Clifford Chance

The Biden Administration's new National Action Plan to Combat Human Trafficking will, among other things, employ US trade policy to combat forced labor, including through a focus on corporations.

The Biden Administration's new National Action Plan to Combat Human Trafficking updates the Plan released in October 2020 and is informed by the objectives of the October 2020 President's Interagency Task Force Report on United States Government Efforts to Combat Trafficking in Persons.

The Action Plan reflects an Administration priority to ensure human rights are reflected in US trade policy through ending forced labor in global supply chains. It also recognizes the disproportionate effects of trafficking on vulnerable populations and demonstrates a focus on "gender and racial equity" and "safe, orderly, and human migration."

Like its predecessor, the Action Plan comprises four pillars: (i) Prevention, (ii) Protection, (iii) Prosecution, and (iv) Crosscutting Approaches and Institutional Effectiveness.

Prevention includes outreach, education, and efforts to address immigration and demand reduction. It also refers to the Department of Homeland Security's Center for Countering Human Trafficking, a mission of which is "to combat trade in goods produced with forced labor overseas by leveraging the civil trade enforcement authority of U.S. Customs and Border Protection to detain and seize goods produced with forced labor." Protection includes assistance to and financial remedies for victims.

Significantly, Prosecution includes a focus to prosecute businesses facilitating trafficking by sourcing goods from companies using forced labor. The Action Plan emphasizes prosecuting "the demand and other facilitators" of trafficking, noting that forfeited assets could be used for victim restitution. It also describes tools that federal agencies can use in response to trafficking, such as the Office of Foreign Assets Control's ("OFAC") use of financial sanctions and the Financial Crimes Enforcement Network's administration of the Bank Secrecy Act, tools that can further the strategic objective of preventing traffickers' access to the US financial system.

Finally, Crosscutting Approaches and Institutional Effectiveness includes enhancing information sharing and using financial intelligence for anti-trafficking efforts.

SEC's Proposed Disclosure Requirements

While not specifically discussed in the Action Plan, the US Securities and Exchange Commission ("SEC") intends to propose new public company disclosure requirements related to Environmental, Social, and Governance issues in early 2022. The proposed rules likely will address a range of "social" issues, including forced labor in public company supply chains. The specifics of the disclosure regime are unclear. The SEC could, for example, require companies to increase the frequency or detail of disclosures about forced labor investigations, or to disclose allegations that products manufactured or distributed in foreign countries were produced with forced labor. Such disclosures could materially harm a company's reputation or lead to private ligation.

Private Sector Focus

The Action Plan addresses corporate liability, stating that "[p]rosecuting novel cases against companies that benefit financially from forced labor within their value chains holds significant potential to suppress global criminal conduct that poses a threat to its victims and to United States labor markets." Interest in the private sector comes as no surprise given growing momentum to address human rights violations within supply chains. Recent cases like Apple v. Doe and Nestle USA, Inc. v. Doe, though civil actions not criminal prosecutions, indicate that litigation on corporate liability within supply chains is on the rise. In Apple v. Doe, alleged victims of child labor in the Democratic Republic of Congo sued several tech companies under the Trafficking Victims Protection Act ("TVPA"), which imposes criminal and civil penalties upon those who knowingly benefit financially from forced labor. Though the trial court ruled, inter alia, that the civil remedy provisions of the TVPA—unlike the criminal provisions—do not apply extraterritorially, this lower court decision does not forego the litigation risk for forced labor within supply chains. Nestle v. Doe involved allegations of aiding and abetting child slavery in the cocoa supply chain. While the Supreme Court held that the application of the Alien Tort Statute did not apply because the injuries took place broad, it sidestepped the issue of whether US corporations can be liable under the ATS altogether.

Forced labor enforcement cases extend to a range of federal agencies, such as OFAC, Customs and Border Patrol ("CBP"), and the Commerce Department's Bureau of Industry and Security ("BIS"). Thus, corporate due diligence focusing on issues such as trafficking and forced labor is vital. In 2019, e.l.f. Cosmetics, Inc. settled with OFAC for importing products containing materials sourced from North Korea, which the US sanctioned (among other things) for forced labor violations. In the last two years, CBP issued at least 10 Withhold Release Orders to prohibit and detain imported goods produced by forced labor. The BIS also added commercial organizations participating in forced labor to its Entity List, which precludes parties from receiving exports, re-exports, and in-country transfers of some or all commodities subject to the Export Administration Regulations.

The Action Plan urges federal agencies to collectively create initiatives to improve private sector awareness regarding forced labor in supply chains. Their efforts will build upon federal resources such as the Comply Chain application, the State Department's Trafficking in Persons Report, and the Department of Labor's List of Goods Produced by Child Labor or Forced Labor. Companies should remain vigilant, as these guidelines will likely be used in future enforcement actions as a standard for expected conduct.