Approximately 27.6 million people work in forced labour conditions around the world. Several jurisdictions have recently introduced legislation aimed at excluding goods made with forced labour from their respective markets; for example, the UK legislated for the Modern Slavery Act in 2015 and the US introduced the Uyghur Forced Labor Prevention Act in 2021. In the EU, the European Commission proposed a regulation to prohibit products made using forced labour in the EU on 14 September 2022. Following internal discussions between the legislation institutions of the EU (i.e. the Parliament and the Council), the Forced Labour Regulation (FLR) was adopted on 19 November 2024 and published in the official journal on 12 December. The regulation will take effect on 14 December 2027. The FLR regulation will ban products made with forced labor from being sold in the EU or exported from the EU and will apply to all sectors and levels of a supply chain, a vital step towards eradicating these abusive practices by effectively forcing companies to eliminate forced labour from their operations and supply chains.
Article 3 of the FLR states that “Economic operators shall not place or make available on the Union market products that are made with forced labour, nor shall they export such products.” Forced labour in the context of this legislation is defined as per article 2 of the International Labour Organisation (ILO) Convention no. 29, i.e., “all work or service which is extracted from any person under the menace of any penalty and for which the said person has not offered themselves voluntarily.”. This definition includes forced child labour. The FLR will apply to all companies, irrespective of size, operating within the EU, as well as to companies exporting from the EU. It will also cover companies based outside the EU that sell goods to EU consumers via online platforms.
Article 1(3) of the FLR states that the regulation will not introduce any new due diligence requirements over and above what is already required under EU or national legislation. As such, it is envisaged that the FLR will work in tandem with other EU legislation, such as the Corporate Sustainability Due Diligence Directive.
Notwithstanding the fact that no new due diligence requirements have been introduced by the FLR, economic operators will be required to ensure that the risk of forced labour cases in their operations and supply chains have been appropriately mitigated or eliminated. It is worth noting that paragraph 12 in the preamble to the regulation makes reference to the “2021 Commission guidance on due diligence for EU business” document as a suitable due diligence model to employ.
The FLR requires the designation of competent bodies in each EU member state to oversee the implementation of the FLR and ban offending products. A risk-based approach will be applied when investigating possible violations of the regulation, with assessments based on the following criteria:
The FLR provides several initiatives to support its aims:
Where it has been established that a product has been placed on the EU market or is being exported from the EU in violation of article 3, the authorities can adopt a decision containing:
Economic operators will be able to request that decisions from the authorities be reviewed.
Once a decision on a particular product has been made, the competent authority will inform the customs authority so that the product can be controlled and prevented from entering the jurisdiction of the EU.
The FLR provides for “effective proportionate and dissuasive” penalties to be imposed in the case of noncompliance. Member states will set out rules on penalties applicable to economic operators for noncompliance and ensure the rules are applied in accordance with national law.
Product bans to be introduced under the FLR will not come into effect until 14 December 2027, which should give companies sufficient time to assess their supply chains to be compliant with the forced labour rules. Companies should consider taking the following steps prior to its implementation:
Carol Lynch
David Savage
BDO in Ireland
Scope
Article 3 of the FLR states that “Economic operators shall not place or make available on the Union market products that are made with forced labour, nor shall they export such products.” Forced labour in the context of this legislation is defined as per article 2 of the International Labour Organisation (ILO) Convention no. 29, i.e., “all work or service which is extracted from any person under the menace of any penalty and for which the said person has not offered themselves voluntarily.”. This definition includes forced child labour. The FLR will apply to all companies, irrespective of size, operating within the EU, as well as to companies exporting from the EU. It will also cover companies based outside the EU that sell goods to EU consumers via online platforms.
How the FLR works
Article 1(3) of the FLR states that the regulation will not introduce any new due diligence requirements over and above what is already required under EU or national legislation. As such, it is envisaged that the FLR will work in tandem with other EU legislation, such as the Corporate Sustainability Due Diligence Directive.Notwithstanding the fact that no new due diligence requirements have been introduced by the FLR, economic operators will be required to ensure that the risk of forced labour cases in their operations and supply chains have been appropriately mitigated or eliminated. It is worth noting that paragraph 12 in the preamble to the regulation makes reference to the “2021 Commission guidance on due diligence for EU business” document as a suitable due diligence model to employ.
The FLR requires the designation of competent bodies in each EU member state to oversee the implementation of the FLR and ban offending products. A risk-based approach will be applied when investigating possible violations of the regulation, with assessments based on the following criteria:
- Scale and severity of the suspected forced labour;
- Quantity or volume of products placed or made available on the EU market; and
- The share of the part of the product suspected to have been made with forced labour in the final product.
The FLR provides several initiatives to support its aims:
- An EU network against forced labour products comprised of national representatives, commission representatives and where appropriate, representatives from the customs authorities. This body will work together to facilitate cooperation, share information and promote the uniform application of the FLR measures across the 27 member states.
- A database of forced labour risk areas or products. The database will provide indicative, non-exhaustive, evidence based, verifiable and regularly updated information on forced labour risks in specific geographic areas or with respect to specific products. It will prioritise the identification of widespread and severe forced labour risks.
- By 14 June 2026, the Commission will issue and then regularly update guidelines that will provide economic operators comprehensive guidance as to how to identify forced labour risk factors and how to comply with the FLR.
Enforcement
Where it has been established that a product has been placed on the EU market or is being exported from the EU in violation of article 3, the authorities can adopt a decision containing:
- A prohibition on the placing/making available of the products on the EU market and on exporting them;
- An order to withdraw the products from the market (including online platforms); and
- An order to dispose of the products (in accordance with provisions laid down in the regulation).
Economic operators will be able to request that decisions from the authorities be reviewed.
Once a decision on a particular product has been made, the competent authority will inform the customs authority so that the product can be controlled and prevented from entering the jurisdiction of the EU.
The FLR provides for “effective proportionate and dissuasive” penalties to be imposed in the case of noncompliance. Member states will set out rules on penalties applicable to economic operators for noncompliance and ensure the rules are applied in accordance with national law.
BDO Insights
Product bans to be introduced under the FLR will not come into effect until 14 December 2027, which should give companies sufficient time to assess their supply chains to be compliant with the forced labour rules. Companies should consider taking the following steps prior to its implementation:
- Assess exposure, i.e., identify goods that could be affected by forced labour rules (e.g., consider where the products were made);
- Undertake due diligence to identify and eliminate products found to be made using forced labour from entering supply chains and use due diligence techniques as approved by EU (e.g., OECD guidelines); and
- Provide training to employees and deepen relationship with suppliers so that all key stakeholders in a supply chain are aware of their legal obligations.
Carol Lynch
David Savage
BDO in Ireland