Purpose
The purpose of Policy Notification (PN)-150 is to inform Public Works and Government Services Canada (PWGSC) Acquisitions Program contracting officers of new contract clauses that contain new obligations for contractors with respect to forced labour.
Effective date
PN-150 is effective immediately and contracting officers must now include new anti-forced labour clauses in all new contracts for goods.
Background
As outlined in PN-146, the Canada-United States-Mexico Agreement (CUSMA) entered into force on July 1, 2020. While the Government Procurement chapter of this agreement does not apply to Canada, CUSMA Article 23.6.1 set out in the Chapter on Labour applies to all Parties to CUSMA, including Canada. The Parties are required to prohibit the importation of goods produced, in whole or in part, by forced labour.
This international obligation was implemented into Canadian domestic law through amendments to the Customs Tariff Act and the Customs Tariff Schedule which took effect on July 1, 2020. Sub-section 136(1) of the Customs Tariff Act and tariff item 9897.00.00 of the Customs Tariff – Schedule expressly prohibit the importation into Canada of goods mined, manufactured or produced wholly or in part by forced or compulsory labour, including forced or compulsory child labour (forced labour prohibition).
Designated officers at the Canada Border Services Agency (CBSA) are responsible for making tariff classification determinations that establish whether goods imported into Canada are prohibited from entering Canada under the forced labour prohibition. These determinations are made at the Canadian border as outlined in CBSA Memorandum D9-1-6 - Goods manufactured or produced by prison or forced labour. The designated CBSA officers identify and intercept shipments suspected of containing goods produced by forced labour. CBSA enforcement actions are supported by intelligence provided by Employment and Social Development Canada, which conducts research on potentially problematic supply chains.
The United States (US) Customs and Border Protection Agency (CBP), under the US Trade Facilitation and Trade Enforcement Act (TFTEA) of 2015, issues Withhold Release Orders (WROs) when goods are reasonably believed to have been made by forced labour. CBP also issues Findings when it has information that conclusively demonstrates that merchandise is produced by forced labour.
In September 2019, the Government of Canada launched a National Strategy to Combat Human Trafficking (2019-2024). The National Strategy includes a commitment for PWGSC to address human trafficking and forced labour in government federal procurement. As the Government of Canada’s procurement authority, PWGSC is committed to upholding this commitment and ensuring that procurements are only conducted with suppliers that maintain supply chains free of human trafficking and forced labour.
There is a risk that goods being procured by Canada are prohibited from being imported into the country due to being produced wholly or in part by forced labour. To that end, a set of new contract clauses has been put in place to allow PWGSC to terminate a contract if a good has been produced in whole or in part by forced labour or human trafficking.
New requirements
In order to ensure PWGSC can terminate a contract where goods have been produced by forced labour or human trafficking, and protect PWGSC from financial liability if imported goods are not released at the border because their importation is prohibited under the forced labour prohibition in the Customs Tariff Act, PWGSC is introducing seven new contracting clauses to be used by contracting officers in all new contracts for goods, effective immediately.
Please note, theses clauses do not apply to the bid solicitation process, Standing Offers or Supply Arrangements. These changes are expected to be introduced in a later phase.
Summary of Additions
Contracting officers should note the following:
New obligation on the contractor to not deliver or sell goods to Canada manufactured wholly or in part by forced labour
As per Contract Clause 1: The Contractor represents and warrants that the Work is not mined, manufactured or produced wholly or in part by forced labour. Regardless of who acts as an importer, the Contractor must not during the performance of the Contract, directly or indirectly, deliver Work to Canada or import Work into Canada the importation of which is prohibited from entry pursuant to ss. 136(1) of the Customs Tariff Act, and tariff item No. 9897.00.00 of the Customs Tariff Act – Schedule (as amended from time to time), because it is mined, manufactured or produced wholly or in part by forced labour.
The first part of this clause pertains to the time that the contract is executed, at which the Contractor represents and warrants to Canada that the Work is not mined, manufactured or produced by forced labour. The second part of the sentence imposes a future obligation not to deliver to Canada or import into Canada any Work that is mined, manufactured or produced by forced labour.
