The EC publishes a new proposal to keep the EU free from forced labour

The objective of this proposal¹ is to effectively prohibit economic operators from placing and making products made with forced labour available on the EU market as well as exporting such products from the EU.

This new proposal follows on the EC's proposal for a directive on corporate sustainability due diligence and Communication on decent work worldwide² of 23 February 2022, which announced that the EC was preparing a new legislative initiative and already laid down its general elements.

In view of the prohibition laid down by the proposed regulation, companies (including SMEs) will be required to carry out due diligence in relation to the risks of forced labour in their supply chain in order to avoid decisions prohibiting the placing and making available of their products on the EU market and their export, as well as decisions ordering the withdrawal of the products already placed or made available, and related reputational and legal risks.

Broad scope

The prohibition (article 3) applies to any economic operators (including SMEs), which means any natural or legal person or association of persons who places or makes available products on the EU market or exports products from the EU market. The proposal applies to any supply of products for distribution, consumption or use on the EU market in the course of a commercial activity, whether in return for payment or free of charge. This includes online offers for sale when such offer is aimed at users in the EU.

The proposal targets both products manufactured within the EU (for domestic consumption or exportation) and imported products, made with forced labour (including forced child labour). Forced labour means 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 themselves voluntarily³.

Role and powers of the national competent authorities

Member States will appoint one or more national authorities to conduct preliminary assessments of the likelihood that economic operators violated the prohibition, following a risk-based approach and using all relevant information available to them (article 4). Such information also includes submissions made, under the protection of the EU Whistleblowing Directive (2019/1937), by any person (including associations without legal personality) who has reasonable grounds to believe that products made with forced labour were placed or made available on the EU market (article 10).

The competent authorities will focus on the economic operators involved in the steps of the value chain as close as possible to where the risk of forced labour occurs, taking into account their size and economic resources as well as the quantity of products concerned and the scale of suspected forced labour. Before initiating an investigation, the competent authority will request information from the economic operator on the actions taken to identify, prevent, mitigate or bring to an end risks of forced labour in their operations and supply chain (article 4.3). In the case of a substantiated concern of a violation of the prohibition, the authority will further investigate the product and the operator concerned (article 5). In the event of a breach of the prohibition, the authority must adopt a decision prohibiting the operator from placing or making the products available on the EU market and from exporting them, along with an order to withdraw the relevant products from the EU market (article 6).

The decision will remain applicable until the economic operator shows evidence of compliance with the decision and elimination of forced labour from its operations or supply chain (article 6.6).

Economic operators may request a review of the decision if they bring new elements evidencing compliance (article 8).

Powers of the EU customs authorities concerning imports and exports

As to products entering or leaving the EU market, the EU customs authorities may, on the basis of the information made available by the economic operator, suspend or refuse the release for free circulation or the export of products that may be in breach of the prohibition (articles 17-19).  In the case of a refusal, article 20 provides for the disposal of the products.

Harmonisation of enforcement measures

The proposal provides for the exchange of information and cooperation between the competent authorities and the customs authorities through several provisions.

The proposal foresees the establishment of a “Union Network Against Forced Labour Product” (article 24), a platform for structured coordination and cooperation between competent authorities and the EC.

Any decision taken by a competent authority in one Member State will be recognised and have to be enforced by the competent authorities in other Member States (article 14).

The proposal further provides that national competent authorities must inform the EC and the competent authorities of other Member States without delay about any decisions taken and any requests for review received from economic operators (article 9). 

Corporate supply chain due diligence

In order to comply with the proposed regulation, companies (including SMEs) will need to carry out due diligence in relation to the risks of forced labour in their supply chain, in accordance with guidelines and principles established by international organisations (ILO, OECD and UN). The EC will also issue guidelines no later than 18 months after the entry into force of the proposal on due diligence in relation to forced labour as well as on risk indicators of forced labour.

It is also worth noting in this respect that the EC has announced the creation of an indicative, non-exhaustive, verifiable and regularly updated database of forced labour risks in specific geographic areas or with respect to specific products (article 11), which should prove useful to economic operators in their due diligence.

Next steps

Now that the proposed regulation has been published, several steps will need to be completed in order to formally adopt the text of the proposal. The European Parliament and the Council will review, amend and finalise the text to reflect the political agreement amongst the EU institutions. Once adopted, the proposal will be applicable 24 months after its entry into force.

Footnotes

<sup>1.Proposal for a Regulation on prohibiting products made with forced labour on the Union market.
2.Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee on decent work worldwide for a global just transition and a sustainable recovery, COM(2022) 66 final, 23.2.2022.
3. Article 2 of the ILO’s Forced Labour Convention, 1930 (No. 29).</sup>