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Under the UN Guiding Principles on Business and Human Rights, business enterprises are responsible for respecting human rights, including avoiding causing or contributing to adverse human rights impacts through their own activities. Laws and regulations concerning responsible business conduct and human rights encompass diverse and evolving approaches. Some examples of laws and regulations follow;
Goods “mined, produced, or manufactured wholly or in part” by convict, forced, or indentured labor are prohibited from entering the United States under section 1307 of the Tariff Act of 1930. Under the implementing regulations at 19 CFR 12.42, any person may report to CBP that merchandise produced by forced labor is being or is likely to be imported into the United States. If the information reasonably, but not necessarily conclusively, indicates that goods made, either wholly or in part, by forced labor are being or are likely to be imported, CBP will issue a withhold release order (WRO) to prevent the goods from entering the United States. While the goods are being detained, the manufacturer has the option to re-export the goods or provide evidence to CBP demonstrating that the goods were not produced by forced labor. If CBP determines that there is conclusive evidence of forced labor, it will publish a formal finding in the Federal Register and Customs Bulletin and seize the goods.
Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), passed in 2010, directed the U.S. Securities and Exchange Commission (SEC) to issue regulations requiring companies that manufacture products that are reliant on certain minerals to report on their corporate supply chains. Congress enacted Section 1502 because of concerns that the exploitation and trade of conflict minerals by armed groups helps finance conflict in the Democratic Republic of the Congo (DRC) and contributes to an emergency humanitarian crisis in the region. The law requires that all companies that submit SEC filings must disclose annually whether products they manufacture contain tin, tantalum, tungsten, or gold (together considered “conflict minerals” under the provision) from the DRC or an adjoining country, and if so, to exercise due diligence on the source of chain custody of those minerals including an audit.
The California Transparency in Supply Chains Act requires mid-sized and large retailers and manufacturing companies having worldwide annual revenues of $100 million or more to report on specific actions taken to eradicate slavery and human trafficking in their supply chains. A company must disclose to what extent it: (1) engages in verification of product supply chains to evaluate and address risks of human trafficking and slavery; (2) conducts audits of suppliers; (3) requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the countries in which they are doing business; (4) maintains accountability standards and procedures for employees or contractors that fail to meet company standards regarding slavery and human trafficking; and (5) provides employee and management training on slavery and human trafficking. The chief goal of this legislation is to ensure that companies provide consumers with information that enables them to understand which companies manage their supply chains responsibly.
EU Directive 2014/95/EUrequires public interest companies with at least 500 employees to include policies they implement on environmental, social and employee matters, respect for human rights, anticorruption and bribery matters in their management reports. These non-financial statements must include due diligence processes implemented, the outcome of these policies, principal risks, and performance indicators. They also must describe diversity policies in relation to their administrative, management and supervisory bodies, including how they have been implemented and results. If the business does not pursue policies on the listed matters, the statement must provide an explanation for not doing so. More information can be found on the European Commission’swebsite.
The Federal Acquisition Regulation Rule Combating Trafficking in Persons, in effect as of March 2, 2015, implements anti-trafficking safeguards in Executive Order 13627: Strengthening Protections Against Trafficking in Persons in Federal Contracts and Title XVII of the National Defense Authorization Act for Fiscal Year 2013: Ending Trafficking in Government Contracting. The rule strengthens the existing prohibition against human trafficking in government contracts by expressly prohibiting federal contractors, contractor employees, subcontractors, and subcontractor employees from engaging in specific types of trafficking-related activities. Such activities include destroying and confiscating identity documents, using misleading recruitment practices, failing to provide return transportation costs upon the end of employment in most situations, failing to provide an employment contract in writing, providing housing that fails to meet standards, and charging employees recruitment fees. Contractors are required to take appropriate action against employees, agents, and subcontractors who violate the prohibitions, and they must inform their employees of the prohibited activities and associated consequences. In addition, where contracts that exceed $500,000 are performed outside the United States, contractors must develop a compliance plan with an employee-awareness program, a process for employees to report violations, a housing plan, and a wage and hour plan. Such contractors must certify annually that they are implementing their plans and that neither they nor their subcontractors have engaged in the prohibited practices, or if violations are found in their supply chain, that they have taken appropriate remedial and referral actions.
