EU proposal to ban goods made with forced labour

How will the EU’s proposed ban on goods made with forced labour impact businesses?

The question

How will the EU’s proposed ban on goods made with forced labour impact businesses? 

The key takeaway

The EU is seeking to ban all products within the EU that have been made with forced labour. Regulators can require that such products are withdrawn from the market and disposed of, and companies may also face national penalties. 

The background

The EU is an avid speaker on violations of decent work conditions in arenas such as the International Labour Organization, the G7 and the World Trade Organisation. President von der Leyen in her 2021 State of the Union Speech outlined the staggering statistic that 25m people are living in forced labour environments. She announced a set of initiatives to eradicate products made with forced labour and promote decent work worldwide. In February 2022, a global initiative called “Decent Work Worldwide” set out the policies the EU will follow to promote decent working environments across all sectors and policy areas in domestic markets, in third countries, and in global supply chains. 

The development

As part of this comprehensive approach, on 14 September 2022, the Commission proposed a new legislative instrument to effectively ban products made with forced labour, defined as “all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily”. The proposal applies to any company that is placing or making available products on the EU market or exporting products.

The Commission recognises that the majority of forced labour takes place in the private sector, some of it imposed by Member States. The aim of the proposal is not to target specific countries, companies or industries, but rather to effectively prohibit the selling of forced labour goods in the EU, irrespective of the source. Therefore, the proposal covers all products within the EU market, meaning both products made in the EU for domestic consumption and for export, as well as imported goods.

The new proposal is to be implemented through a robust, risk-based enforcement approach starting with investigations led by national authorities in Member States. If national authorities find forced labour, they must order the withdrawal of the products already placed on the market and prohibit the products from being exported or placed on the market. Companies will also be required to dispose of the goods and may face penalties under national law.

The proposal now needs to be discussed and agreed by the European Parliament and the Council before it can enter into force. Once in force, it will apply 24 months later. 

Why is this important?

The proposal will cover all goods produced in or imported into the EU as well as exports, and will affect all sectors, including manufacturing. More specifically, the EU ban is expected to have a significant impact on corporate approaches to due diligence and supply chain management. It has the potential to be challenging for industry actors with global supply chains, who might face a prolonged period of supply chain transitions.

Any practical tips?

Companies should follow the legislative process as it unfolds. To be ready for compliance with the proposed regulation, as well as other global measures seeking to address forced labour and labour rights concerns in global supply chains, companies operating in the EU would do well to take the following steps,:

• review internal controls and oversight measures that relate to the company’s operations and supply chain, to ensure that they address both known and unknown risks
• develop or adapt a policy statement showcasing the company’s commitment to respecting human rights and labour rights
• ensure that due diligence and disclosure or reporting obligations can be satisfactorily fulfilled
• develop or adapt clauses for agreements about relevant policies and expected procedures, with both suppliers and customers – and include appropriate indemnity protections
• update training materials so that relevant stakeholders are aware of the company’s expectations
• evaluate disclosures and reporting in view of impending regulatory obligations, industry obligations and best practices.

Winter 2022