Global Trade Compliance Update—March 27: Forced Labor Regulations

Welcome to FlavorCloud’s Global Trade Compliance update to keep you up to date on what’s going on in the world of Global Trade Compliance. This weekly update seeks to best serve FlavorCloud customers and partners as we facilitate and automate frictionless international trade and logistics.

Forced Labor Restrictions and Regulations

One of the major global trade compliance topics over the last couple of years, which has seen a significant amount of attention, is that of forced labor. Various countries have already enacted or signaled intentions to enact regulations to prohibit the importation of products supplied using forced, slave, child, prison, and other prohibited labor. The United States, Canada, the United Kingdom, and European Union have levied sanctions, asset seizures, and travel prohibitions against foreign government officials who have had accusations of forced labor enablement levied against them.

We have previously detailed developments related to new Forced Labor regulations in the United States. We encourage our merchants and partners to familiarize themselves with these expansive regulations. Similarly, Canada has enacted regulations, and Mexico will implement its new regulations, effective May 18, 2023, which restrict the importation of goods made by prison or forced labor. Outside North America, regulators in the EU, United Kingdom, Australia, New Zealand, and other countries have also been working to implement regulations to combat forced labor.

Key Takeaways for FlavorCloud Merchants and Partners

FlavorCloud recommends that our merchants and partners consult relevant regulations, perform due diligence to review their supply chains, and conduct comprehensive risk assessments to ensure that no forced, prison, child, or other prohibited labor is involved. FlavorCloud merchants and partners must comply with all local laws and regulations—including forced labor laws of the countries where they conduct business. The Organisation for Economic Co-operation and Development (OECD) has published “Due Diligence Guidance for Responsible Business Conduct”, among other documentation. This guide illustrates definitive actions companies can take to perform due diligence reviews of their international supply chains.

North America (United States, Canada, Mexico)

United States

Please review FlavorCloud’s September 2, 2022, Global Trade Compliance Update, which details developments related to new Forced Labor regulations in the United States.

Canada

In Canada, this is chiefly regulated under advisory D memo Memorandum D9-1-6-Goods manufactured or produced by prison or forced labor. Canada Border Services Agency (CBSA) has stepped up its enforcement and inspections of shipments where there’s suspicion of forced labor involved in the supply chain. When there’s suspicion, CBSA will detain/seize the shipment to further inspect and subsequently prohibit import when forced labor involvement has been confirmed. This will lead to increased delays at the border as well as heightened operational and financial costs. If forced labor is established, significant monetary fines and jail time can be applied. Furthermore, under the new proposed legislation Bill S-211, “An Act respecting the corporate responsibility to prevent, address and remedy adverse impacts on human rights occurring in relation to business activities conducted abroad”, additional penalties, reporting requirements, and controls can be expected.

Mexico

Under obligations in the USMCA Agreement among the United States, Canada, and Mexico, all parties must prohibit imports of goods produced or procured from forced labor. While the US and Canada have already enacted such regulations, Mexico’s regulations go into effect as of May 18, 2023. The proposed regulations, which can be found in the Official Journal of the Federation (“DOF”), allow Mexican citizens to submit a petition to the government if they suspect specific imported products have been made using forced labor. The government would then research and ultimately determine to prohibit the imports. The Mexican government, specifically the Ministry of Economy and the Ministry of Labor and Social Welfare, would also initiate their own investigations to uncover any imports of potential forced labor products.

European Union, United Kingdom, Australia, New Zealand

European Union

Responsible, ethical, and sustainable supply chains, free of forced labor, form one of the main pillars form the EU’s 2021 trade strategy. While actual legal requirements are not expected to become adopted until 2025 at the earliest, the European Commission has published FAQs on the “Prohibition of products made by forced labor in the Union Market”. These include details on the EU’s “Proposal for a regulation on prohibiting products made with forced labor on the Union market”. Proposed regulations are communicated in European Commission Proposal 2022/0269 (COD) / COM (2022) 453 final on “prohibiting products made with forced labour on the Union market”. All indications are that companies should expect increased forced labor controls and more scrutiny on imports accumulating through official enactment by the Union.

United Kingdom

While legislation dates back to 1897 in the Foreign Prison-Made Goods Act 1897, import prohibitions on prison labor-produced goods have been on the books but were never enforced. In 2015, updated and relevant regulations were outlined in the Modern Slavery Act 2015. In early January 2021, the British Foreign Secretary initiated new measures to combat Chinese forced labor. These measures are not only targeted at the import of foreign-produced goods into the UK but also at the export of goods from the UK to the Xinjiang region of China, where human rights abuses are alleged. Under the Modern Slavery Act of 2015, the measures also include financial penalties for violators, comprehensive guidance for industry to educate on the matter, and establishes a framework for multinational cooperation to combat forced labor globally. In April 2022, the Parliamentary Bill “Import of Products of Forced Labour from Xinjiang (Prohibition)” was proposed. This proposal would require UK importers, who import products from the Xinjiang region of China, to prove that they were not made using forced labor.

Australia

Existing regulations under the Modern Slavery Act 2018 require Australian companies with annual revenues greater than AUD $100M to “report annually on the risks of modern slavery in their operations and supply chains, and actions to address those risks”. While legal requirements for compulsory reporting are only in place for designated larger companies, any Australian entity may opt to report voluntarily. A new piece of legislation, the Customs Amendment (Banning Goods Produced By Forced Labour) Bill, was introduced in 2021 into the Australian Parliament. This legislation would prohibit imports of forced labor-produced goods. Australia has also expanded legal frameworks which allow the government to more effectively impose sanctions on human rights violators, such as those enabling forced labor. Indications suggest that if passed, the new Customs Amendment (Banning Goods Produced By Forced Labour) Bill would likely require the Australian Border Force to inspect and seize forced labor products, issue fines, and require that importers establish due diligence frameworks to certify their supply chains do not include forced labor.

New Zealand

New Zealand’s Customs and Excise Act 1996 (Section 54) has made it illegal to import products into New Zealand specified in Schedule 1, which includes “goods manufactured or produced wholly or in part by prison labour, or within or in connection with any prison, jail, or penitentiary…”. This is a predecessor to the Customs and Excise Act 2018, which enables lawmakers to prohibit broader categories of goods and facilitates the process of prohibiting forced labor goods ostensibly. Finally, on March 16, 2021, New Zealand released an action plan “to tackle modern forms of slavery”. Similar to legislation and proposal outlined in other countries, this action plan contains specific themes such as creating due diligence and education programs, prohibiting imports of forced labor goods, increasing enforcement and prosecution mechanisms, and participation in multinational organizations to combat forced labor.

Key Takeaways for FlavorCloud Merchants and Partners

FlavorCloud recommends that our merchants and partners consult relevant regulations, perform due diligence to review their supply chains, and conduct comprehensive risk assessments to ensure that no forced, prison, child, or other prohibited labor is involved. As always, FlavorCloud merchants and partners must comply with all local laws and regulations—including forced labor laws of the countries where they conduct business. Among other country-specific publications, the Organisation for Economic Co-operation and Development (OECD) published “Due Diligence Guidance for Responsible Business Conduct”, which illustrates definitive actions companies can take to perform these due diligence reviews of their international supply chains.

That concludes this edition of the FlavorCloud Global Trade Compliance update.