Clifford Chance

Effective due diligence by companies will be a key mitigant to ensure there is no forced labour in supply chains and also to stave off investigations and potential sanctions.

EU Regulation 2024/3015 on prohibiting products made with forced labour on the Union market (the "Regulation") entered into force on 13 December 2024 and will apply from 14 December 2027. In the interim, the Regulation lays down preparatory actions to be taken by the Commission and Member States.

Here, we summarise key elements of the Regulation and how it is expected to operate, how companies can prepare for it, and how it compares to similar US legislation.

Ban on products made with forced labour

The Regulation prohibits economic operators from placing or making available on the Union market, or exporting from it, any products made with forced labour (the "Forced Labour Ban"). This includes products made available by way of distance sales (including online) if targeted at end users in the EU.

Products are not just items that have been manufactured or somehow refined for sale. Rather products are "any item that can be valued in money and is capable, as such, of being the subject of commercial transactions, whether it is extracted, harvested, produced or manufactured". Such products are considered to have been made with forced labour if such labour has been used in whole or in part at any stage of their extraction, harvest, production or manufacture.

Violation of the prohibition does not require any knowledge of forced labour on the part of an economic operator.

Scope of application

The Regulation targets "forced or compulsory labour […] including forced child labour" and "forced labour imposed by state authorities" as defined by Article 2 of ILO Convention No. 29 (1930) and Article 1 of ILO Convention No. 105 (1957) respectively.

The Forced Labour Ban will apply to:

• Economic operators. These are "any natural or legal person or association of persons who is placing or making available products on the Union market or exporting products from the Union." This can include economic operators outside as well as within the EU.
• Products made from forced labour occurring at any stage in the supply chain leading up to a product being made available or placed on the EU market or exported therefrom. The "supply chain" is the "system of activities, processes and actors involved at all stages upstream of a product being made available on the market, namely the extraction, harvesting, production and manufacturing of a product in whole or in part, including working or processing related to the product at any of those stages."

What governance framework applies?

The Regulation assigns roles and responsibilities to the Commission and national competent authorities designated by member states ("NCAs") and controls and measures to be applied by customs authorities. There is an emphasis on promoting coordination and cooperation within the Union as well as with relevant third countries. For example, the Regulation establishes a Union Network Against Forced Labour Projects (the "Network") which is to serve as a platform for structured coordination and cooperation between NCAs and the Commission. The aim is to streamline enforcement of the Regulation to make it effective and coherent.

Key to the operation of the Forced Labour Ban regime will be a database of forced labour risk areas or products that the Commission is to establish by 14 June 2026. The database will provide regularly updated information on forced labour risks in specific geographic areas or with respect to specific products or product groups. It will not publicly disclose information that names economic operators directly.

The database, details of NCAs and other information concerning the Regulation and its implementation (including decisions to ban products) will be made available online to the public via a Forced Labour Single Portal ("Portal"). The Portal will also house a "single information submission point" on which anyone may submit information on alleged violations of the Forced Labour Ban. The Regulation also amends the Whistleblower Directive ((EU) 2019/1937) to provide protection to persons reporting violations of the Forced Labour Ban by economic operators.

How will violations of the Forced Labour Ban be investigated and enforced?

The main onus will be on the Commission and NCAs which are empowered to investigate potential violations of the Forced Labour Ban. Given that investigations may span more than one member state and/or third countries, a lead competent authority will be identified in each relevant case. There is provision for coordination of investigations, information exchange and mutual assistance.

The Commission and NCAs are to prioritise cases using a risk-based approach. Relevant criteria include the scale and severity of the suspected forced labour and the quantity or volume of products placed or made available on the Union market.

Where a potential violation of the Forced Labour Ban has been identified (including on the basis of information submitted via the Portal), the lead competent authority may request information from economic operators and other product suppliers. If it concludes that there is a substantiated concern that there has been a violation of the Forced Labour Ban, an investigation will be initiated. Investigation powers include requests for information to economic operators and other stakeholders and, in exceptional circumstances, field inspections.

The aim is for any investigation to be concluded within 9 months. Where it is determined that there has been a violation of the Forced Labour Ban, the lead competent authority will adopt a decision:

• prohibiting the products concerned being placed or made available on or exported from the Union market;
• requiring the withdrawal of products already placed or made available on the market;
• requiring the economic operators investigated to dispose of the products concerned (or to replace parts of products that are found to have been made with forced labour).

Products that have already reached an end user will not be affected.

