadian foreign policy. As such, corporations should expect increasing scrutiny of their compliance activities, including as relates to supply chains and sanctions compliance, and will be expected to ensure that their compliance programs respond to and reflect these new legal requirements.

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