Key points under the EU Forced Labour Regulation Guidelines

Key takeaways

OBLIGATIONS

• Companies must not place products made with forced labour on the EU market, import them into the EU or export them from the EU, regardless of whether a formal investigation has been launched.
• This means that unlike the Corporate Sustainability Due Diligence Directive, if a company identifies a forced labour impact, products affected by forced labour must not be sold in the EU while a prevention or corrective action plan is being implemented.

SCOPE

• The Regulation covers almost all products sold in or exported from the EU.  However, transport, warehousing, logistics and distribution services do not fall under the Regulation.
• Forced child labour falls under the Regulation, while other forms of child labour that do not amount to forced labour are not covered. 

DEFINITION OF FORCED LABOUR

• The Guidelines list 15 indicators of forced labour. While the terminology differs slightly, these are largely based on the ILO’s 11 forced labour indicators, and the Guidelines expressly refer readers to the ILO’s guidance for further detail. The main additions are “forced recruitment” and “abusive additional obligations”, which are identified as standalone indicators.
• The Guidelines distinguish between three forms of forced labour: 1. privately imposed forced labour, 2. state-imposed forced labour and 3. forced child labour. The Guidelines do not list any specific jurisdictions that are high-risk for state-imposed forced labour. 

INVESTIGATIONS

• Investigations will be prioritised based on: (i) the scale and severity of the suspected forced labour; (ii) the quantity or volume of products placed on the EU market; and (iii) the share of the final product suspected of having been made with forced labour.
• In cases involving forced labour outside the EU, importers are likely to be a key focus for competent authorities.
• The Guidelines set out the type of evidence companies may need to provide. The list is just for illustrative purposes and includes: 
  • Full due diligence policy and system across all due diligence steps
  • Information on working conditions at the site including worker interview transcripts, lists of workers, surveys, email correspondence, audits.
  • Information about the product including traceability and shipping and customs info, EU codes, raw material sources, bills and certificates
  • Supply chain information including for example supply chain maps, ownership structures, list of manufacturers and suppliers, supporting location evidence such as GPS coordinates.
  • Transactional and logistics records 
  • Information on production and capacity info. 

ENFORCEMENT AND PENALTIES

• If a product is found to have been made with forced labour, it must be withdrawn from the EU market and can no longer be sold or exported. Businesses must withdraw affected products and ensure they are donated, recycled or destroyed, as directed.
• A decision banning a product is a general ban, meaning it applies not only to the company that was investigated, but also to any other business placing the same product on the EU market or exporting it from the EU.
• Financial penalties are only issued if a company fails to comply with an enforcement decision—for example, by continuing to place a banned product on the EU market or by failing to withdraw products in accordance with the decision.
• The Regulation does not set minimum or maximum financial penalties. This will be decided at Member State level.

DUE DILIGENCE 

• The EU FLR does not require companies to carry out forced labour due diligence. However, where concerns are raised, companies may submit documented due diligence as evidence. This makes following the EU’s due diligence guidance important. 
• It is also helpful in indicating what may be expected of companies carrying out forced labour due diligence under the CSDDD.