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Understanding the new EU Forced Labor Regulation

Insights Understanding the new EU Forced Labor Regulation Stephanie De Giovanni · Understanding the new EU Forced Labor Regulation Elia El Kouh · January 8, 2025

Background:

According to the International Labor Organization, approximately 27.6 million people – of whom 3.3 million are children – work in forced labor conditions around the globe in every continent and in many industries such as textiles, mining, agriculture and consumer product manufacturing to name only a few.

The eradication of forced labor in all its forms, including State imposed forced labor, is a priority for the European Union. Through its policies and legislative initiatives, the EU seeks to eradicate the use of forced labor and promote decent work and labor rights worldwide.

The EU has relied notably on due diligence obligation in line with international guidelines and principles established by international organizations (ILO, OECD, the UN), to ensure that forced labor does not have a place in the supply chains of entities established in the Union.

Adoption of a new Regulation which provides measures to prevent the sale of products made with forced labor, in comparison with other EU laws which relies on due diligence procedures for companies concerned.

After reaching a provisional agreement on 5 March 2024, the Council adopted on 19 November 2024, a Regulation which forbids the sale on the Union market, or the export from the Union market, of any product made using forced labor (hereinafter the “Regulation”).

This Regulation covers all type of products “made with forced labor” – defined as  “a product for which forced labor[1] has been used in whole or in part at any stage of its extraction, harvest, production or manufacture, including in the working or processing related to a product at any stage of its supply chain,” and shall also apply to market places and online sales.

Consequently, this Regulation will have extra-territorial effects. The prohibition of products made with forced labor should apply to all products, of any type, including their components, and should apply to products regardless of the sector, the origin, whether they are domestic or imported, or placed or made available on the Union market or exported. However, the Regulation does not apply to the provision of transport services and does not cover the withdrawal of products which have already reached end users in the Union market.

This could notably impact the Chinese region of Xinjiang. Indeed, several Western countries have condemned the practice of massive forced labor used against the Uighur minority, which is still contested by the Chinese government, and the US Congress already passed in late 2021 the Uyghur Forced Labor Prevention Act (UFLPA), which bans the import of products from Xinjiang into the USA, unless companies can prove that their production does not involve forced labor.

What duties for the economic operators having an activity wihtin the EU market?

Economic operators shall note that they will not be subject to additional specific due diligence obligations in order notably to avoid duplication with the Corporate Sustaibanility Due Diligence Directive (CSDDD). However, all economic operators concerned by this Regulation will still have to demonstrate their compliance and their effective due diligence practices to comply with this Regulation.

In fact, this Regulation rather relies on investigations – and European cooperation & mutual assistance – based on a risk-based approach conducted by the European Commission in the case of the use of forced labor outside the EU or by EU Member State authorities when forced labor is used within their territory.

  1. First, in the preliminary phase, the likelihood of a violation of the Regulation by products or companies will be assessed by the lead competent authority.
  • This assessment will be made against criteria such as the scale and severity of the suspected forced labor, the quantity or volume of products placed or made available on the EU market, the share of the part of the product suspected to have been made with forced labor in the final product.
  • The companies under assessment and other product suppliers where relevant, shall explain the relevant actions they have taken in order to identify, prevent, mitigate, bring to an end or remediate risks of forced labor in their operations and supply chains with respect to the products under assessment.
  1. Second, if a substantial concern arises during the preliminary investigation, the lead competent authority shall initiate an investigation on the products and companies concerned.

The concerned company must cooperate with the authority and must submit any relevant and necessary information for the investigation within 60 working days maximum. Otherwise, the lead competent authority may establish a violation of the forced labor ban where it was not possible to gather information and evidence, in particular where a company or a public authority has refused or has failed to provide the information requested without a valid justification or has otherwise impeded the investigation.

The lead company may also collect information from or interview any interested natural or legal person and may conduct field inspections in exceptional situations.

Tools available to rely on for the effective implementation of the Regulation

The European Commission will create a Database of forced labor risk areas or products to support the work of competent national authorities in assessing possible violations of this Regulation. This database will provide indicative, non-exhaustive, evidence-based, verifiable and regularly updated information on forced labor risks in specific geographic areas or with respect to specific products or product group. Those resources will be based on independent and verifiable information from international organisations, in particular the ILO and the UN, or institutional, research or academic organisations, and shall not disclose information that names economic operators directly.

Economic operators shall also expect Guidelines from the Commission within the 18 months after the date of entry into force of this Regulation which will include guidance for companies on due diligence in relation to forced labor and on best practices for bringing to an end  and remediating different types of forced labor, information on the risk indicators of forced labor, as well as guidance for competent national authorities government  and customs.

Access to the Database and Guidelines will be available on the Forced Labor Single Portal, a website created by the Commission which will serve as a centralized location for all resources necessary to implement the Regulation, including details of any decisions to ban products and the result of reviews.

Besides, each Member State, the Commission and, where appropriate, customs authorities will establish an Union Network Against Forced Labor Products which will serve as a platform for structured coordination and cooperation between the EU competent authorities.

 

What risks/consequences ?

Where the lead competent authority evidences a violation of the Regulation, it will adopt without delay a decision containing :

  1. A prohibition on the placing, making available, or export of the products concerned on or from the Union market ;
  2. An order requiring the company to withdraw the products from the EU market or to remove content from an online interface referring to the products;
  • An order requiring the companies to dispose of the products concerned or of the concerned parts of the products if they are replaceable.

The final decision taken by the lead competent authority will apply in all other member states, based on the principle of mutual recognition, and will be communicated to the customs authorities of Member States.

Products to be disposed shall be recycled or, when impossible, be rendered inoperable in order to be in line with the waste hierarchy set out in Directive 2008/98/EC of 19 November 2008. Perishable products, shall be donated for charitable or public interest purposes or, when that is not possible, be rendered inoperable.

Companies affected by a decision shall be allowed to request a review of that decision at any time if it provide new substantial information that was not brought to the attention of the lead competent authority during the investigation. They shall be subject to penalties if they fail to comply with the decision taken by the lead competent authority.

Entry into force and date of application

The Regulation shall fully apply on 13 December 2027 but some provisions shall nevertheless apply earlier, such as the establishment and development of the information and communication system, the Database of forced labor risk areas or products and the implementing acts to specify the procedural acts, templates and details in relation to those submission of information.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with Rimon, P.C. or its affiliates.

[1] “Forced labor » as stated in the Regulation refers to the definition provided by the International Labor Organization (ILO), i.e “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”. It refers to situations in which persons are coerced to work either through the use of violence or intimidation, or by more indirect means such as manipulated debt, retention of identity papers or threats of denunciation to the immigration authorities.”

Stephanie De Giovanni is an accomplished international and litigation attorney with over 20 years of experience practicing commercial law and complex commercial litigation. Ms. De Giovanni has a background in international distribution law and spent her early career focused on commercial agency and the setting-up of distribution networks. For the duration of her legal career, she has dealt with termination issues and the disputes arising therefrom. Read more here.

Elia El Kouh is an Associate in Rimon’s Paris office. Ms. El Kouh focuses on international law, commercial law, litigation, and compliance. She has prior experience in law firms in Paris and Morroco advising clients on matters relating to commercial law, criminal business law, economic law, contract law, litigation, and arbitration.  Ms. El Kouh also has experience serving as in-house counsel for the legal department of an automotive manufacturer, where she advised on issues relating to contract law, competition law, distribution, and consumer law. Read more here.