New option to terminate a contract if the CBSA has classified the goods pursuant to the Customs Tariff
As per Contract Clause 2: If a tariff classification determination is made under the Customs Act and the importation of the Work, or any part of the Work, is prohibited, the Contractor must immediately inform the Contracting Authority in writing. Canada may terminate the Contract for default in accordance with section Default by the Contractor if the Work or any part of the Work is classified under tariff item no. 9897.00.00 of the Customs Tariff Act – Schedule as mined, manufactured or produced wholly or in part by forced labour. If the Contractor is aware that the Work, or any part of the Work, is being or has been investigated regarding whether it is prohibited from entry pursuant to tariff item No. 9897.00.00, the Contractor must immediately inform the Contracting Authority in writing of that investigation.
This Clause creates an expectation for the Contractor to notify the Contracting Authority in writing if their Work is being or has been investigated, or is prohibited from entry pursuant to tariff item No. 9897.00.00 of the Customs Tariff Act – Schedule. If the Contracting Authority receives a notification from the Contractor, the Contracting Authority will notify Integrity Verification Services (IVS) within the Departmental Oversight Branch (DOB).
Independently of whether the Contractor discloses this information to the Contracting Authority, should IVS receive a notification that the Work is classified under subsection 1, it will notify the Contracting Authority.
It is important to note that a classification made by the CBSA does not automatically trigger a contract termination; rather, a classification made by CBSA gives PWGSC the option to terminate or not. However, the CBSA classification may delay the delivery of the Work, and a late delivery, in and of itself, could be a separate breach of contract, especially if the deadline is critical. If this situation arises, the Contracting officer must consult with Legal Services, particularly if considering whether to terminate a contract.
New option to terminate a contract if there are reasonable grounds to believe that the good has been produced in whole or in part with the use of forced labour
As per Contract Clause 3, Canada may terminate the Contract for default in accordance with section Default by the Contractor if it has reasonable grounds to believe the Work was mined, manufactured or produced in whole or in part by forced labour or linked to human trafficking. Reasonable grounds for making such a determination may include:
- Findings or Withhold Release Orders issued by the United States Customs and Border Protection, under the US Trade Facilitation and Trade Enforcement Act (TFTEA) of 2015; or
- Credible evidence from a reliable source, including but not limited to non-governmental organizations.
The purpose of this Clause and its sub paragraphs is to give PWGSC the choice to terminate a contract based on these grounds.
Procedural fairness is an important element in applying the clauses. Inadequacy in this area may result in the clause, or actions taken in reliance on them, to be invalidated. PWGSC will only terminate a contract on the basis of credible information. Depending on the specific circumstances of the situation, PWGSC reserves the right to not terminate a contract when it determines that continuation is warranted, based on relevant business considerations.
IVS will be responsible for managing information relating to forced labour and human trafficking. This information may come from a variety of sources, including CBSA, ESDC, US CBP, court processes and other governmental or non-governmental organizations (domestic or foreign). IVS will flag to DOB’s Determinations Team if there are concerns with a Contractor under Clause 3 a) or b). The Determinations Team will conduct research and analysis, collaborate with SPS, as needed, and provide a recommendation to the Registrar of Ineligibility and Suspension (the Registrar) on whether there are “reasonable grounds to believe” that the “Work was mined, manufactured or produced in whole or in part by forced labour or linked to human trafficking”. If the Registrar agrees that reasonable grounds exist, the Registrar will issue a Notice of Concern (NoC) to the Contractor, at the same time alerting the Contracting Authority to the process.
The NoC will provide the supplier with the grounds for the concern and a reasonable period of time within which the supplier may respond in writing with any information it believes to be relevant. Time lines will be strictly adhered to because the contract is already in place and being administered.
Following receipt of information, if any, from the Contractor, the Determinations Team will evaluate the information and make a final recommendation to the Registrar as to whether reasonable grounds exist to terminate the contract due to the use of forced labour in the supply chain or links to human trafficking. The Registrar’s determination will be provided to the Contracting Authority which will then have the responsibility for deciding whether or not to terminate the contract.
Legal Services must be consulted throughout the determination and any termination process.
New option to terminate a contract if the Contractor has been convicted of a human trafficking offence in Canada or abroad
Contract clauses 4 and 5 are related to each other as they introduce the option to terminate a contract based on a human trafficking conviction in Canada or a similar conviction in a foreign jurisdiction. Contract clause 6 identifies the parameters to determine if a conviction outside of Canada is considered to be similar.
