Global Affairs Canada advisory on doing business with Xinjiang-related entities
Global Affairs Canada and the Canadian Trade Commissioner Service have issued the following advisory to bring attention to human rights violations in China affecting Uyghurs and other ethnic minorities from the Xinjiang Uyghur Autonomous Region (XUAR) to help Canadian firms and stakeholders understand the legal and reputational risks posed to companies whose supply chains engage with entities possibly implicated in forced labour.
The Government of Canada is deeply concerned by reports and documentary evidence of repression of Uyghurs and other ethnic minorities by Chinese authorities in the XUAR on the basis of their religion and ethnicity under the pretext of countering “terrorism” and “religious extremism.” There are credible reports of human rights violations affecting Uyghurs and other ethnic minorities in the region, including mass arbitrary detention, forced mass arbitrary separation of children from their parents, suppression of religious and cultural practices, repressive targeting and surveillance measures, forced labour, forced sterilization, torture and other forms of mistreatment.
Evidence suggests that forced labour of Uyghurs and other ethnic minorities is taking place not only in Xinjiang, but across China. Reports indicate mass transfers of Uyghur labourers to factories across China where they are enrolled in forced labour programs that taint global supply chains in a variety of industries.
Responsible business conduct
Human rights violations in Xinjiang pose a number of risks that Canadian firms operating in and doing business with China should carefully consider.
As part of the implementation of the Canada-United States-Mexico Agreement (CUSMA), the Customs Tariff Act was amended on July 1, 2020, to prohibit the importation from all countries of goods produced, in whole or in part, by forced or compulsory labour. This prohibition applies to all goods, irrespective of their country of origin, and will be enforced by the Canadian Border Services Agency. The Government of Canada expects companies to take every step possible to ensure that their supply chains conform to Canadian law with respect to the prohibition on the import of goods produced by forced labour. It should be noted that Canadian companies and individuals that operate within CUSMA may also be subject to legislation related to human rights. In addition to legal risks, companies face reputational damage related to their supply chains if it is discovered that they are sourcing from entities that employ forced labour.
The Government of Canada expects Canadian companies active abroad, in any market or country, to respect human rights, operate lawfully, conduct their activities in a responsible manner and adopt voluntary best practices and internationally respected guidelines such as the United Nations Guiding Principles on Business and Human Rights and the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises, including provisions on the elimination of forced labour or other abuses from their supply chains. Furthermore, Canada operates two voluntary dispute mechanisms: the National Contact Point and the Canadian Ombudsperson for Responsible Enterprise. Although voluntary, these dispute-settlement mechanisms are robust: not collaborating in good faith could result in a number of consequences, including breaching Canada’s Export and Import Permit Act (EIPA), the withdrawal of trade advocacy support, and jeopardizing future Export Development Canada financial support.
Although these risks are not limited to Xinjiang or China, the Government of Canada considers that Xinjiang-related entities pose a particular risk, given the reports and documentary evidence of repression of Uyghurs and other ethnic minorities by Chinese authorities.
Canada has one of the strongest export-control systems in the world and respect for human rights is enshrined in our export-control legislation. All permit applications for controlled items are reviewed under Canada’s extensive risk-assessment framework, including the United Nations Arms Trade Treaty criteria, which are included in the EIPA.
Under the EIPA, controlled goods and technologies cannot be exported from Canada where there is a substantial risk that they could be used to commit or to facilitate serious violations of international humanitarian law, international human rights law, or serious acts of gender-based violence.
The Government of Canada evaluates every export permit application on a case-by-case basis to determine what the goods, services or technologies will be used for, where they will be used, and who will use them, among other factors.
In light of the risks inherent in doing business with Xinjiang-related entities, thorough due diligence is essential. The Government of Canada urges business and individuals with links to Xinjiang or labourers from Xinjiang to closely examine their supply chains to ensure that their activities do not support repression, including, for example, the Chinese government’s surveillance apparatus in Xinjiang, detention or internment facilities, or the use of forced labour. Similarly, the Government of Canada encourages companies and individuals to closely examine end-users of their products and services to ensure that they are not being used to support these activities.
When reviewing supply chains related to Xinjiang, businesses should closely examine potential indicators of forced labour and other abuses, including a lack of transparency on the origins of goods, internment terminology (e.g. education training centres, vocational schools, or boarding schools/kindergartens for children), Xinjiang government incentives and factory locations (e.g. near detention or internment facilities).
Canadian businesses and individuals operating in certain high-technology fields such as cameras, sensors and biometric devices may face greater risks when doing business in China as these products are being used to arbitrarily track Uyghurs and others in Xinjiang. Businesses in these fields should exercise the highest level of due diligence and caution with respect to end-users of their products and services.
Third-party audits are an important part of due diligence, but may not be a sufficient source of information. Businesses are therefore encouraged to work with the relevant industry groups and non-governmental organizations to prevent human rights abuses in their supply chains. Possible sources of information include KnowTheChain, the Responsible Sourcing Tool, the Responsible Business Alliance and the United States Department of Labor’s Comply Chain.
If you need assistance or advice, please contact the Trade Commissioner Service in Ottawa or in regional offices in Canada, or abroad in embassies, high commissions or consulates.