Here we go again … how recent updates to Canada’s supply chain transparency reporting guidance may impact your 2025 reporting obligations
By Christine Pound, Colleen Keyes, K.C., and Daniel Roth
As reporting entities and government institutions prepare their supply chain transparency reports, Public Safety Canada (“PSC“) has updated its guidance for reporting under Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act“). The updates build on PSC’s prior updates (see our coverage here, here, and here), and materially change the analysis of which organizations are subject to the Act and required to report. Organizations should review the updated guidance to determine how the updates may impact their 2025 reporting obligations.
Reports covering the 2024 financial year must be submitted by May 31st, 2025. PSC has indicated that additional updates will be issued in February 2025 prior to the reporting deadline.
Key developments in PSC’s guidance include:
1. “Assets” are limited to tangible property
Only tangible property that is owned by a person or business will be considered an “asset” when determining if an organization has “assets in Canada” or at least $20 million in global gross assets. Intangibles (such as intellectual property, goodwill, and securities) will not be considered “assets”. This clarifies that foreign parent companies whose only nexus to Canada is the shares they hold in their Canadian subsidiary will not need to report, even if the subsidiary is a reporting entity. Further, the Canada Revenue Agency (CRA) factors for “carrying on business in Canada” may be evaluated to determine if an organization “does business in Canada”.
2. “Selling” and “Distributing” are no longer reportable activities
All references to “selling” and “distributing” have been removed from the guidance. Entities that are solely involved in distributing and selling are not expected to report under the Act, and PSC will not seek enforcement action in those instances. Only entities that are directly producing or importing goods, or that control an entity that produces or imports goods, will be required to submit a report.
3. “Goods” are also limited to tangible physical property
Only tangible physical property that is the subject of trade and commerce, understood in the ordinary sense, will be considered “goods” when determining if an entity is “producing” or “importing” goods. Real property, electricity, software services, and insurance plans are specifically excluded, clarifying that “producing” or “importing” software and cloud-based media are not reportable activities.
4. “Importing” is a causation-based analysis
An entity will be “importing” goods if it caused the goods to be brought into Canada, even if it is not formally identified as the importer (e.g. placing a custom order that causes a third-party company to import a product it does not ordinarily carry to fulfil that order). However, an entity will not be “importing” goods produced outside Canada if a third party caused those goods to be brought into Canada (e.g. purchasing an imported product that a third-party company ordinarily carries in its inventory). The importer will often be the party that accounts for or pays duties on the goods being imported. However, third parties that are authorized to account for goods on behalf of the importer are not “importing” those goods (e.g. customs brokers, express couriers, trade consultants).
5. “Control” of an entity should be interpreted broadly
In addition to conventional accounting frameworks, the guidance from the Office of the Superintendent of Financial Institutions (“OSFI“) on the concept of “control” may be used to assess whether one entity controls another entity and is required to report as a result. OSFI’s guidance resembles the “control” analysis under many Canadian “individuals with significant control” regimes and includes indirect control and “control in fact”, which extend beyond the traditional ‘50% plus one’ definition of “control at law”.
6. “Very minor dealings” will be assessed contextually
The “very minor dealings” threshold may be interpreted in accordance with the generally accepted legal principles of de minimis[1] and evaluated in the context of a reporting entity. This suggests that the level of activity that constitutes “very minor dealings” will vary based on the size and nature of the operations of a reporting entity, in contrast to, for example, the set de minimis values for imports under the Canada-United States-Mexico Agreement.
7. Temporary Foreign Worker Program may carry forced labour risk
The Temporary Foreign Worker Program (the “Program“) has been identified by PSC as a potential source of risk for participating reporting entities due to limitations on the ability of Temporary Foreign Workers to change their employment terms or employer. Reporting entities that employ Temporary Foreign Workers in higher risk roles (e.g. manual labour) and sectors (e.g. agriculture) may choose to discuss their participation in the Program and the measures they take to mitigate related forced labour risk in their report.
8. Provincial and municipal government bodies are not exempt
Provincial crown corporations, provincial and municipal government bodies, and other quasi-governmental organizations that are not “government institutions” as defined in the Act may still be required to report if they satisfy the “entity” threshold criteria and engage in reportable activities in connection with delivering their mandate.
9. CBCA public company shareholder reporting options
Reporting entities incorporated under the Canada Business Corporations Act must provide their report to their shareholders with their annual financial statements. While the updated guidance clarifies that this requirement can be satisfied using an entity’s standard means of delivery, it remains unclear if a public company shareholder that opts out of receiving financial statements is exempt from this requirement.
In addition to substantive developments, PSC also addressed how to avoid common formatting and compliance issues seen in reports filed during the 2024 reporting period, including:
- a report prepared in compliance with foreign legislation should only be used if it addresses all the requirements of the Act and covers the appropriate reporting period under the Act;
- the attestation for a joint report must indicate whether the report was approved directly by the governing body of each entity included in the report, or only by the governing body of the entity, if any, that controls each entity included in the report;
- only scanned wet ink or electronic signatures will be accepted – typing “signed” in the signature block does not constitute a signature and will cause a report to be rejected; and
- if a report is submitted in both official languages, both of the submitted reports must include a signed attestation.
Finally, PSC confirmed that their focus remains promoting compliance, not enforcement, and that the reporting exercise is intended to encourage transparency, not to penalize reporting entities.
Although the submission deadline is May 31st, the timing of reporting entities’ internal processes, board meetings, securities filings, and shareholder AGMs will often require reporting entities to finalize their report before May 31st.
This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Corporate Governance Group.
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[1] The legal term “de minimis” refers to immaterial matters that are too trivial or minor to merit consideration and which have such a negligible impact that they ought to be disregarded.