The UK Modern Slavery Act, in effect as of October 29, 2015, contains transparency in supply chains provisions that require all companies turning over at least £36 million annually and which conduct business in the United Kingdom to disclose any steps they are taking to deal with modern slavery risks in their supply chains and their own business. The law recommends covering organization structure and supply chains, policies in relation to slavery and human trafficking, due diligence processes, risk assessment and management, key performance indicators to measure effectiveness of steps being taken, and training on modern slavery and trafficking. A company may comply by noting in its statement that it has not taken any steps to combat slavery or human trafficking. The statement must be published on the company’s website in a prominent place. These duties are enforceable by the Secretary of State through civil proceedings for an injunction.
The French Corporate Duty of Vigilance Law, amended on March 28, 2017, requires large corporations with 5,000 or more employees headquartered in France with 5,000 or more employees and foreign corporations with 10,000 or more employees doing business in France to create and implement a vigilance plan. The plan should include reasonable measures to identify risks and prevent severe violations of human rights and fundamental freedoms, serious bodily injury or environmental damage or health risks resulting directly or indirectly from the operations of the company and from the operations of the subcontractors or suppliers with whom it maintains an established commercial relationship. Vigilance plans must be drafted in association with company stakeholders and include: (1) a mapping that identifies, analyzes, and ranks risks; (2) procedures to regularly assess subsidiaries, subcontractors, and suppliers with whom the company maintains an established commercial relationship; (3) appropriate action to mitigate risks and prevent serious violations; (4) an alert mechanism developed in working partnership with the trade union organization representatives of the company; and (5) a monitoring scheme to follow up on the measures implemented and assess their efficiency. Failure to comply may result in liability to compensate for the harm that due diligence would have avoided.
On January 1, 2019, Australia’s Modern Slavery Act 2018 came into force. The act requires entities based in or operating in Australia, which have an annual consolidated revenue of more than AUD $100 million, to report on the risks of modern slavery in their operations and supply chains and the actions taken to address those risks in a modern slavery statement. The statement must also describe any risks of modern slavery in the supply chain of the reporting entity (and its owned and controlled entities), as well as the steps the entity has taken to respond to the risks identified, including due diligence and remediation processes. The Government of Australia has also released Guidance for Reporting Entitiesto explain in plain language what entities need to do to comply with the act.
On July 1, 2020, the United States-Mexico-Canada Agreement (USMCA) came into effect. The USMCA includes a labor chapter and dispute settlement mechanism, which cover freedom of association and the effective recognition of the right to collective bargaining, the elimination of forced or compulsory labor, the effective abolition of child labor and a prohibition on its worst forms, the elimination of employment discrimination, and acceptable conditions of work. For facilities in Mexico, the Rapid Response Labor Mechanism (RRLM), which focuses on the denial of workers’ freedom of association and their collective bargaining rights, provides a time-bound review process. In addition, the USMCA labor chapter also requires that all parties establish a prohibition on the importation of goods made wholly or in part with forced labor.
In June 2021, the German Parliament adopted a new law on human rights in supply chains (Lieferkettensorgfaltspflichtengesetz), which entered into force on January 1, 2023. Under the Supply Chain Due Diligence Act, companies are obligated to identify and assess human rights and environmental risks and establish an adequate and effective risk management system, including by publishing an annual report outlining steps to identify and address risks. The risks that companies must address include forced labor, child labor, discrimination, violations of freedom of association, unethical employment, unsafe working conditions, and environmental degradation. The act applies to companies with their head office, principal place of business, administrative headquarters, domestic branch, or registered office in Germany and with more than 3,000 employees (more than 1,000 employees beginning in 2024). Companies not in compliance with the act face penalties up to €8,000,000, or up to 2 percent of global revenue, as well as exclusion from the public tender process in Germany for a period of up to 3 years.
The Norwegian Transparency Act, which entered into force in July 2022, requires large companies selling products and services in Norway and liable to tax in Norway or based in Norway to undertake fundamental human rights and decent working conditions due diligence in alignment with the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. Large companies are those that meet two of three criteria: (1) sales revenue of at least NOK 70 million; (2) a balance sheet total of at least NOK 35 million; and/or (3) an average number of 50 full-time or equivalent hours employees in a financial year. The due diligence must investigate whether there are any actual or potential adverse impacts on human rights and decent working conditions that the enterprise has caused or contributed toward, or that are directly linked with the enterprise’s operations, products or services via the supply chain or business partners. The enterprise must address adverse impacts and track the results of implemented measures. Due diligence also includes communicating with affected stakeholders and rights-holders and remediation and compensation.
