On Tuesday 5 March 2024, the European Council and European Parliament reached a provisional agreement on the EU Forced Labour Regulation (“Regulation“), which will prohibit the placing and making available on the EU market, or the export from the EU market, of products made, extracted or harvested using forced labour. It is expected that the Regulation will enter into force by the summer of 2024.
This follows the Commission’s proposal of the Regulation on 14 September 2022, and negotiations between the EU Council and Parliament which took place on 22 January 2024.
Scope:
The Regulation covers products of any type, including their components, from all sectors and industries. It targets forced labour carried out across the globe in relation to the production, extraction or harvest of products (unlike the equivalent forced labour laws in the US, which also target forced labour in the transport and handling of products).
The Commission will prepare lists of specific economic sectors in specific geographical areas where state-imposed forced labour exists, and will also identify certain products or product groups for which traders must submit additional details to EU customs (e.g., data concerning the manufacturer and suppliers of these products).
Investigations and EU Database:
The provisional agreement on the Regulation clarifies that the Commission will lead investigations of forced labour occurring outside the EU, whilst Member State national competent authorities (“NCAs“) will investigate suspected breaches of the Regulation which occur in their national territories.
The Commission and NCAs must take a risk-based approach when deciding whether or not to open an investigation and the final decision on product treatment will be made by the competent authority leading the investigation. The provisional agreement clarifies the criteria which competent authorities should adopt when assessing violations of the Regulation. Such criteria include an assessment of the “scale and severity of the suspected forced labour” as well as the “quantity or volume or products placed or made available on the Union market.”
The provisional agreement also confirms that, to facilitate the implementation of the Regulation, the Commission will make available an EU-wide database of information regarding forced labour risks, including reports from international organisations (e.g., NGOs).
If investigation determines forced labour has been used, the products must be withdrawn from the EU market and online marketplaces, and confiscated at the borders (e.g., by national Customs authorities). Products must be donated, recycled or destroyed (although traders may request that, for products which are deemed to be of “strategic or critical importance” to the EU, they securely withhold these until they can demonstrate that forced labour has been eliminated from their supply chain).
Notably, the provisional agreement clarifies that, where a component of a product violates the Regulation but can be replaced, only that component must be disposed of. This is in contrast to the current US approach, where entire products are detained.
The provisional agreement also confirms that, if companies eliminate forced labour from their supply chains, products which have been banned may be allowed back on the market.
Next Steps:
The provisional agreement now needs to be “endorsed and formally adopted by both institutions“. We understand that the aim is for this to be completed before the EU elections, which will take place in June 2024 (this is because a six month hiatus will take effect following the elections, as a new Commission takes office).
Once the final text has been agreed, the Regulation will be published in the Official Journal and will enter into force the following day. EU countries will then have up to three years to start applying the new rules.
Following the Regulation’s entry into force, the Commission will also publish due diligence guidelines to assist companies with their compliance efforts.
We will continue to monitor developments on the Regulation. In the meantime, companies should ensure robust processes are in place in order to mitigate against any potential human rights (including forced labour) and environmental risks in their supply chains.
