EU Prohibits Products Associated with Forced Labour

Regulation (EU) 2024/3015 (the "Regulation") was recently published in the Official Journal of the European Union. It is intended to remove forced labour from European supply chains. The Regulation assures that products resulting from forced labour will not be tolerated in the EU's internal market and in its exports. It will apply from 14 December 2027 save for a few provisions that apply earlier. Below is a summary of the key takeaways.

The Objective of the Regulation

The Regulation has two objectives: (1) to improve the functioning of the European internal market and (2) to contribute to combating forced labour at the international level. By doing this, the legislator hopes to uphold the EU's reputation while simultaneously pledging to create a society in which human dignity is never compromised for the sake of profit. The Regulation aims to prevent forced labour, which is defined in Convention No. 29 of the International Labour Organization (ILO) as "all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily".

What is prohibited?

Starting in late 2027, businesses, or "economic operators" as they are commonly referred to in the European Union, will not be permitted to:

• place or offer for sale any goods in the European Union that have been produced using forced labour, or
• export these goods from the European Union.

This applies to all goods, whether they are produced, mined, or grown, at any point in the supply chain where the possibility of forced labour exists. Forced labour is prohibited on all production level of materials, from raw materials to finished goods.

Internet sales aimed at customers within the European Union? Yes, they are also covered.

Who is Watching?

The European Union is not taking this lightly:

• Each Member State will designate competent authorities to review and enforce the prohibition within its borders.
• The European Commission will take the initiative when there is suspicion that forced labour has been used outside the European Union.
• Customs authorities will monitor products being imported or exported from the European Union, and are prepared to stop any goods they deem suspicious.

All of this will be connected by a new Union Network Against Forced Labour Products, which will ensure coordination, exchange best practices, and maintain uniform enforcement throughout the bloc.

How Will It Work?

The investigation process is based on a risk-based approach. This means that the competent authorities will focus on the risks in the most critical parts of supply chains. The authorities will:

1. evaluate risks based on information received from publicly available sources, such as a database of forced labour risk areas or products (expected to go online by June 2026), as well as from any affected individuals and whistleblowers. Whistleblowers will be protected under existing EU legislation, thus encouraging insiders to speak out.
2. examine whether there is substantial evidence of the identified risks. Companies will have an opportunity to clarify their actions; however, it may have adverse consequences for the companies if they impede or mislead investigators.
3. decide whether a product violates the prohibition; if so, it should be quickly removed from the market.

If a company is found guilty, it must either remove its products, recycle non-perishable goods, donate perishables to charity, or destroy them if recycling is not an option. In some exceptional cases, strategic supply chains, i.e. those for goods that are critical to the European market, may be temporarily interrupted so that the risk of forced labour can be eliminated without destroying all products.

Support for Businesses – Especially SMEs

The European Union realized that the Regulation may adversely affect small and medium-sized enterprises (SMEs). To support them, the Commission will:

• release Guidelines on spotting and tackling forced labour risks, tailored to SMEs.
• establish a Forced Labour Single Portal, a one-stop website with resources, risk data and a submission point to report violations.
• designate Contact Points in each Member State to help SMEs navigate the new rules.

Penalties

If a company fails to comply with an authority's decision, the relevant Member State will impose a penalty. The specific amount of the penalty will depend on criteria such as the extent and duration of the violation, past violations, and the degree of cooperation to mitigate the violation. It is worth noting that the Regulation does not set a maximum limit for the penalty. 

What is Next

As mentioned above, the Regulation will apply from 14 December 2027. Nevertheless, some preliminary work has already started, such as the preparation of relevant IT systems and application guidelines. 

By 2029, the Commission will evaluate the enforcement practice of the Regulation, including its impact on SMEs and victims of forced labour. The rules will then be revised if necessary.

The Significance of the Regulation

Tens of millions of people worldwide are used for forced labour. The most vulnerable are women, children, migrants, prisoners and marginalized groups. The EU's moral position is to remove financial incentives that support this practice. By banning certain products, the European Union hopes to incentivize fair and moral market conditions.