National Competent Authorities (NCA) Gets Powers from European Commission (EC) To Investigate and Punish Those Violating Prohibition of Forced Labour as Per EC’s Recent Proposal
Karma Management has now become Karma Management Global Consulting Solutions Pvt. Ltd. which was incorporated in the year 2004 and has now successfully completed almost 18 years of its existence.
As late as April 2021, Karma Global took a very bold step of venturing into foreign shores in terms of shoving up its business in countries like the US, UK, UAE, Canada, Philippines, and South East Asia.
It has already made its mark in terms of providing excellent services in the areas of payroll, outsourcing, recruitment and talent acquisition, and regulatory compliances in these foreign countries as per feedback and testimonials shared by Global Clients.
Karma Management thus entails the compliances of global clients in these countries as well, and in keeping with the global scenario, it does keep a very hard track of the status of global compliances all around the world and especially so, it keeps an update on what is happening as far as people, wages, work, and benefits are concerned across the globe.
Let us primarily take a look at all the rulings brought out by EC between the years 2020 and 2022 before actually going into the main topic.
OCTOBER 6, 2022 – EUROPEAN COMMISSION ENFORCES FORCED LABOUR BAN
The EU Commission published its proposal for a Regulation introducing a ban on the placing and making available on the EU market or export from the EU market of products made using forced labour.
FEBRUARY 25, 2022 – EU COMMISSION PUBLISHES DRAFT DIRECTIVE ON CORPORATE SUSTAINABILITY DUE DILIGENCE
The EU Commission published its proposal for a directive on corporate sustainability due diligence obligations, which aims to foster sustainable and responsible corporate behaviour throughout global value chains.
OCTOBER 26, 2021 – PROPOSED EUROPEAN CHIPS ACT
The EU Commission published its 2022 Work Programme which sets out the key goals that the EU Commission hopes to achieve in 2022. Chief amongst these is a desire to make “A Europe Fit for the Digital Age”, with a key proposal to achieve this being a possible “European Chips Act”.
OCTOBER 6, 2021 – PROPOSED EU FORCED IMPORT LABOUR BAN
The EU Commission President Ursula von der Leyden announced the European Commission’s intention to introduce a ban on the import of products made with forced labour into the EU market.
MAY 18, 2021 – EU AIMS TO ADDRESS STRATEGIC DEPENDENCIES
The EU Commission has acknowledged the trading bloc’s technological and strategic dependencies will need to be addressed. The EU Commission identified a number of products imported into the EU on which the EU is highly dependent in notably sensitive sectors. The EU Commission also performed six in-depth reviews on the origin of strategic dependencies and their impact on importation.
APRIL 15, 2020 – EU WEIGHS MANDATORY SUPPLY CHAIN HUMAN RIGHTS DUE DILIGENCE
On February 20, 2020, the European Commission published a report titled “Study on due diligence requirements through the supply chain” (“the EC Study”) which examined the need for EU-level regulation of corporate due diligence obligations aimed at identifying, preventing, mitigating and accounting for human rights abuse in the supply chain.
CALL IT A “FORCED BAN” OR CALL IT “SLAVERY” IN THE GLOBAL SUPPLY CHAIN OR “ABUSE OF HUMAN RIGHTS”, LET US UNDERSTAND THE EUROPEAN COMMISSION’S PROPOSED RULING ON FORCED BAN
Supply chains have more and more become global supply chains, due to which it becomes increasingly more difficult for states to monitor whether the production process of goods entering the territory has been free of labour rights abuses.
States are less able to hold corporate entities accountable that are knowingly or unknowingly benefiting from labour rights abuses.
Transparency measures have been suggested as a way to close this accountability gap and circumvent traditional issues of enforcement when the production and consumption of goods take place in different jurisdictions, places, and countries.
It was therefore thought prudent that companies, consumers, and non-governmental organizations take a look at the degree to which the practices have been rampant and explore the possibilities and limitations on the use of transparency measures in combatting the abuse of labour rights in the global supply chain.
The risk factor lies mostly with traditionally consuming countries (as opposed to producing countries) which have suggested looking for effective ways to monitor the global supply chain.
