Negotiators from the European Parliament and European Council reached a provisional agreement this week on a regulation to prohibit products made with forced labor in the European Union market. The regulation covers all products, including imports as well as goods made in the EU for domestic consumption and export.
According to a Parliament press release, the regulation provides that national authorities of EU member states (or, if third countries are involved, the EU Commission) will investigate the suspected use of forced labor in companies’ supply chains. To aid in this process the European Commission will (1) draw up a list of specific economic sectors in specific geographical areas where state-imposed forced labor exists and (2) establish a database containing verifiable and regularly updated information about forced labor risks, including reports from international organizations. The Commission may also identify products or product groups for which importers and exporters will have to submit extra details to EU customs, such as information on the manufacturers and suppliers of these products.
A Council press release states that authorities will use four criteria to determine whether a violation has occurred: (1) the scale and severity of the suspected forced labor, including whether state-imposed forced labor may be a concern, (2) the quantity or volume of products placed or made available on the EU market, (3) the share of the parts of the product likely to be made with forced labor, and (4) the proximity of economic operators to the suspected forced labor risks in their supply chain as well as their leverage to address them.
If an investigation concludes that forced labor has been used, the Parliament states, authorities may demand that relevant goods be withdrawn from the EU market and online marketplaces and confiscated at the borders. Those goods will then have to be donated, recycled, or destroyed, although goods of strategic or critical importance may be withheld until the company eliminates forced labor from its supply chains.
The regulation provides for a number of measures to aid in enforcement, including (1) a new Forced Labor Single Portal that includes compliance guidelines for economic operators and authorities, a whistleblower portal, and other information, (2) cooperation with third countries on risk areas or products, best practices, etc., and (3) checks and inspections in third countries if the relevant company and the government of the third country agree to it.
Once both the Council and the Parliament give their final approval, the regulation will be published in the EU’s Official Journal and enter into force the following day. EU countries will then have three years to start applying it.
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.
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