Sabine Weyand, the Director-General of the Directorate General for Trade at the European Commission gave a briefing to the European Parliament’s Committee on International Trade (INTA) on 25 January 2022, addressing the position of the Commission on upcoming legislation on sustainable corporate governance (supply chain due diligence obligation) and forced labour.

 

Commission has noted three approaches / options (can be combined):

 

-Product based approach: banning a product or groups of products. The challenge is finding the evidence base (product does not show if forced labour is used or not). However, with insights into supply chain / production, some assumptions can be safely made as to whether forced labour is involved. The question is then who bears burden of proof and how can evidence be refuted.

-Origin approach: banning products from some countries or regions but risks cutting a lot of products not tainted by forced labour.

-Combined approach / US approach: bans all imports of forced labour products, enforced by legal acts, and puts companies under a rebuttable presumption that goods from certain origins are produced with forced labour. Companies have burden of proof to show the goods are free from forced labour.

 

EU has been looking at US approach, noting:

 

-It is discriminatory, only dealing with imports;

-Leads to products being diverted to other regions, doesn’t address root causes of forced labour;

-Very heavy burden for companies to refute a withhold release order, risks disengagement from developing countries;

-Withhold release order can be circumvented by setting up new companies in other countries.

 

Suggested EU approach that the Commission is investigating would be to oblige companies to implement due diligence procedures, to identify, prevent, mitigate and account for the risk of human rights violations in their supply chain. This can then be linked through different means, e.g. through a marketing ban when due diligence obligation is not followed. Member states market surveillance authorities would enforce the due diligence obligation and product prohibition.

 

Advantages are that it works for the global operations of the company, and allows companies to have a structural engagement and improve the situation (investment in the supply chain can be used as proof that the supply chain is free of forced labour). In regions where forced labour is state sponsored, the only option may be withdrawal.

 

This approach of due diligence and marketing enforcement is what is used on timber, and now on deforestation prohibition and also batteries – so it is shown to work.

 

There is a need to weigh up different options, ensure consistency of ongoing and upcoming proposals, and to avoid situation where companies need to comply with multiple but overlapping obligations. Also important to have a comprehensive approach.

The Commission is working on getting the balance right on the supply chain due diligence proposal, hence the delay, and it should be published in a few weeks’ time as announced (15 February).

 

Important that due diligence meets international standards and is implemented with effective enforcement.

 

Complementing the due diligence directive proposal and discussions on forced labour are the sustainable product initiative, which introduces product-related sustainability requirements as part of the eco-design directive review. Additionally, the review of anti-trafficking directive to introduce a ban in member states on the use of exploited services from victims of trafficking.

 

Discussions are also taking place with the US bilaterally. The EU is looking to kickstart due diligence discussions in the ILO and OECD.

The briefing came the day the office of the United States Trade Representative, Katherine Tai, announced the development of a Focused Trade Strategy to Combat Forced Labor.

 

Contact: Lebo Mofolo, lmofolo@frucom.eu