Our key takeaway: Forced labour import bans are in the air these days. The release of the European Commission’s proposed regulation on prohibiting products made with forced labour on the European market follows on the heels of the U.S.’s Uyghur Forced Labor Prevention Act (UFPLA), which was signed into law at the end of last year. While the two approaches are not identical, one common point continues to echo: due diligence, due diligence, due diligence. In short, conducting robust human rights due diligence across the full value chain (deep in the supply chain and own operations included) will help companies lower their risks of forced labour—and their risks of goods being stopped at borders. A clear example of convergence of risk to people and risk to business if there ever was one!
On 14 September 2022, the European Commission proposed a regulation of the European Parliament and of the Council on prohibiting products made with forced labour on the Union market. The European Commission has posted an easily digestible 2-page factsheet on the proposal. You can also check out KnowTheChain’s recent briefing on Forced Labour Risks, Remedy and Changing Regulation for a birds’-eye view on regulatory developments. The Commission’s proposal now needs to be discussed and approved by the European Parliament and the Council of the European Union before it can enter into force. We highlight some of the key points from the proposal itself below:
- Objectives and legal basis: The aim of the proposal is “to effectively prohibit the placing and making available on the EU market and the export from the EU of products made with forced labour, including forced child labour.” The legislation would promote uniform cooperation among all EU Member States to better address forced and child labour and would “ensure a level playing field for all businesses established within and outside the EU.” The proposal is supported by a “robust, risk-based enforcement framework” and builds on “international standards and complementing existing horizontal and sectoral EU initiatives, in particular the corporate sustainability due diligence and reporting obligations.” The proposal uses the ILO’s definition of forced labour as established in Forced Labour Convention, 1930 (No. 29) and the ILO’s 11 indicators of forced labour, and is intended to align with the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises and the OECD Due Diligence Guidance on Responsible Business Conduct.
- Scope and proportionality: The proposal “targets products made with forced labour of any type and provenance, all economic operators placing and making available those products on the EU market would be within scope.” However, in practice the proposal also calls on enforcing authorities to “focus their efforts where the risks of forced labour are most prevalent, and where the impact is likely to be largest. This means that emphasis will likely be placed on larger economic operators at early stages of the EU value chain (e.g., importers, manufacturers, producers or product suppliers).” Recognising that micro, small and medium-sized enterprises often have fewer resources to conduct robust due diligence to detect forced labour in their supply chains, the proposal calls on the Commission to develop guidelines on conducting due diligence which take into account company’s size and resources. In addition, "the Commission should issue guidelines on forced-labour risk indicators and on publicly available information in order to help SMEs, as well as other economic operators, to comply with the requirements of the prohibition.”
- Due diligence expectations on the part of companies: Under the proposal, the “competent authorities should bear the burden of establishing that forced labour has been used at any stage of production, manufacture, harvest or extraction of a product, including working or processing related to the product.” Their determination should rely on information gathered during an investigation stage, while giving companies the opportunity to provide information in their defence throughout the investigation. That said, the proposal clearly lays out an expectation for companies to conduct robust due diligence in their own operations and supply chains to detect and address forced labour, both as a risk mitigation factor and a preemptor of investigation: “Before initiating an investigation, competent authorities should request from the economic operators under assessment information on actions taken to mitigate, prevent or bring to an end risks of forced labour in their operations and value chains with respect to the products under assessment. Carrying out such due diligence in relation to forced labour should help the economic operator to be at a lower risk of having forced labour in its operations and value chains.” Specifically, “[a[ppropriate due diligence means that forced labour issues in the value chain have been identified and addressed in accordance with relevant Union legislation and international standards. That implies that where the competent authority considers that there is no substantiated concern of a violation of the prohibition, for instance due to, but not limited to the applicable legislation, guidelines, recommendations or any other due diligence in relation to forced labour being applied in a way that mitigates, prevents and brings to an end the risk of forced labour, no investigation should be initiated.”