On December 23, 2021, the U.S. passed the Uyghur Forced Labor Prevention Act (UFLPA). The UFLPA aims to address the plight of Uyghurs and other persecuted minority groups in China’s Xinjiang Uyghur Autonomous Region (the “XUAR”). A key feature of the UFLPA is the creation of a rebuttable presumption that all goods manufactured even partially in the XUAR,and goods made by entities on the UFLPA Entity List (such as those using government labor transfer schemes involving members of persecuted groups from Xinjiang), are products of forced labor and, therefore, not entitled to entry at U.S. ports. The UFLPA requires importers of goods made in Xinjiang or by an entity on the UFLPA Entity List to demonstrate that they have followed the UFLPA Strategy’s due diligence guidance and to demonstrate by clear and convincing evidence that the goods in question were not made with forced labor in order to import such goods. The UFLPA also builds on the 2020 Uyghur Human Rights Policy Act by expanding that act’s authorization of sanctions to cover foreign individuals responsible for human rights abuses related to forced labor.
According to the Fighting Against Forced Labour and Child Labour in Supply Chains Act, as of January 1, 2024, companies listed on a stock exchange in Canada or doing business or having assets in Canada and meeting at least two of the conditions that it 1) has at least $20 million in assets, 2) has generated at least $40 million in revenue, and 3) employs an average of at least 250 employees, are required to annually report on the measures taken to prevent and reduce the risk that forced labor or child labor is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity. False or misleading information is punishable by a fine of up to $250,000. The act also prohibits the importation of goods manufactured or produced, in whole or in part, by forced labor or child labor.
In May 2023, the EU Council adopted a comprehensive regulation (2023/115/EU) on deforestation that requires traders of certain commodities on the EU market to be able to prove that the products do not originate from recently deforested land. In addition, these commodities may only be placed on the EU market or exported from the EU if they have been produced in accordance with the production country’s labor and human rights laws and are covered by a due diligence statement. Traders must maintain adequately conclusive and verifiable information that the commodities have been produced in accordance with such laws. The regulation applies to cattle, cocoa, coffee, oil palm, rubber, soy, and wood.
The CS3D requires E.U. companies with more than 1,000 employees and a net worldwide turnover of over €450 million (and Franchises with a net worldwide turnover of over €80 million if at least €22.5 million was generated by royalties from E.U. franchising agreements) to integrate due diligence into their policies and management systems; identify, prevent, cease, and minimize actual and potential adverse human rights and environmental impacts; monitor and report on the effectiveness of measures; and provide remediation. It includes due diligence obligations for large companies with respect to their own operations as well as those of their subsidiaries and business partners. Companies subject to the requirements also need to monitor and assess the impact of their value-chain partners – including suppliers and partners in sale, distribution, transportation, storage, waste-management, and other areas. Potential penalties for noncompliance include fines of at least 5 percent of the company’s net worldwide turnover. Companies based outside the E.U. face loss of public procurement in the E.U. The Directive officially entered into force across the E.U. on July 25, 2024. E.U. Member States must integrate the Directive into their respective national laws and legal frameworks by July 26, 2026.
This Regulation bans products made with forced labor (including forced child labor) from access to E.U. markets as well as their export from the E.U. This ban applies to all products by type and origin, and accounts for forced labor at any stage of a product’s “production, manufacture, harvest and extraction, including working or processing related to the products.” Designated authorities (i.e. the E.U. Commission or Member State authorities) will prioritize enforcement efforts based on the share of the suspected part in the final product, the quantity and volume of products concerned, and the scale and severity of the suspected forced labor, . Products determined to have forced labor within their supply chains are to be prohibited from export from the E.U., withdrawn from the E.U. market, and donated, recycled, or destroyed. The E.U. Commission will establish a non-exhaustive database of forced labor risks, including in specific geographic areas or with respect to specific products.