EU Forced Labour Regulation Leads to Hard Work
The EU's new Forced Labour Regulation supplements a broad range of other legislative acts to fight forced labor.
On November 19, 2024, the Council of the European Union ("EU") signed off on the EU Forced Labour Regulation ("FLR"). The FLR supplements a broad range of other legislative acts to fight forced labor, such as the Corporate Sustainability Due Diligence Directive ("CS3D"), the Deforestation Regulation, and others.
When the FLR becomes applicable (there is a three-year grace period commencing from the date the FLR enters into force), it will provide for a ban of products made with forced labor (as defined in ILO Conventions 29 and 105). The FLR will apply to any company selling into, within, or exporting from the EU, regardless of its size or its place of business.
Whether or not a product has been made with forced labor is to be determined by the EU Commission or the competent authorities of EU Member States. In contrast to the U.S. Uyghur Forced Labor Prevention Act, the burden of proof is on the investigating authority.
Once it has been determined that a product has been made with forced labor, the respective company is prohibited from importing, selling, or exporting it. Further, it will be ordered to withdraw any product already sold or to remove any partial content made with forced labor from a more complex product. Any noncompliance with these orders can lead to fines, although a company will not be subject to fines pursuant to the FLR solely because it has been dealing with products made with forced labor.
While the FLR does not impose any due diligence obligations on top of the CS3D, it provides for a sales ban that the more general CS3D does not provide. Because companies having to comply with sales bans based on the FLR may face potentially significant economic consequences, impacted companies are advised to check their supply chains for forced labor. In addition, companies may consider including contractual protections with suppliers designed to provide financial recourse in such a scenario. Although the FLR has a three-year grace period, companies should begin to consider planning for its implementation now.
