Forced Labor
The European Parliament gave its final approval April 23 to a new regulation allowing the European Union to prohibit the sale, import, and export of goods made using forced labor.
According to a Parliament press release, EU member state authorities and the European Commission will be able to investigate suspicious goods, supply chains, and manufacturers. Decisions to investigate will be based on factual and verifiable information that can be received from, for example, international organizations, cooperating authorities, and whistle-blowers. Several risk factors will be taken into account, including the prevalence of state-imposed forced labor in certain economic sectors and geographic areas.
If a product is deemed to have been made using forced labor it will have to be withdrawn from the EU market and donated, recycled, or destroyed. Non-compliant companies may be fined. The goods may be allowed back into the EU once the company eliminates forced labor from its supply chains.
Once the regulation receives a final formal approval from the EU Council it will be published in the EU’s Official Journal. EU member states will then have to start applying it within three years.
Click here for more information on this new regulation.
Sandler, Travis & Rosenberg offers a comprehensive suite of services to help companies address forced labor concerns around the world, including supply chain reviews, due diligence strategies, and proactive remediation. ST&R also maintains a frequently updated web page offering a broad range of information on forced labor-related efforts in the U.S. and around the world. For more information, please contact ST&R at supplychainvisibility@strtrade.com.
Due Diligence
The European Parliament approved April 24 a new due diligence directive requiring firms and their upstream and downstream partners – including supply, production, and distribution – to prevent, end, or mitigate their adverse impacts on human rights and the environment. Such impacts will include slavery, child labor, labor exploitation, biodiversity loss, pollution, and destruction of natural heritage.
A Parliament press release states that covered firms will have to integrate due diligence into their policies, make related investments, seek contractual assurances from their partners, improve their business plans, or provide support to small and medium-sized business partners to ensure they comply with new obligations. Companies will also have to adopt a transition plan to make their business models compatible with the Paris Agreement global warming limit of 1.5°C.
The directive will be phased in based on company size and will ultimately apply to EU companies and parent companies with over 1,000 employees and a worldwide turnover higher than €450 million (higher limits than had been proposed at 500 employees and €150 million). It will also apply to companies with franchising or licensing agreements in the EU ensuring a common corporate identity with worldwide turnover higher than €80 million if at least €22.5 million was generated by royalties. Non-EU companies, parent companies, and companies with franchising or licensing agreements in the EU reaching the same thresholds will also be covered.
Noncompliance may be met with “naming and shaming” as well as fines of up to five percent of companies’ net worldwide turnover. Further, companies will be liable for damages caused by breaching their due diligence obligations and will have to fully compensate their victims.
Once the directive is formally approved by the European Council and published in the EU’s Official journal, EU member states will have two years to transpose the new rules into their national laws.
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