From information to accountability:
Domestic consumption relies increasingly on global supply chains since technological advancement has allowed for the production processes of most goods to take place in more than one country. Due to this fragmented process, it has become signiﬁcantly more difﬁcult for national governments to control and regulate the production of goods entering the domestic market, in particular when it comes to the enforcement of international and domestic labour rights.
The greater the distance between the regulator and the production site, the more vulnerable the global supply chain becomes to abuse. The risk that products are derived from forced or slave labour becomes a very real one.
In an effort to reduce this risk most traditionally consuming countries (as opposed to producing countries) have looked for effective ways to monitor the global supply chain. In practice, this has been a difﬁcult process. Most initiatives have either been aimed solely at regulating the national market, or have resulted in international instruments addressing efforts that should be taken by states.
One disadvantage of existing international approaches towards the protection of labour rights is that they do not effectively address the role companies play in the global supply chain, since the actions of private parties do not fall within the scope of public international law. Firms are not easily held accountable for the way they shape and make use of global supply chains.
EC’s PRESS RELEASE – WHAT DOES IT SAY
The Commission has today proposed to prohibit products made with forced labour on the EU market. The proposal covers all products, namely those made in the EU for domestic consumption and exports, and imported goods, without targeting specific companies or industries.
This comprehensive approach is important because an estimated 27.6 million people are in forced labour, in many industries, and in every continent. The majority of forced labour takes place in the private economy, while some are imposed by States.
The proposal builds on internationally agreed definitions and standards and underlines the importance of close cooperation with global partners. National authorities will be empowered to withdraw from the EU market products made with forced labour, following an investigation. EU customs authorities will identify and stop products made with forced labour at EU borders.
The Commission will also issue guidelines within 18 months from the entry into force of this Regulation. The guidelines will include forced labour due diligence guidance and information on risk indicators of forced labour. The new EU Forced Labour Product Network will serve as a platform for structured coordination and cooperation between competent authorities and the Commission.
The proposal now needs to be discussed and agreed upon by the European Parliament and the Council of the European Union before it can enter into force. It will apply 24 months after its entry into force.
EUROPEAN UNION’S ACTION PLAN
On 14 September 2022, the EU Commission published its proposal for a Regulation introducing a ban on the placing and making available on the EU market or export from the EU market of products made using forced labour.
Following on from Commission President von der Leyen’s announcement of the proposed ban in her State of the Union Address last year, under the Proposed Regulation, products found to have been made using forced labour cannot be sold in, exported from, or imported into the EU.
The proposal combines the EU’s human rights agenda priorities of combating forced labour and promoting corporate sustainability due diligence standards. It further adds to the series of EU measures that will impact supply chains, including new proposals for rules on foreign subsidies, corporate sustainability report and due diligence, carbon taxes, deforestation, and the single market emergency instrument.
The Proposed Regulation adopts a ‘non-discriminatory’ approach, covering all products (including components) for which forced labour has been used in whole or in part, at any stage of the product’s extraction, harvest, production or manufacture. The prohibition will apply regardless of whether the goods are produced in the EU for domestic consumption or export, as well as to imported goods. It does not purport to target specific countries, companies or industries.
Investigations and Enforcement
NCA Gets Power to enforce this proposed ban
To enforce the new rules, the proposal gives National Competent Authorities (“NCAs “) at Member State level powers to investigate and punish, using applicable Member State law, companies that violate the prohibition. The burden of proof to establish that forced labour has been used at any stage of the supply chain prior to the placement of the products on the market will lie with these NCAs.
NCA’s Two Stages of Investigations:
Investigations carried out by NCAs will be split into two stages.
FIRST STAGE – At the preliminary phase, NCAs must follow a risk-based approach and determine whether there is a ‘substantiated concern ‘of a violation of the prohibition. This assessment should be based on all relevant information available to them, including information requested from other relevant authorities and a database of forced labour risk areas or products maintained by the Commission (which will be built from reports from e.g. the International Labour Organization, civil society, and business organizations).
