EU Forced Labour Ban - What You Need to Know
This article will not only help you understand the objectives and key requirements of the EU’s Forced Labour Regulation (FLR), but also some of the challenges of approaching compliance and the interaction with other due diligence requirements.
While 2024 was dominated by discussions around the EU Corporate Sustainability Due Diligence Directive (CS3D), another crucial piece of legislation quietly came into play: the EU Ban on Products Made with Forced Labour. With a transition period until December 2027, businesses now have time to align with the new regulation. However, to ensure full compliance, companies should begin their preparation efforts immediately. Let’s jump into it to find out why.
What Is the Aim of the Ban?
The main goal of the EU Forced Labour Ban is to prohibit the sale of products made with forced labour within the EU. Companies will be required to demonstrate that their products are free from forced labour, aiming to eliminate unethical practices and promote fair labour conditions globally. The ban marks a significant shift in the EU’s approach to combatting forced labour in global supply chains as it directly targets products linked to unethical practices and holds businesses accountable for ensuring compliance across their supply networks.
Who Is Affected?
Unlike the CS3D, which mainly targets larger companies, this regulation casts a much wider net, encompassing businesses of all sizes. The regulation applies to all companies selling products to the EU market, including small and medium-sized enterprises (SMEs) and online sellers. It also impacts businesses involved in importing or exporting products to and from the EU. Importantly, the ban does not apply to products already in the hands of consumers.
Companies that are unprepared to address forced labour risks could face severe consequences. This post will break down the key elements of this legislation and explain why compliance is crucial.
What Are the Key Requirements?
Underlying Obligation
The EU Forced Labour Regulation mandates that companies ensure no forced labour exists at any stage of their upstream supply chain, extending as deep as tier 4 suppliers such as farmers or oil extractors. However, businesses are only required to demonstrate compliance if requested by competent authorities during an investigation. The question remains: if a product is investigated, what will be required to prove there was no forced labour used in its production?
Investigations
The regulation sets out a detailed investigation procedure, which authorities and companies must follow if there’s a suspicion of forced labour. This includes:
Preliminary Investigation: Companies have 30 days to provide evidence of actions taken to address forced labour risks for the product under investigation. If sufficient evidence is provided, the investigation ends here.
Official Investigation: If concerns persist after the preliminary investigation, an official investigation is launched. Businesses must submit detailed information within 30–60 days, including product details and information about relevant manufacturers, suppliers, or exporters.
Due Diligence
The regulation explicitly states that no new due diligence obligations are introduced beyond those already mandated by EU and national legislation. However, demonstrating that a product’s supply chain is free from forced labour will, in practice, necessitate robust traceability and due diligence measures. These measures will be critical to effectively identifying, preventing, mitigating, and addressing the use of forced labour within business operations and supply chains.
Why Should Compliance with the Ban Not Be Overlooked?
High Price of Non-Compliance
Businesses must not underestimate the importance of complying with the EU Forced Labour Ban, particularly those in high-risk sectors such as electronics or textiles. Competent authorities will be established in every EU Member State to monitor compliance, and penalties for non-compliance are severe.
If an investigation concludes that forced labour is present within a product’s supply chain, the company will be prohibited from placing the affected products on the market until the issue is resolved. The company will also be required to withdraw the products from circulation and either destroy or donate those already on the market. Failure to comply will result in significant penalties.
Global Trend Toward Forced Labour Regulation
For businesses operating globally, compliance with the EU Forced Labour Ban should be seen as part of a broader strategy to meet international regulations. Other countries are also tightening their laws on forced labour.
In the U.S., the Uyghur Forced Labour Prevention Act is setting a high bar for supply chain transparency, and Canada is updating its Fighting Against Forced Labour and Child Labour in Supply Chains Act to require businesses to take proactive steps to combat forced labour. Similarly, the UK and Australia have introduced Modern Slavery Acts to combat forced labour and human trafficking.
As global regulations evolve, businesses must adopt a holistic approach to forced labour compliance. To reduce business friction and compliance costs, it is important to understand the similarities and differences of each legislation. Staying ahead of the curve not only helps avoid penalties but also protects your company’s reputation and ensures long-term success.
How 2B Policy Can Support Your Business
Navigating the complexities of the EU Forced Labour Regulation can be challenging. 2B Policy offers comprehensive support for your business to prepare for compliance:
In-depth Analysis: Detailed insights into the EU FLR and international forced labour requirements.
Gap Assessments: Evaluation of your existing compliance capabilities against the FLR’s requirements.
Holistic Compliance Strategies: Development of integrated approaches to manage forced labour risks.
Cross-Jurisdictional Interaction: Guidance on how the EU FLR aligns with other legislation (Canada, USA, etc.).
Reach out to start building a robust compliance framework today!