The European Commission published long-awaited guidelines last week on its forthcoming Forced Labour Regulation (FLR), putting substantial meat on the bones of one of the bloc’s most consequential trade rules in years.
The rule mandates that businesses operating in the EU ensure their products are free from forced labor. It then establishes penalties, starting in December 2027, for those that don’t comply, starting with the removal of any “tainted” products from the EU market.
The new FLR guidelines give companies a roadmap for how to avoid supply-chain disruptions — or worse.
How it will work: The FLR will apply to all products exported from or placed on the EU market, including through online retailers, regardless of where in the world they were made.
The regulations empower the EU Commission and national authorities to initiate investigations if they suspect a product is made using forced labor.
That means any operator placing the product in question on the EU market, even one uninvolved in the original probe, can be affected by the same ruling. That broad scope is designed to prevent circumvention.
Further penalties: Failure to comply with a ban-violation decision can trigger fines.
Each member state has “discretion” to decide how those penalties will be calculated, the EU says, but the “gravity and duration” of non-compliance with a ban are the main factors that will be used. The company’s revenue, the total value of the products, and any previous instances of non-compliance can influence the final amount as well.
Zoom in: The third step above includes developing corrective action plans and adjusting business practices to prevent or mitigate identified forced labor risks.
That guidance applies in cases of state-imposed forced labor (SIFL), too. But SIFL cases can leave companies with little to no corrective leverage, since the coercion originates from a government rather than a supplier, and the usual mechanics of corporate due diligence tend to break down.
The rule mandates that businesses operating in the EU ensure their products are free from forced labor. It then establishes penalties, starting in December 2027, for those that don’t comply, starting with the removal of any “tainted” products from the EU market.
The new FLR guidelines give companies a roadmap for how to avoid supply-chain disruptions — or worse.
How it will work: The FLR will apply to all products exported from or placed on the EU market, including through online retailers, regardless of where in the world they were made.
The regulations empower the EU Commission and national authorities to initiate investigations if they suspect a product is made using forced labor.
- Businesses will have to be ready to provide all information authorities require, such as details on their supply chains, their due-diligence efforts, any relevant transactions, and working conditions at the site where the suspected forced labor took place.
- If a company fails to cooperate, the guidelines say that can contribute toward establishing a violation.
The Consequences: Market Bans and Fines
When forced labor is identified in a product on the market, the EU says, authorities will issue a ban-violation decision, which will involve:- a prohibition on selling that product in the EU market or exporting it elsewhere.
- an order to withdraw any such product from the EU market.
- an order to dispose of those products or any specific, replaceable parts that are tainted with forced labor.
That means any operator placing the product in question on the EU market, even one uninvolved in the original probe, can be affected by the same ruling. That broad scope is designed to prevent circumvention.
Further penalties: Failure to comply with a ban-violation decision can trigger fines.
Each member state has “discretion” to decide how those penalties will be calculated, the EU says, but the “gravity and duration” of non-compliance with a ban are the main factors that will be used. The company’s revenue, the total value of the products, and any previous instances of non-compliance can influence the final amount as well.
Best Practices to Address Forced Labor Risks
The EU guidelines detail a due-diligence framework, originally designed by the Organisation for Economic Co-operation and Development (OECD), to help businesses assess and address risks. It consists of six complementary steps:- “Integrate forced labour due diligence into company policies and risk management systems.”
- “Identify and assess forced labour risks in the company’s operations, supply chains and business relationships.”
- “Prevent, mitigate and bring to an end forced labour risks.”
- “Monitor and assess implementation and results.”
- “Communicate [publicly] how risks are addressed.”
- “Provide or cooperate in remediation” when necessary.
Zoom in: The third step above includes developing corrective action plans and adjusting business practices to prevent or mitigate identified forced labor risks.
- One example: building “due diligence expectations” into contracts with suppliers.
What the Three Categories of Forced Labor Require
The EU guidelines segment forced labor into:- privately imposed forced labor, which the EU called the most common type, spanning industry, services, agriculture, and domestic work;
- state-imposed forced labor;
- and forced child labor.
That guidance applies in cases of state-imposed forced labor (SIFL), too. But SIFL cases can leave companies with little to no corrective leverage, since the coercion originates from a government rather than a supplier, and the usual mechanics of corporate due diligence tend to break down.
- Audits in high-risk countries are unlikely to provide impartial evidence that a product or supply chain is free of forced labor, the EU notes.
- In their place, it recommends that companies and authorities scrutinize possible SIFL risks by relying on independent sourcing: “desktop research, reporting from international organisations, expert risk analysis, and credible civil society data.”
The EU is not alone in scrutinizing state-linked forced labor risk. In the U.S., the Uyghur Forced Labor Prevention Act (UFLPA) specifically blocks the import of goods produced wholly or in part in Xinjiang, China — where forced labor risk stems from state-run programs — unless a company provides clear and convincing evidence that they were not made using forced labor.
The Brief has previously detailed red flags for forced labor risks from Xinjiang-based companies, such as references to “poverty alleviation” or “economic revitalization” programs, connections to sanctioned entities like Xinjiang Aid, or the use of language promoting ethnic assimilation.
The Bottom Line
With the EU regulation coming online in December 2027, companies have less than 18 months left to prepare. Those that get ahead of their forced labor exposure now will be far better positioned to demonstrate compliance than those waiting to see how enforcement unfolds.Read more on forced labor:
