Canada’s forced labour regime is about to get real

For the past few years, Canada’s legislation to prevent forced and child labour has functioned largely as it was intended. Companies report. Government collects. The law was built for transparency, not enforcement. But that era is ending — and not because Ottawa suddenly found its appetite for enforcement. It is ending because the United States is watching.

Canada is one of 60 countries the U.S. administration is currently investigating under Section 301(b) of the Trade Act of 1974 to determine if it is doing enough to prevent goods produced by forced labour from entering the U.S. If that investigation concludes that Canada is failing to enforce the U.S.’s forced labour import ban, tariffs as high as 25 per cent or other trade measures could be imposed. U.S. Trade Representative Jamieson Greer wants the investigation completed by late July, around the time the temporary 10 per cent global tariffs are due to expire.

The outcome of the investigation is not difficult to predict. Canada will be quickly forced into a far more aggressive posture. That will mean broader reporting obligations, real enforcement at the border and, ultimately, legislation with teeth.

Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act came into force in 2024 with a narrow objective: to shine a light on supply chains. It requires certain entities to report annually on steps taken to reduce the risk of forced and child labour across their global supply chains. But critically, it does not require companies to eliminate those risks — only to describe what they have (or have not) done. Even with these very basic reporting requirements, a KPMG assessment of the more than 5000 reports filed by Canadian companies in 2025 found less than five per cent demonstrated clear alignment with multiple reporting criteria contained in the Act.

The U.S. has taken a fundamentally different path. Its forced labour regime — anchored by the Uyghur Forced Labor Prevention Act (UFLPA) — is enforcement-first. Goods are presumed tainted. Importers must prove otherwise. Against this backdrop, Canada’s relatively low number of import detentions has not gone unnoticed. Critics, including both the Biden and Trump administrations, have long argued that Canada risks becoming a back door for goods barred from the U.S. Now, with the U.S. investigation, the stakes have shifted from reputational to economic.

First, expect a dramatic expansion of who must report. The law already applies to entities that produce or import goods. Going forward, we could see companies that merely sell or distribute goods pulled into scope.

Second, the Canada Border Services Agency will be required to increase enforcement quickly and visibly. Canada’s forced labour import ban took effect in 2020, but enforcement to date has not been visible.

Prior to 2025, Canada had detained only 50 shipments, but ramped up to 50 more detentions in 2025 alone. Still, that is an extremely low number relative to the tens of thousands more U.S. detentions resulting from UFLPA enforcement actions, valued at almost $4 billion. Canada’s current approach will not survive sustained U.S. scrutiny.

Third, expect legislative reform. Canada has already signaled that further legislation is on the horizon following the first reporting cycle for companies in 2024. 

For Canadian businesses, the implications are immediate and material. Compliance requires mapping supply chains (beyond Tier 1 suppliers), conducting risk assessments, implementing controls, and making difficult sourcing decisions. All of this takes time and money. As border detentions increase, even companies that meet current reporting requirements risk shipment delays, seized goods, and forced changes to their supply chains. The result is a dramatic shift from low-cost disclosure to high-cost compliance — almost overnight.

Canada’s forced labour regime is about to move from transparency to enforcement because a new trade reality demands it.  For businesses, the window to “report now, figure it out later” is closing. Those that treat compliance as a disclosure exercise will be caught flat-footed. Those that treat it as an operational and legal risk will be better positioned to absorb what comes next. Because what comes next is not more reporting. It is real consequences.