Forced labor due diligence – When regulation meets geopolitics

The regulatory 'ESG tsunami' that swept over the corporate world in recent years took a remarkable turn in 2025. The European Omnibus Directive is postponing application dates, CSRD reporting obligations are being simplified, and on the other side of the Atlantic, the new Administration's stance and proposals from U.S. Congress is rolling in as a counter-movement. An ESG backlash, it seems, is in full swing. Yet one group of legislative measures has been exempt from this ESG-regression: forced labor regulation. This can be explained, on the one hand, by the fact that combating the worst forms of forced labor remains a priority in the eyes of the public, despite resistance to bureaucracy and additional burden for businesses in economically challenging times. Forced labor strikes at the core of what is considered an affront to human dignity – its eradication enjoys cross-partisan support.

On the other hand, forced labor regulation has become a geopolitical battleground. While the U.S. and the EU deploy these measures to secure supply chains and enforce human rights standards, China has responded with counter-measures targeting companies that comply with Western regulations. For globally operating companies, this creates a complex field of tension between competing legal obligations.

Forced labor is a global phenomenon. Estimates from the International Labor Organization (ILO) from 2021 indicate that 50 million people are affected by modern slavery – that is, forced labor and forced marriage.¹ The five largest affected sectors account for 87 percent of cases of forced labor: manufacturing, construction, agriculture, domestic work and services.² While ILO conventions have provided an international framework since 1930, they used to lack practical enforcement power. National and regional laws are increasingly closing this gap with real consequences. For companies, forced labor represents not only a serious human rights concern but also a substantial business risk. High-profile enforcement actions, import bans, and reputational damage have made forced labor a boardroom issue. Companies across industries – from apparel and electronics to automotive and food – have faced supply chain disruptions, investor scrutiny, and negative media coverage tied to forced labor allegations in their supplier networks. Robust due diligence is now essential for protecting brand value and maintaining market access, given the increasing number of adverse media reports on forced labor.

The term "forced labor" is defined in Article 2 of ILO Convention No. 29 as "all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily." Forced labor thus encompasses situations in which persons are coerced to work through violence, intimidation, manipulated debt, retention of identity documents, or threats of denunciation to immigration authorities.

The ILO has developed eleven main indicators to help identify forced labor, ranging from abuse of vulnerability and debt bondage to retention of identity documents. A single indicator may be a warning sign; multiple indicators together strongly suggest forced labor.

In 2024, the European Union enacted the Forced Labor Regulation (Regulation 2024/3015), prohibiting products made with forced labor from the Union market. The core prohibition is straightforward: any product tainted by forced labor at any stage of production – whether in raw material extraction, manufacturing, or assembly – must not enter, circulate within, or leave the EU market. The prohibition takes effect from 14 December 2027 and applies to companies of all sizes and all product types, including product components. Thus, the Regulation addresses the entire value chain – from import through trade to export. There is no de minimis exemption – small and medium-sized enterprises fall within the scope of the regulation.

The EUFLR establishes an obligation of result, not an obligation of means: what matters is whether a product was made with forced labor, not whether the company has implemented certain processes. If forced labor was involved, the prohibition is applicable – regardless of what compliance measures the company may have in place.

The Regulation does not create additional due diligence obligations for economic operators, but essentially such due diligence will be required in practice. Indeed, conducting robust forced‑labor due diligence will be highly important and can materially influence the outcome of an investigation. The Commission or relevant Member State authority must take into account any due diligence measures and processes that a company has in place when assessing the risk of forced labor in a specific case, including any actions taken to identify, prevent, mitigate, bring to an end or remediate risks of forced labor in their operations and supply chains. Accordingly, the recitals to the Regulation recognize that carrying out due diligence in relation to forced labor, including any remediation measures taken, should contribute to helping the economic operator to be at a lower risk of having forced labor in its operations and supply chains.

The burden of proof lies with the competent authorities, which must establish that a violation has occurred. A finding of violation under the EUFLR triggers significant consequences. Where the competent authority determines that a product has been made using forced labor, it must prohibit the placing or making available of that product on the EU market and order the withdrawal and disposal of any such products already in circulation. In exceptional cases, however, remediation can be an option. Specifically, where disposal would disrupt a strategically important supply chain for the EU, the authority may temporarily withhold the product while the economic operator removes the identified forced labor from the supply chain. If the operator demonstrates within that period that forced labor has been eliminated, the authority must review its decision. If the operator fails to do so, the order to dispose of the product will apply.

