The European Union (EU) has passed a landmark regulation banning products made with forced labour from the EU market (the Regulation). Businesses exporting products to or from the EU will need to eliminate forced labour from their supply chain to keep EU market access. New Zealand exporters will need to comply, or risk being shut out of New Zealand’s fourth biggest export market.

What is forced labour?

The Regulation relies on the International Labour Organization’s definition of forced labour as work or services exacted under threat or coercion, without voluntary consent. Key indicators include physical threats or harm, abusive working conditions, deception, document retention, and threats to report workers to immigration authorities.

Forced labour is widespread globally, with an estimated 27.6 million people in forced labour situations in 2021. Forced labour occurs in every country in the world. In New Zealand, forced labour most frequently occurs in the horticulture, construction, and hospitality sectors.

Scope of the Regulation

The Regulation applies to all products, regardless of type or origin, if forced labour has been used at any stage of production, manufacture, harvest, or extraction, except for transportation services. It includes any “working or processing related to a product at any stage of its supply chain”.

The Regulation also applies to online sales where the product is targeted at EU consumers. Indications that a product is targeted at EU consumers include whether delivery is available, what languages and currency are used, and whether the site uses a domain name registered in an EU Member State. For online marketplaces, information facilitating the sale of products made with forced labour will be treated as illegal content under existing digital service regulations.

Identifying products made with forced labour 

Both the European Commission and Member States will be responsible for identifying and investigating products that might breach the Regulation. They will use a risk-based approach and prioritise investigations based on:

• How much of the final product was made with forced labour
• The quantity and volume of products concerned
• The scale and severity of the suspected forced labour, including whether state authorities may be responsible 
• The importer’s size and economic resources
• The complexity of the supply chain
• How close the importer is to the forced labour and how much leverage it has to prevent, mitigate, or end the use of forced labour.

The investigator, whether it is the European Commission or a Member State, is responsible for establishing whether forced labour was used at any stage in the product’s lifecycle.

Enforcement

Where evidence shows that products are tainted by forced labour, those products cannot be sold in, or exported from, the EU or exported from the EU. If the products are already for sale in the EU, they must be withdrawn from sale. Perishable products can be donated to charitable or public interest causes, while non-perishable products must be recycled where possible and destroyed or disposed of if not recyclable. However, if products are part of strategic or critically important supply chains, and disposal would alter the proper functioning of the internal market, authorities can order those products to be withheld from the EU market for a defined period.

How can New Zealand exporters prepare?

Fortunately, New Zealand businesses have time to prepare. The Regulation will not take effect until late 2027 or early 2028, providing time for strategic planning. However, mapping supply chains and finding replacement suppliers takes time, so exporters should consider starting preparations now:

• Supply Chain Scrutiny: Thoroughly map and verify labour practices across the entire production process.
• Due Diligence: Conduct a thorough risk assessment and identify and mitigate/remove possible forced labour risks.
• Engagement: Engage transparently with suppliers and stakeholders about possible risks.

The European Commission will establish a database of forced labour risks in specific geographic areas or with respect to specific products or product groups and will issue guidelines on how to identify risk indicators for forced labour. Businesses can use this information to help identify possible forced labour risks in their supply chains.

This Regulation represents more than a compliance challenge. It's a statement of the EU's commitment to ethical global trade, signalling that human rights are now a non-negotiable aspect of international commerce.

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If you have any questions about how the forced labour regulation may affect your business, our experts can help.