NCAs should request from the economic operator information on actions they have taken to identify, prevent, mitigate or bring to an end risks of forced labour in their operations and value chains, with respect to the products concerned. NCAs must not initiate an investigation where they consider, on the basis of their initial assessment (including the information submitted by the economic operators) that there is no substantiated concern of a violation. In their assessment, NCAs should focus on economic operators involved in the steps of the value chain as close as possible to where the risk of forced labour is likely to occur and take into account the size and economic resources of the economic operators, the number of products concerned, as well as the scale of suspected forced labour.
SECOND STAGE – If within 30 working days following receipt of the information from the economic operators, the NCAs find that there is a ‘substantiated concern ‘of forced labour, they may progress to the full investigatory phase. During this phase, the economic operators concerned must submit to the NCAs any information that is ‘relevant and necessary ‘for the investigations, including information identifying the relevant products, the manufacturer or producer, and the suppliers. As part of these investigations, NCAs will be empowered to request information from companies and carry out checks and inspections, including in countries outside the EU.
NCAs must then relay their findings to the customs authorities of the Member State, which are empowered to block the circulation of the relevant goods. If the NCAs determine that forced labour was used to make the products in question, the relevant goods must be withdrawn from the EU market by the relevant companies and subsequently disposed of.
Penalties for Non-Compliances by relevant Companies
In the event of non-compliance, relevant companies will face ‘effective, proportionate and dissuasive ‘penalties under national law.
Member State cooperation lies at the heart of the proposal, with NCA investigations to be assisted by a new EU Forced Labour Product Network to facilitate data sharing across the Union.
Furthermore, conclusions reached on products by an NCA in one Member State will be recognized and enforced by the NCAs of the other Member States.
Due Diligence Obligations and Guidance
The Commission will issue guidance for companies on forced labour due diligence and information on risk indicators of forced labour within 18 months from the entry into force of the Regulation, in order to assist companies with their due diligence obligations and practices.
These guidelines are likely to build on the Commission’s guidance on due diligence to help EU companies address the risk of forced labour in their operations and supply chains, which was earlier published in July 2021.
Next Steps and Key Takeaways
The Commission’s proposal will be taken up for serious discussions with the European Parliament and Council before it gets into the final act of publishing the text of the legislation.
In the meantime, with the meticulous building up of consumer pressure, regulatory and governmental scrutiny, and developing legislation in this area, generally with the EU and, more broadly, across the globe, companies should carefully take it up among themselves to continue to monitor developments and conduct regular, thorough reviews of their supply chains for human rights (including forced labour) and environmental impacts.
This also means implementing robust and effective compliance processes in line with international due diligence standards and relevant guidance, before taking adequate steps to address forced labour and other risks in their global value chains and wider business operations.
Karma Management’s integrated regulatory compliance services run on expert machinery that is agile and consistent and is simplified for the global clients in a manner that they can easily grasp the subject matter against the tangled complexity and risk, which gives the global clients the power of confidence and control.
Karma Global is well aware that the lengthening list of supranational regulations is a burden enough for any multinational business, while each jurisdiction implements its regime with its own unique local twists, creating a maze of localized regulations.
Also, it is universally known that compliance timelines are always tighter given the stipulated dates. Sometimes simple oversights on the part of the employers can threaten to damage reputations and jeopardize operations and therefore, such Organizations like Karma Global make it a point to reach out to employers and establishments struggling with compliance in order to keep pace with them so that staying compliant and in good standing with the Government’s rules, across the entire operational footprints is made simpler and easy by Karma Global Tech Firm.
For global clients facing urgent one-off regulatory challenges – perhaps a major hurdle that puts the global clients in an embarrassing situation, Karma Global Tech Firm has all the capabilities, competencies, and expertise to scale up quickly and easily thanks to a flexible structure and global resource base with international, regional and local hands to deal with any compliance complexities
Proprietory blog of Karma Management Global Tech Firm
This blog has been collated and compiled by the internal staff of Karma Management with the knowledge and expertise that they possess, for its monthly newsletter Issue 05 of November 2022 in case of specific or general information or compliance updates for that matter, kindly reach out to the