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Executive summary

On 19 November 2024, the European Council adopted a proposed regulation (Regulation) on prohibiting, on the European Union (EU) market, products made with forced labor (EU Forced Labor Regulation or EUFLR). As this is the last step in the legislative process, the Regulation has been adopted. It will enter into force on the day following its publication in the Official Journal of the European Union and will apply three years after the date of entry into force. This means that these rules will impact imports and sales taking place as of late 2027 or early 2028.

Requirements under the Regulation

Detailed rules around the products or product groups affected by this Regulation and the details on information to be made available to customs authorities will be included in delegated and implementing acts, which have yet to be drafted and adopted. Based on the adopted Regulation, the following requirements apply.

1. Trade, import and export ban

   The Regulation prohibits economic operators from placing and making available on the EU market, or exporting from the EU market products made with forced labor. This broad definition is similar to the definition in the EU’s Deforestation Regulation, with the main difference being that the EU Forced Labor Regulation also applies to “distance sales” when they are offered for targeted sale to EU users. This means that this Regulation not only covers transactions controlled by the customs authorities (import and export), but also internal transactions (domestic and intra-EU).

2. Obligation to provide information to customs authorities

   Importers and exporters are required to provide the customs authorities “with information identifying the product, information about the manufacturer or producer and information about the product suppliers as regards to products entering or leaving the Union market.” The competent authorities may use this information in determining whether violations have occurred and whether there is basis for an assessment (see item 3, below).

3. Risk-based investigations

   Competent authorities shall investigate potential violations of the Regulation following a risk-based approach, assessing all information available to them. This includes the information provided by economic operators (see item 2, above), as well as a third-party-provided, indicative, non-exhaustive, verifiable and regularly updated databases of forced labor risks, and information requested from other authorities. For example, it is possible that the USFLPA Statistical Dashboards, the Entity List and/or the Withhold Release Order and Findings Dashboards would be consulted or leveraged. More broadly, it is likely that enhanced collaboration and information sharing between jurisdictions that have adopted similar forced labor protection acts will take place.

Action for businesses

In its Explanatory Memorandum, the EU Commission explains that because forced labor requires urgent action, certain steps in the legislative procedure have been fast tracked (e.g., an impact assessment) or will be fast tracked (e.g., delegated acts). The Preamble to the Regulation encourages businesses to put appropriate (additional) due diligence in place in relation to forced labor to lower the risk that the economic operator will utilize forced labor in its operation or value chain. By taking proactive steps to assess the impact of these changes and by implementing strategic and preventative measures, companies can work to safeguard their operations against potential disruptions and focus on thriving in the competitive global market.

Immediate actions for companies may include:

• Supply chain mapping: Conduct a comprehensive end-to-end supply chain mapping to fully understand who is involved in your value chain, all the way back to the manufacturer of the products to be placed onto the EU market.
• Due diligence program establishment/enhancement: Set up new, or enhance existing, due-diligence programs by identifying the key areas to investigate, developing a comprehensive checklist, assessing potential risks in the supply chain and embedding mechanisms to respond and de-risk accordingly.
• Mitigation or simplification strategies: Explore strategies to centralize imports or procurement, review costs and risks of alternative sourcing and manufacturing options, including relocation of all, or a portion, of production or sourcing out of high-risk or at-risk areas into lower-risk areas, taking into account existing considerations, costs and benefits of supply chain planning.