Background

The European Union is gathering public input through June 20 on a proposed regulation that would prohibit making available products made, extracted, or harvested with forced labor on the EU market, whether they are made in the EU or elsewhere. The EU is currently planning to impose this ban in the third quarter of 2022.

According to a communication from the European Commission, existing legislation does not tackle or only partially tackles the placing of products made with forced labor on the market. Existing initiatives on due diligence do not address the products directly but rather target the economic operators, such as companies above a certain size or in certain sectors, and their supply chains (e.g., the EU’s proposed corporate sustainability due diligence directive and the responsible minerals regulation). Products made using forced labor could therefore still be present in the EU market.

The Commission states that EU member states’ legislation alone in this area is unlikely to be sufficient and effective, not least since many companies’ value chains extend to other EU and non-EU countries. Without EU action, the Commission adds, products linked with forced labor in supply chains cannot be prevented from entering the EU market, and significant differences among EU member states would lead to legal uncertainty, additional costs, and administrative burden for companies.

In response, the Commission is proposing a regulation that would effectively ban the placing on the EU market of products made wholly or in part by forced labor. This ban would cover both domestic (EU) and imported products and would be combined with a “robust, risk-based enforcement framework.” Enforcement would likely be carried out by the relevant authorities of EU member states, while the Commission’s role would likely be to encourage consistent enforcement; e.g., by issuing guidelines and making information related to forced labor available.

The Commission acknowledges that businesses involved in supply chains potentially associated with forced labor could see their production costs rise to ensure compliance. On the other hand, “the playing field would level” for companies that already ensure their products are free of forced labor (as companies already doing proper forced labor due diligence will be able to rely on this). The Commission also notes that the proposed ban could have negative consequences for the EU economy if (1) the product concerned is an important input for EU industry, (2) the product concerned cannot be sourced elsewhere, and (3) producers do not react to the threat of a ban.

Because “this initiative requires urgent action” the Commission states that it will not conduct a “classic open public consultation” but instead rely on targeted consultations with stakeholders such as business associations, importers, manufacturers, consumers, non-governmental organizations, trade unions, and retail businesses.

Sandler, Travis & Rosenberg offers a comprehensive suite of services to help companies address forced labor concerns, 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 around the world. For more information, please contact ST&R at supplychainvisibility@strtrade.com.

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