As per Contract Clause 4, Canada may terminate the Contract for default in accordance with section Default by the Contractor if the Contractor has, in the past three years, been convicted of specified offences under the Criminal Code (see section 279 of the Criminal Code) or the Immigration and Refugee Protection Act (see section 118 of the IRPA).
As per Contract Clause 5, Canada may terminate the Contract for default if the Contractor has, in the past three years , been convicted of an offence in a jurisdiction other than Canada that, in Canada’s opinion, is similar to any of the offences identified in paragraphs 4(i) to (vii).
IVS will be responsible for monitoring convictions pertaining to human trafficking offences in Canada and abroad. IVS will flag the conviction information to DOB’s Determinations Team. The Determinations Team will evaluate and make a final recommendation to the Registrar as to whether reasonable grounds exist to terminate the contract.
For Clause 4 and 5, the Registrar will follow the same process of issuing a NoC, allowing for the Contractor to provide a response, and then coming to a final determination as to whether grounds exist for the contract to be terminated.
Guidance for making a determination under Contract Clause 5 is provided in Clause 6: For purposes of determining whether a foreign offence is similar to a listed offence as per clause 5, PWGSC’s determination will include consideration of, but not be limited to the following factors:
- in the case of a conviction, whether the court acted within its jurisdiction;
- whether the supplier was afforded the right to appear during the court’s proceedings or to submit to the court’s jurisdiction;
- whether the court’s decision was obtained by fraud; or
- whether the supplier was entitled to present to the court every defence that the supplier would have been entitled to present had the proceeding been tried in Canada.
Contracting officers are expected to consult with their senior management to assess whether to pursue or terminate a contract based on the determination provided by the Registrar. Legal Services must be consulted if a contract termination is being considered.
Contractor may make representations to PWGSC before PWGSC terminates a contract
As per Contract Clause 7, Where Canada intends to terminate the Contract under this section, Canada will inform the Contractor and provide the Contractor an opportunity to make written representations before making a final decision. Written representations must be submitted within 30 days from receiving a notice of concern unless Canada establishes a different deadline.
The Registrar will give the Contractor notice of its concern regarding the applicable anti-forced labour clause and give the Contractor a reasonable opportunity to provide written Representations.
It will be up to the Contractor to determine what, if any, representations to provide to the Registrar. DOB’s Determinations Team in consultation with Legal Services and SPS, as needed, will make a recommendation to the Registrar. The Registrar in turn, will decide whether grounds exist to terminate the contract. The Registrar will provide a determination to the Contracting Authority and the Contractor. It will then be up to contracting officers to engage with their senior management and decide whether to continue or terminate the contract based on the finding of the Registrar. The Registrar does not have a role in assessing the business rationale for continuing or terminating the contract.
If applicable, the contracting officer will send a termination notice under the Default by Contractor Clause that takes effect immediately, without giving the supplier a cure period, for example, to replace the goods (with something that is not produced in whole or in part by forced labour) within a specific time frame.
Alternatively, a termination notice could be sent with a cure period. If, in consultation with their client, the contracting officer determines that the goods are critical, then the contracting officer would have the option to send a termination notice with a cure period, or alternatively, not issue a termination notice and amend the contract to change the delivery date.
Legal Services must always be consulted in the application of the anti-forced labour clauses, including the decision to terminate a contract or issue a notice of termination.
Revisions to the Supply Manual
There are no related changes to the Supply Manual.
Revisions to the Standard Acquisition Clauses and Conditions Manual (SACC)
The SACC Manual has been revised in support of this PN. For more details, refer to the Affected SACC Manual sections listed below.
Revisions to the Standard Procurement Templates
There are no changes to the Standard Procurement Templates.
Contact information
For assistance with the application of the forced labour clauses, Acquisitions Program contracting officers may contact the Ethical Procurement Unit of the Strategic Policy Sector at TPSGC.PAAchatseEthiques-APEthicalProcurement.PWGSC@tpsgc-pwgsc.gc.ca.
Questions related to the SACC Manual may be sent by email to the following address: TPSGC.Outilsdapprovisionnement-ProcurementTools.PWGSC@tpsgc-pwgsc.gc.ca.