Where a product is of strategic or critical importance for the Union, and to avoid supply chain disruption, the lead competent authority may order that products be withheld for a period to permit the elimination of forced labour from the relevant supply chain. Where this is achieved, the banned products may then be allowed back onto the market. This should incentivise companies to take swift remedial action.

Enforcement of decisions and penalties

Member States are to lay down rules on effective, proportionate and dissuasive penalties for non-compliance with decisions relating to a violation. Relevant factors will include the gravity and duration of non-compliance with decisions, the degree of cooperation with competent authorities and other factors, including whether financial benefit has been gained from the non-compliance.

How companies can prepare

Article 3 of the Regulation creates the prohibition on economic operators to place or make available on, or export from, the Union market products made with force labour. Beyond this, there are no specific requirements for companies prior to an investigation being initiated. The Regulation expressly does not create new diligence obligations on economic operators; nor does it require them to provide assurances that products have not been made using forced labour (although such requirements could be introduced in future).

However, economic operators wishing to mitigate the risks of investigation and enforcement under the Regulation will be well advised to undertake and document due diligence in relation to forced labour, being: "efforts […] to implement mandatory requirements, voluntary guidelines, recommendations or practices to identify, prevent, mitigate or bring to an end the use of forced labour with respect to products that are to be placed or to be made available on the Union market or to be exported". It is clear from the Regulation that it will be important for companies to be able to provide information about such due diligence if enquiries are received from competent authorities or investigations initiated. Due diligence information may also be relevant where an economic operator wishes to challenge a decision that forced labour has been used in relation to a product.

Practical steps

Many economic operators will already have due diligence policies and processes in place that are designed or can be adapted to identify and address forced labour risks. Steps that economic operators might take to prepare for the Regulation include:

• Where not already in place, create policies and processes to identify and address the risk of forced labour in their operations and supply chains following the models of the UN Guiding Principles on Business and Human Rights and OECD Guidelines for Multinational Enterprises which are increasingly reflected in new mandatory requirements such as the Corporate Sustainability Due Diligence Directive.
• Once available, have recourse to the database, compliance tools and due diligence guidance to be provided by June 2026. That guidance will build on existing guidance for businesses prepared by the European External Action Service in July 2021.
• Establish and/or update internal policies and codes of conduct as well as supplier codes of conduct and contract terms that will facilitate the identification and prevention of forced labour risks.
• Establish teams with capacity to identify and address forced labour risks and clear reporting lines to ensure forced labour issues are appropriately escalated and addressed. This is likely to be a cross-functional effort that will include teams in procurement, compliance and legal.
• Establish ongoing dialogue with relevant stakeholders, including industry bodies, civil society organisations and sector-specific initiatives.
• Consider possibilities to develop and apply collective leverage within shared supply chains.
• Institute appropriate independent assurance and assessment of risk management measures and their effectiveness.
• Establish and publicise accessible notification and complaints mechanisms for customers and third parties to report potential forced labour issues as a means to support ongoing due diligence and to address forced labour risks at the earliest stage.
• Regularly refresh supplier mapping and risk assessments by reference to information available on the Portal and other relevant sources.

It may be expected that due diligence efforts that are demonstrably effective to identify, prevent or bring to an end the risk of forced labour will be the most robust form of protection against investigation and enforcement.

Approaches to Forced Labour in the US

The Regulation is representative of recent efforts internationally to try to clamp down on forced labour in supply chains through the use of trade controls and related measures.

In the US, in contrast to the Regulation's application to products originating in the EU as well as imports and exports, the focus has been on forced labour bans on imports. Since 2015, the United States has deployed Section 307 of the Tariff Act of 1930 to bar the import of goods suspected to have been produced in whole or in part with forced labour. US Customs and Border Protection ("CBP") has used Section 307 to bar particular imports from a wide range of countries.

Further, since 2021, the Uyghur Forced Labor Prevention Act ("UFLPA") compels CBP to apply a presumption that imported goods emanating from specified regions of China were produced with forced labour. As of November 2024, CBP has withheld more than USD $3.6 billion in goods at the US border, with a key focus on the electronics, apparel, and manufacturing industries.

In contrast to the Regulation, the UFLPA identifies specific commercial organisations which are deemed to use forced labour. The creation of a rebuttable presumption of forced labour from specific regions also differs from the EU's approach, which only goes as far as identifying risk areas (by sector and geography) on the database, to assist NCA investigations and economic operators' due diligence.

Clifford Chance follows developments in forced labour regulation closely, including reporting and due diligence requirements on companies and the enforcement and civil litigation risks of perceived involvement with forced labour. For more information on developments globally, please contact a member of our team