Forced Labour Ban Set to Reshape Global Supply Chains

The Forced Labour Regulation (FLR) has been approved by the European Parliament, marking a significant milestone in the EU's fight against forced labour and promoting corporate ESG responsibilities. This regulation will impact businesses of all sizes by banning forced-labour-made products from the EU market. Our Employment Law & Benefits team explores the FLR’s scope, likely means of enforcement, and how it complements other EU directives. Discover what companies should do to prepare.

Following its initial proposal by the European Commission in late 2022, the European Parliament has given its final approval to the Forced Labour Regulation, or FLR. The approval of the Regulation marks a considerable step forward in the EU’s drive to combat forced labour and a considerable development in the promotion of ESG responsibilities.

Scope of the FLR

The FLR will prohibit products made through the use of forced labour from being placed on the EU market or from being exported outside of the EU.

The Regulation defines forced labour, with reference to the ILO Convention on Forced Labour, as:

“all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily”.

This encompasses child labour.

If at any stage of the supply chain, including at extraction, harvest, production, manufacture, or processing, that the definition is met, the product will be considered to be made by way of forced labour.

The FLR’s scope is therefore not limited to specific sectors and encompasses all products and companies, regardless of their size.

Regarding distance selling and online retailers, if the targeted end-users are in the EU, the products with fall within scope of the Regulation.

How the FLR will be enforced

The competent authorities of the Member States will be charged with implementing and enforcing the Regulation. Each will be responsible for conducting investigations into suspected use of forced labour and will employ a risk-based approach when assessing the likelihood of a violation under the FLR. The final decision at the conclusion of the investigation will lie with the competent authority. The Commission will adopt its decisions by means of implementing acts.

The European Commission will create a public database with information on forced-labour risks in different regions and industries, and regarding specific products or product groups to support the collective operation. All decisions banning a product will be published in the Forced Labour Single Portal and will be taken into account in future investigations.

Companies will also be requested to provide information on actions taken to identify, prevent, mitigate or extinguish risks of forced labour in their operations and supply chains with respect to the products under investigation.

Where forced labour is found in supply chains, custom authorities will be alerted and charged with ensuring the relevant product is not placed on the EU market. All products already on the market will be withdrawn and disposed of.

Comparison with the US Uyghur Forced Labor Import Ban

While the FLR has been compared with the US Uyghur Forced Labor Import Ban, the competent authorities here will bear the burden of investigating and establishing whether and how forced labour took place. By comparison, under the US-American Uyghur Forced Labor Prevention Act, there is a presumption that goods manufactured entirely or partially in Xinjiang or by certain listed companies, were made using forced labour. As such those companies and manufacturers are required to demonstrate that their supply chains are free from forced labour.

Comparison with Corporate Sustainability Due Diligence Directive

While the Corporate Sustainability Due Diligence Directive (CSDDD) adopts a company size approach, i.e. based on turnover and number of employees, the FLR applies to all companies supplying products which could potentially be made with forced labour. Suppliers that do not meet the CSDDD thresholds may still therefore be affected by the Regulation.

In addition, unlike the CSDDD, the FLR does not impose additional due diligence obligations. However, companies will be encouraged to implement thorough due diligence checks and monitoring to reduce the risk of investigation and the potential for the withdrawal of their products from the market altogether. These processes will also provide the basis for the competent authority’s investigation.

Consequently, the new Regulation should be seen to complement the CSDDD, extend corporate responsibility across the entire supply chain and reinforce the EU's commitment to preventing forced labour.

The impact for companies in Ireland

To support implementation of the FLR, the Commission is expected to publish due diligence guidelines. However, EU Member States will have three years to start applying the FLR from when its published in the Official Journal.

The full scope of the FLR and the measures it will introduce will be considerable. Companies therefore are encouraged to begin early preparation to ensure that products they market within and outside the EU are produced ethically and are free from forced labour.

We await the publication of the due diligence guidelines. Our Employment Law & Benefits and ESG teams are well versed in preparing client companies for the rigours of new legislation and regulations impacting their operations. If you would like to discuss the introduction of the FLR and its bearing on your business, please contact a member of our team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.