The Council of the European Union and the European Parliament have reached a provisional deal on regulations banning forced labor in European Union supply chains. The legislative proposal supports the EU’s goals of prohibiting the use of forced labor in manufacturing, applying to both manufacturing within Europe and also to goods imported from abroad. This agreement marks a historic step in EU forced labor policymaking.

The provisional agreement, adopted March 5^th, includes the following key features:

• Establishment of a Forced Labor Database: To aid the effective implementation of this regulation, the European Commission will create a database offering verified, up-to-date information on the risks of forced labor across various locations and industries. This tool is expected to bolster the efforts of the Commission and national authorities in identifying and addressing potential violations.

• Risk-based approach for  assessment Criteria: The agreement outlines specific criteria for assessing the likelihood of forced labor. These include the scale and severity of the suspected forced labor, the quantity of products involved, the proportion of the product likely to be made with forced labor, and the proximity and influence of economic operators over their supply chains.

• Guidance for Compliance: The Commission will release guidelines to assist companies and national authorities in adhering to the regulation’s requirements. These guidelines will cover best practices for ending and remedying instances of forced labor and will offer support specifically tailored to micro, small, and medium-sized enterprises.

• Investigation Procedures: The provision determines which authority will lead investigations into suspected forced labor, depending on whether the risk lies within or outside the EU. It also mandates the sharing of information between member states and the Commission to facilitate these investigations.

• Enforcement and Decision-making: The final decision to ban, withdraw, or dispose of products made with forced labor will rest with the authority that conducted the investigation. Notably, if a product or part of a product is found to be in violation, only the affected part may need to be disposed of or replaced, thereby minimizing waste and encouraging companies to ensure clean supply chains. Companies that do not comply with the regulation will be subject to fines. If companies are able to eradicate forced labor, good will then be allowed to enter the EU stream of commerce.

The provisional deal marks a critical milestone in the EU’s commitment to eradicating forced labor from the global supply chain. However, it awaits formal endorsement and adoption by both the Council and the European Parliament. The Council is set to vote on adoption on March 13^th, while the Parliament will vote in April. If both institutions vote to adopt the agreement, the Regulation will enter into force on the day following the Parliament’s affirmative vote. Member States will then have three years from the date the Regulation enters into force to begin applying the new rules. This allows ample time for companies to start developing an internal anti-forced labor program. Although the scope of the proposed legislation feels similar to the Uyghur Forced labor Prevention Act (UFLPA), the UFLPA only left importers with 6 months of time to react and create a compliance program.

Read the press release from the Council here and the Parliament here.

Crowell & Moring, LLP continues to monitor developments in forced labor regulation and their potential impact on customers and businesses going forward.