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On 13 March, the EU Council approved the final text of the EU Forced Labour Regulation. The law will apply to companies from 2027/28. The regulation includes significant powers for EU authorities to investigate and withdraw products from the EU market and detained products cannot be exported or resold in other markets.

Scope

  • The regulation bans all products made with forced labour from entering and being distributed on the EU market, and from being exported from the EU market. 
  • It covers all companies placing goods on the EU market, including through online sales. It includes all products and their components, regardless of the sector, origin, or stage of the supply chain where forced labour took place.
  • Forced labour is defined in line with ILO definitions including the ILO’s 11 indicators for forced labour and the ILO’s definition of state-sponsored forced labour. 
  • The Commission will adopt additional legislation, in the form of Delegated Acts, which will require companies to disclose specific detailed product and supply chain information to customs authorities for select high-risk products.
  • The Commission will set up a Forced Labour Single Portal. This will include a single submission point for cases, a database of high-risk products and regions, any decisions to ban a product, and decisions to withdraw a ban. The database will include forced labour risks in specific geographies, products or product groups, particularly on risks of state-imposed forced labour. This will be based on information from international institutions such as the ILO and UN and research / academic institutions.

Investigations

  • Competent authorities determine what products and companies are investigated. Individuals and organisations can also submit cases of alleged forced labour with evidence.
  • Investigations must be risk based, meaning that authorities are required to focus on severe cases of forced labour including state imposed forced labour, and consider the volume of the product, and the share of the part suspected to be made with forced labour in the final product.
  • Authorities will focus investigations on the company that is closest to the value chain where the risk occurred, meaning brands and suppliers; on companies with the highest leverage in addressing the forced labour; and taking into account the size and economic resources of the company.  We interpret this to mean that larger brands are most likely to be targeted for investigation.
  • Member State competent authorities will conduct investigations into cases of suspected forced labour within their territories. The Commission will be responsible for conducting investigations where the risk of forced labour is located outside the EU. The Commission can also conduct field inspections in exceptional cases.

Company requirements if an investigation is triggered

  • If an investigation is triggered, companies only have 30 days to respond to a preliminary investigation, and between 30-60 days to provide additional information if a full investigation is triggered.
  • The submission requirements for companies are substantial – companies must provide evidence of full forced labour due diligence and demonstrate how their actions are aligned with the EU Forced Labour Guidance and relevant international standards including OECD due diligence guidance. Authorities can also request information from other relevant stakeholders and other companies related to the product, which would mean suppliers.

Decisions

  • Authorities are required to come to a decision within nine months on whether the ban has been violated. The decision will be disclosed on the Forced Labour Single Portal along with information identifying the product, the supplier, and where relevant, the production site and the evidence of forced labour. Companies have the right to contest the legality of a decision in court.
  • Companies will have to withdraw goods that have been identified as being made with forced labour from the market and the goods must either be donated, recycled or destroyed.
  • Customs authorities will have the right to withhold products that they believe violate an existing decision. Unlike in the US, customs authorities do not have the right to investigate and hold products that are not linked to an existing decision.
  • Companies will face penalties if they fail to comply with a decision. Penalties and liability are left in the hands of individual Member States, but will need to be effective, proportionate, and dissuasive.

Start preparing

  • The Regulation is in the final stages of the EU legislative process. It will now need to be voted on by the EU Council and Parliament. This would mean that it will be in force for companies in 2027/2028. 
  • We advise companies to prepare for the legislation by conducting a thorough forced labour due diligence gap analysis. We advise clients to prepare with the assumption that a case will be raised against you.
  • We conduct gap analysis for our clients against the EU Forced Labour Regulation. We help our clients know where they have the highest forced labour risk and review their forced labour due diligence processes against the regulation, EU guidance and international standards.
Contact
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email: info@duediligence.design