European Commission proposal to ban products made by forced labor from the EU market | Hogan Lovells
As part of target 8.7 of the UN Sustainable Development Goals, UN member states have committed to eradicate forced labour.
Against this background and in response to growing demands from civil society, to promote corporate sustainability due diligence standards and to combat forced labour, the EU has worked on various initiatives to protect the rights of the man.
On 23 February 2022, the European Commission presented a proposal for a directive on corporate sustainability due diligence, aiming to introduce a harmonized human rights due diligence obligation for large companies operating in the EU to prevent and mitigate actual and potential abuses of human rights and the environment. impacts, including labor rights, which extend to cover the business activities carried out by their subsidiaries as well as throughout their value chain.
On 14 September 2022, the European Commission presented a proposal for a regulation prohibiting products produced by forced labor on the Union market, aimed at prohibiting the placing and making available on the EU market and the export from the EU of products produced by forced labor, including forced child labor (“the Proposal”).
The proposal prohibits any economic operator from placing or making available on the EU market products produced by forced labour, regardless of their origin. The proposal prohibits the use of forced labor at all stages of the supply chain, including extraction, harvesting, production, manufacturing or processing.
In order to take into account small and medium-sized enterprises (“SMEs”), national authorities take into account the size and resources of enterprises when carrying out their assessments and surveys. The European Commission will publish guidelines for SMEs.
Investigations and decisions
The proposal foresees that enforcement will be carried out by the authorities of the Member States (the “competent authorities”) following a risk-based approach, concentrating their efforts where they are likely to be most effective and taking into account the size and economic resources of the economic operators, the volume of the products concerned and the scale of the alleged forced labour.
As a first step, the competent authorities will assess whether there are good reasons to suspect that products are likely to have been produced with forced labor on the basis of information provided by civil society, a database on the risks of forced labor, risk indicators and due diligence that companies carry out.
Before opening an investigation, the competent authority should request information from the economic operator on the actions it has taken to identify, prevent, mitigate or put an end to the risks of forced labor in its operations and value chains in regarding the targeted products. Economic operators will have 15 working days from receipt of the request to respond to the Competent Authority.
If the economic operator demonstrates that it complies with the applicable legislation in a way that mitigates, prevents or puts an end to the risk of forced labour, the competent authorities decide that no investigation is necessary.
Competent authorities should initiate investigations into products for which there is a well-founded fear of breach of applicable law. The competent authorities will notify the economic operator under investigation within 3 working days and inform him of the products concerned, the reasons and the possibility of submitting other documents to the competent authority.
Economic operators under investigation will have 15 working days to submit to the competent authorities any information relevant and necessary for the investigation. The competent authorities will then have to carry out the necessary checks and inspections.
If the investigation reveals that a product has been produced with forced labour, the competent authority will issue a decision: (i) prohibiting the placing or making available of the forced labor products on the EU market and export them; (ii) order the withdrawal from the EU market of the products of forced labour; and (iii) order economic operators to dispose of the products of forced labour.
Member States are required to provide for penalties applicable in the event of non-compliance with the decisions of the competent authorities, which must be effective, proportionate and dissuasive. The proposal only penalizes failure to comply with the rulings and not the initial import or export of products made with forced labour.
- Revision and withdrawal of the decision
The decisions of the competent authority are subject to judicial review in accordance with national laws.
If economic operators provide evidence that they have complied with the decision and have eliminated forced labor from their operations or supply chain, the competent authority must withdraw its decision and inform the economic operators accordingly. .
EU border controls
The competent authority must communicate to the customs authorities of the Member States their decisions, in particular those prohibiting the placing or making available of the products of forced labor on the market and their export or those ordering the withdrawal of the products already placed or made available on the market. the market and the flow of these products. The customs authorities of the Member States will rely on these decisions to identify the products concerned and to carry out import and export controls.
When customs authorities identify a product that may be the result of forced labour, they must: (i) suspend the release for free circulation or export of this product; and (ii) notify the relevant authorities of the suspension and forward all relevant information.
If the competent authorities conclude that the product is the result of forced labour, they will request the customs authorities not to release it for free circulation or authorize its export.
If the competent authorities have not asked the customs authorities to maintain the suspension or if the competent authorities have approved the release for free circulation or export, the product will be released for free circulation within 4 days.
The European Commission will publish guidelines within 18 months of the entry into force of the regulation, which will include guidance on forced labor due diligence, information on forced labor risk indicators and a list of sources relevant information available to the public.
The proposal will follow the ordinary legislative procedure which involves the European Parliament and the Council of the EU. This procedure is likely to last at least between 18 and 24 months.
The proposal complements a range of other measures proposed by the European Commission last year relating to environmental, social and governance criteria in business practices, such as the Corporate Sustainability Due Diligence Directive, the on deforestation-free products and the corporate sustainability reporting directive.
Therefore, international companies should begin to prepare and review existing human rights due diligence, including labor rights, processes and determine whether they comply with the proposal to reduce risk. product bans and associated penalties as well as bad publicity.
The proposal follows a global trend set by the United States after the passage of the Uyghur Forced Labor Prevention Law. Businesses must anticipate increasingly stringent requirements against forced labor in key markets around the world.
Although the proposal does not target specific regions or properties, EU policymakers and Chinese government officials are aware that the Xinjiang region would be affected by the proposal. Companies that comply with possible forced labor regulations in the EU could face retaliatory measures in China. Although companies must comply with EU law, they must try to do so in a way that avoids further escalating the problem or drawing attention to their actions and policies in a way that invites consumers or government retaliation in China.