EU Forced Labor Regulation Investigations Will Be Public - Why Proactive Due Diligence is More Important Than Ever

The EU Forced Labor Regulation (EUFLR), which goes into effect December 2027, will bar any goods made whole or in part using forced labor from the EU market. There are some key differences between the EUFLR and the U.S. forced labor ban that was signed into law by President Biden in 2021. First, the U.S. law is an import ban that grants customs the authority to detain goods upon entry into the United States that they suspect of being made with forced labor. The EUFLR, on the other hand, is not an import ban but rather an outright ban on products from the EU market. While there will not be shipments detained upon entry under the EUFLR, products may be withdrawn from the EU market at the conclusion of an investigation by competent authorities if said products are found to be made using forced labor. Furthermore, products that have been found to be made using forced labor and have been subsequently banned from the EU market will be flagged at EU borders and detained should companies attempt to place them on the market, in violation of the law.

The second and perhaps most known difference between the U.S. and EU forced labor laws is the absence of a rebuttable presumption of forced labor under the EUFLR. In the EU, the burden will be on investigators to prove that forced labor is present in the manufacturing of a product while the company under investigation mounts evidence to prove their innocence. On the U.S. side, the rebuttable presumption of forced labor means that Customs and Border Protection can presume that all goods that have originated from or passed through particular regions were made with forced labor, with the burden of proof is placed on the importer to rebut this presumption within an allotted period of time after the shipment has been detained.

These two laws approach the issue of forced labor in product supply chains differently. But perhaps the most important difference between the two is that while only generic, anonymized statistics regarding detentions made under the U.S. forced labor ban are published by U.S. Customs and Border Protection, the results of investigations conducted under the EUFLR will be publicly available - significantly changing the stakes for companies subject to the Regulation.

What is the ICSMS Forced Labor Module, and how will it work?

The Information and Communication System for Market Surveillance (ICSMS) Forced Labor Module is a new component of the EU's existing IT platform designed to implement and enforce the upcoming EUFLR. The objective of the module is to facilitate the rapid exchange of information between the EU Commission, competent authorities within each Member State, and customs authorities tasked with investigating and prohibiting products made whole or in part with forced labor from being placed on the EU market.

But this module is not just set up to facilitate communication between enforcement bodies. Another key aspect of the ICSMS Forced Labor Module is providing transparency into the results of forced labor investigations for the general public via the soon-to-come Forced Labor Single Portal so that consumers know which products have been found to be made using forced labor and subsequently banned from the EU market.

While authorities are meant to only launch investigations into "credible" accusations of forced labor, the language included in the draft guidelines for competent authorities allows for room for interpretation based on the use case:

"A ‘substantiated concern’ means a reasonable indication based on objective, factual and verifiable information for the Commission or competent authorities to suspect that it is likely that a product was made with forced labour. The determination of what constitutes a substantiated concern depends on the circumstances of the specific case"

Failure to Prepare for EUFLR Increases Reputational Risk

Unlike the U.S. forced labor ban, the public nature of EUFLR investigations has a much higher risk of impacting a company's reputation in the market. Early preparation via upstream supply chain mapping and risk identification can decrease the likelihood that products are publicly removed from the EU market.

Don't wait until irreparable reputational damage has been done. To learn more about how Sourcemap can help prepare your company for compliance with the upcoming EU Forced Labor Regulation, reach out to our team of experts.