Forced labour and responsible supply chains

Canada's forced labour regime is entering a new phase

For much of the past decade, Canada has addressed forced labour through supply chain transparency. Under this approach, organizations reported on the steps they took to address risk in their supply chains, and stakeholders gained visibility into those disclosures. That approach is now evolving.

The federal government has proposed legislation in Bill C-35, the Ban on Importing Goods Made with Forced Labour Act, to establish a standalone forced labour import prohibition regime that is separate from the existing Supply Chains Act. At the same time, U.S. authorities are increasing scrutiny on forced labour risks, which puts further pressure on Canadian businesses with cross-border trade exposure. As a result, organizations must now be prepared to demonstrate what they knew and what actions they took, rather than simply what they disclosed.

For organizations with complex or global supply chains, there are significant risks well beyond compliance reporting, including increased customs scrutiny, shipment delays, sourcing disruption, and reputational risk. Managing those risks requires coordination across legal, procurement, trade, sustainability, and supply chain teams.

KPMG’s legal, trade and customs, sustainability, procurement, and supply chain practitioners can help organizations identify and manage forced labour risk, and document the actions that they are taking to address this issue.

The following timeline highlights key developments related to Canada’s new legislation, U.S. enforcement activity, and Canada's reporting obligations.

Canada's forced labour regulatory timeline

Key Canadian and U.S. developments shaping supply chain due diligence and enforcement, 2026–2027

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Who is affected by forced labour issues?

Who is affected	What this may mean in practice
Organizations with modern slavery reporting obligations in Canada	You may need to support statements in your report with policies, supplier controls, contracts, documentation and evidence of follow-through.
Importers, exporters, and cross-border businesses	You may face customs questions, shipment delays, requests for supplier documentation, or pressure to revisit importer-of-record and sourcing arrangements.
Manufacturers, retailers, and goods-based businesses	You may need better visibility into higher-risk goods, suppliers, regions and production pathways beyond direct suppliers.
Boards and senior leadership	You may need clearer oversight of forced labour risk because it can affect compliance, business continuity, market access and stakeholder confidence.
Legal, procurement, sustainability, and trade teams	You may need clearer roles, escalation paths and shared documentation so reporting, supplier management and customs responses are aligned.

What is driving this shift?

Organizations are responding to developments that are changing expectations around forced labour risk management:

Border and customs scrutiny is increasing

Customs authorities are paying closer attention to forced labour risk. Organizations trading across the Canada-U.S. border may need to be able to evidence the origin of higher-risk goods on relatively short notice.
Supply chain due diligence expectations are broadening

Regulators and counterparties are placing greater weight on the substance behind a disclosure, including whether an organization's policies, supplier controls, and contracts can actually support their claims. This can affect an organization's broader sustainable supply chain risk profile, alongside other environmental and governance considerations.
Cross-border pressure continues to build

U.S. enforcement activity is raising the stakes for Canadian businesses with trade exposure, and reducing the time available to respond to an inquiry or a shipment detention.

Together, these developments are shifting the focus from reporting towards readiness. Organizations should prepare now to respond quickly to forced labour issues and questions.

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How we can help

While most organizations already have some capabilities in-house, they are often spread across different teams that rarely collaborate. For these organizations, the challenge is connecting information across functions so that legally privileged risk assessments, trade decisions, procurement due diligence, and supply chain oversight all support one another.

Organizations are often best positioned to manage forced labour risk when legal, trade and customs, sustainability, procurement, and supply chain teams work together. KPMG brings these perspectives together to help organizations assess exposure, strengthen supporting evidence and prepare for trade and customs scrutiny.

Assess exposure

Identify where forced labour risk is most likely to arise through supply chain risk assessments, governance reviews, and supplier or third-party mapping by goods, geography and business activity.
Strengthen the underlying evidence

Review policies, contractual protections, evidence frameworks, and documentation protocols to ensure disclosures can withstand regulatory, customer, and market scrutiny.
Prepare for trade and customs scrutiny

Improve import and export readiness through customs documentation reviews, supplier visibility assessments, and response planning for inquiries and shipment disruptions.

Assess your organization's readiness

Most organizations already have some controls, reports and processes in place. The question is whether those measures are connected, documented and ready to withstand scrutiny. Our readiness checklist can help you identify gaps across supplier visibility, customs readiness, public disclosures and internal accountability.

Responsible supply chain readiness checklist

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Frequently asked questions (FAQs)

Forced labour supply chain risk refers to the possibility that forced labour may be connected to an organization's supply chain. Because these risks often exist beyond direct suppliers, they can be difficult to detect.

Organizations may need to do more than disclose supply chain risk, and demonstrate that they understand where risk exists and the steps they have taken to manage it.

Bill C-35 introduces a standalone forced labour import prohibition regime in Canada that emphasizes import controls and requires organizations to demonstrate that goods are not connected to forced labour. For Canadian businesses, this means expanding their focus to supply chain traceability and customs documentation instead of just reporting.

Companies can prepare by reviewing the traceability of higher-risk goods, confirming that customs documentation supports their import and export positions, and testing whether they could respond quickly to a shipment detention or customs inquiry. Organizations that prepare in advance of enforcement activity, rather than in response to it, will generally have a more defensible position.

Most organizations should start by identifying where risk is most likely to exist, testing whether supplier information can be verified, and confirming whether existing contracts provide the right to audit, suspend, or remediate where required.

Meet the team

Forced labour and responsible supply chain expectations are evolving quickly. Organizations may need to assess how these developments affect their business, where risk may exist in their supply chain, and which actions to prioritize first. Our multidisciplinary team can help you understand what the proposed legislation may mean in practice, how prepared your organization is for increased scrutiny, and where to focus next.