On September 14, 2022, the European Commission (the “Commission”) published its legislative proposal for a regulation prohibiting products made with forced labor from the European Union (EU) market.1.
The legislative proposal aims to prohibit producers, manufacturers and suppliers from placing products made by forced labor2 on the EU market or exporting these products to third countries. If passed, EU member states will be required to detain, seize or order the direct removal of any product produced by forced labor at any stage of that product’s supply chain.
The Dentons sales team outline key takeaways for European and international businesses.
The proposal covers all products, namely those produced 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 recognizes that there are certain sectors — such as services, textiles, mining and agriculture — where forced labor has been more frequently reported.
Proposed mechanism for determining the goods produced by forced labor
The legislative proposal obliges EU member states to designate competent authorities responsible for implementing and enforcing the regulation. The implementation of the mechanism, in particular the investigation and the decision to prohibit the products of forced labour, will fall under the competence of the national authorities of the Member States. Customs authorities are expected to act in turn, mainly on the basis of decisions taken by these competent authorities, at the external borders of the EU to detect and prevent products produced by forced labor from entering or leaving the market. of the EU. The Commission will support EU Member States by ensuring the availability of a public database, ensuring effective coordination between national authorities and publishing guidelines.
The proposed mechanism contemplates a two-tier investigation process – (1) a preliminary investigation phase and (2) an investigation phase.
During the preliminary phase of the investigationthe competent authorities will follow a risk-based approach and, in particular, will assess the risk of infringement resulting from the placing on the Union market of products produced with forced labor3.
If, within 30 working days of receipt of the information, there is a well-founded suspicion of forced labour, the competent authority will be required to proceed to the second phase, namely the investigation phase, to investigate the products and the economic operators concerned4.
When conducting investigations, competent authorities will consider all information available to them, including, but not limited to:
- Independent and verifiable information on the risks that forced labor has been used in the production process
- Information on market surveillance and product conformity shared by other Member States
- Submissions made by third parties, including civil society
- Information on whether a company conducts forced labor due diligence in its operations and supply chains
At the request of the competent authorities, economic operators under investigation will be required to provide any information relevant and necessary for the investigation, including information identifying the products under investigation, the manufacturer or the producer and the suppliers5. It is important to note that in the event of non-cooperation by an economic operator, the competent authorities may establish a violation of the prohibition of the products of forced labor on the basis of any other facts available.6.
If the competent authorities find a violation of the prohibition of forced labor products, they shall without delay adopt a decision (1) prohibiting the placing or making available of the products on the EU market and the export of these products; (2) order economic operators to withdraw from the EU market affected products which have already been placed or made available on the market; (3) order economic operators to dispose of the affected products in accordance with national law in accordance with EU lawseven.
Member States will be required to lay down rules on penalties applicable in the event of non-compliance with a decision of the competent authorities and to take all necessary measures to ensure their implementation in accordance with national law. Penalties must be effective, proportionate and dissuasive8.
Forced Labor Risk Database and Trade Union Network Against Products of Forced Labor
The proposed regulations provide for the creation of a database on areas or products at risk of forced labor9 and a new platform (EU Forced Labor Product Network)ten ensure structured coordination and cooperation between competent authorities and the Commission.
In addition, the proposed legislation requires the Commission to issue guidance to facilitate the application of the ban by economic operators and competent authorities. The guidance should include guidance on forced labor due diligence and additional information for competent authorities on the implementation of the prohibition11.
Next steps and key takeaways
The European Parliament and the Council of the European Union will further examine the proposal with a view to agreeing on a final version of the text. Once adopted, the regulation provides for an implementation period of 24 months after its entry into force12. The Commission will also publish guidelines within 18 months of the entry into force of this Regulation. The guidelines will include guidance on forced labor due diligence and information on forced labor risk indicators.
In terms of cross-border trade, the customs authorities of EU Member States can play a key role in enforcing the regulation. Customs clearance delays may be expected in some cases and customs authorities may request additional information about products, their manufacturers and suppliers. European and international companies are advised to carry out a comprehensive assessment of their operations throughout the supply chain in order to comply with the EU regulation banning products made with forced labour.
The Dentons trade team will continue to monitor the EU legislative process and report as events unfold.
- See the proposal for a regulation on the prohibition of products produced by forced labor on the Union market (europa.eu).
- The term “forced labor” meansany work or service which is exacted from a person under the menace of a penalty and for which the person has not offered himself voluntarilyas defined in Article 2 of the Forced Labor Convention, 1930 (No. 29) of the International Labor Organization (ILO).
- See Article 4 of the proposed regulation.
- See section 5 of the proposed settlement.
- See section 5 of the proposed settlement.
- See Article 6(2) of the proposed regulation.
- See Article 6(4) of the proposed regulation.
- See section 30 of the proposed regulations.
- See section 11 of the proposed settlement.
- See section 24 of the proposed regulations.
- See section 23 of the proposed regulations.
- See section 31 of the proposed regulations.