On September 14, 2022, the European Commission (the “Commission”) published its legislative proposal for a regulation prohibiting products made with forced labour on the European Union (EU) market¹.

The legislative proposal aims to prohibit producers, manufacturers and suppliers from placing products made with forced labour² on the EU market or exporting such products to third countries. If adopted, EU member states will be required to directly detain, seize or order the withdrawal of any product made with force labour at any stage of that product’s supply chain.

Dentons’ Trade team sets out the main takeaways for European and international companies.

Scope

The proposal covers all products, namely those made in the EU for domestic consumption and exports, and imported goods, without targeting specific companies or industries. Although this legislative initiative covers all industries, the Commission recognises that some there are some sectors -- such as services, textiles, mining and agriculture -- where forced labour has more frequently been reported.

Proposed mechanism to determine goods produced by forced labour

The legislative proposal requires EU member states to designate competent authorities responsible for implementing and enforcing the regulation. The implementation of the mechanism, in particular the investigation and decision to prohibit products made with forced labour, will fall within the competence of the national authorities of the member states. It is envisaged that customs authorities will in turn act, mainly on the basis of decisions taken by such competent authorities, at the external EU borders to detect and stop products produced with forced labour from entering or leaving the EU market. The Commission will support EU member states by ensuring the availability of a public database, providing efficient coordination among the national authorities, and issuing guidelines.

The proposed mechanism envisages a two-tiered investigation process – (1) a preliminary phase of investigation and (2) an investigation phase.

During the preliminary phase of investigation, the competent authorities will follow a risk-based approach and, in particular, assess the risk of infringement arising from the placing of products on the Union market made with forced labour³.

If within 30 working days following receipt of the information that there is a substantiated concern of forced labour, the competent authority will be required to proceed with the second phase, i.e., the investigation phase, to investigate the products and economic operators concerned⁴.

In conducting investigations, competent authorities will examine all the information available to them, including but not limited to:

• Independent and verifiable information on risks that forced labour has been used in the production process
• Information on market surveillance and compliance of products shared by other member states
• Submissions made by third parties including civil society
• Information on whether a company carries out forced labour due diligence in its operations and supply chains

At the request of the competent authorities, the economic operators under investigation will be required to provide any information that is relevant and necessary for the investigation, including information identifying the products under investigation, the manufacturer or producer, and the suppliers⁵. Importantly, in the case of non-cooperation by an economic operator, the competent authorities may establish a violation of the prohibition on forced labour products on the basis of any other facts available⁶.

Should the competent authorities find a violation of the prohibition on forced labour products, they shall without delay adopt a decision (1) prohibiting to place or make the products available on the EU market and to export such products; (2) ordering economic operators to withdraw from the EU market the products concerned that have already been placed or made available on the market; (3) ordering economic operators to dispose of the products concerned in accordance with national law consistent with the EU law⁷.

Member states will be required to lay down rules on penalties applicable to non-compliance with a decision of competent authorities and to take all necessary measures to ensure that they are implemented in accordance with national law. The penalties must be effective, proportionate and dissuasive⁸.

Database of forced labour risks and the Union Network Against Forced Labour Products

The proposed Regulation provides for the creation of a database on forced labour risk areas or products⁹ and a new platform (EU Forced Labour Product Network)¹⁰ to ensure structured coordination and cooperation between the competent authorities and the Commission.

In addition, the proposed legislation requires the Commission to issue guidance in order to facilitate the application of the prohibition by economic operators and competent authorities. The guidance should include guidance on due diligence in relation to forced labour and additional information for the competent authorities on the implementation of the prohibition¹¹.

Next steps and the main takeaways

The European Parliament and the Council of the European Union will scrutinize further the proposal with a view to agreeing on a final version of the text. Once adopted, the regulation foresees an implementation period of 24 months after its entry into force¹². The Commission will also issue guidelines within 18 months form the entry into force of this Regulation. The guidelines will include force labour due diligence guidance and information on risk indicators of force labour.

In terms of cross-border trade, customs authorities in EU member states may play a key role in the enforcement of the regulation. Customs clearance delays can be expected in certain cases and customs authorities may request additional information about the products and their manufactures and suppliers. European and international companies are advised to conduct a full assessment on their operations along the supply chain with a view to complying with the EU regulation on prohibiting products made with forced labour.

Dentons’ Trade team will continue to monitor the EU legislative process and report as events unfold. Please feel free to reach out to your Dentons partner if you have any questions or require assistance in respect of the proposed legal instrument.

1. See Proposal for a regulation on prohibiting products made with forced labour on the Union market (europa.eu).
2. The term ‘forced labour’ means “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” as defined in Article 2 of the Convention on Forced Labour, 1930 (No. 29) of the International Labour Organization (ILO.).
3. See Article 4 of the proposed Regulation.
4. See Article 5 of the proposed regulation.
5. See Article 5 of the proposed regulation.
6. See Article 6(2) of the proposed regulation.
7. See Article 6(4) of the proposed regulation.
8. See Article 30 of the proposed regulation.
9. See Article 11 of the proposed regulation.
10. See Article 24 of the proposed regulation.
11. See Article 23 of the proposed regulation.
12. See Article 31 of the proposed regulation.