Finally, the product as a whole is in focus: the prohibition covers not only the final product but also individual components.

The EUFLR complements the EU's existing sustainability architecture. The Corporate Sustainability Due Diligence Directive (CSDDD) – and its forerunner, the German Supply Chain Due Diligence Act – oblige companies to fulfil procedural due diligence obligations along their chain of activities, while the EUFLR establishes a product-based prohibition. Both instruments address forced labor, but through different mechanisms: the CSDDD asks whether companies have implemented the right processes and have done the right thing in case of a risk or violation. As an obligation of means, the CSDDD does not penalize companies for adverse impacts that occur despite reasonable, risk-based efforts – what matters is whether the company has done what could reasonably be expected, not whether it has achieved a particular outcome. A company that has conducted thorough risk analysis, implemented proportionate preventive measures, and responded adequately to identified risks will not face fines under the CSDDD merely because forced labor was nonetheless present somewhere in its supply chain. The EUFLR, in contrast, requires success: products tainted by forced labor will be prohibited from being supplied to or from the EU market, regardless of the efforts undertaken. That said, as explained above, effective forced labor due diligence, including meaningful remediation measures, can lower the risk of a violation being found under the EUFLR and will be taken into account by the authorities when assessing whether concerns have been mitigated or eliminated.

The interplay of these regulatory frameworks creates both synergies and complexity. Companies that fulfil their due diligence obligations under the CSDDD will generally be well-positioned for the EUFLR – however, process-based compliance does not guarantee immunity under the EUFLR, as the latter focuses on results. A company may have exemplary due diligence processes and still face product bans if forced labor is discovered in its supply chain. After all, the EUFLR nudges effective due diligence policies and processes.

Enforcement of the EUFLR follows a formalized procedure with clear deadlines. Jurisdiction is determined by the location of the suspected forced labor: if it is outside the EU, the European Commission takes the lead; if it is within the EU, the national authority of the relevant Member State assumes responsibility. The enforcement process is divided into three phases. In the preliminary investigation phase, the authority issues a request to the company upon suspicion of forced labor. The company has 30 working days to submit information on due diligence measures taken. Within 30 working days of receiving the company's response, the authority shall conclude the preliminary phase and decide whether there is a substantiated concern.

If such a concern exists, the authority initiates the investigation phase. An investigation will not be initiated if the authority considers that no substantiated concern exists or that the concern has been effectively addressed, for example where applicable legislation, guidance or due diligence measures are applied in a way that sufficiently mitigates or eliminates the risk of forced labor. Once the investigation is opened, the company again has 30 to 60 working days to submit further information. The authority shall endeavor to conclude the investigation within nine months – either by closing the case or by issuing a decision. In case a violation is found, the competent authority must issue a decision prohibiting the placing of the product on the Union market, an order to withdraw products already placed on the market, and an order for disposal.

In the review phase, the company may request a review of the decision at any time. The authority decides within 30 working days whether to uphold or withdraw its decision. Additionally, judicial review remains available.

Of particular importance is the non-cooperation clause in Article 20(2) EUFLR. The burden of establishing whether forced labor has been used lies in principle with the relevant authority carrying out the investigation. However, under the aforementioned provision, the authority may rely on “facts available” to establish a violation if a company or a public authority refuses cooperation without valid justification, fails to provide information in a timely manner, provides incomplete or incorrect information with the objective of blocking the investigation, provides misleading information, or otherwise obstructs the investigation. This clause might be particularly relevant in cases of state-imposed forced labor, where states might refuse cooperation. It effectively shifts the burden of proof in cases of non-cooperation.

Article 14 EUFLR sets out the criteria by which authorities should prioritize their investigations: scale and severity of the suspected forced labor (including state-imposed forced labor), quantity of products concerned, and the share of suspect components in the final product.

In practice, initial enforcement will target large, visible companies in high-risk sectors such as textiles, electronics and agriculture, with authorities pursuing "demonstration cases" to establish precedents. SMEs will be less of an initial focus but remain legally covered.

A central instrument will be the risk database to be published by June 2026 pursuant to Article 8 EUFLR. It will identify specific geographic areas, products and sectors with forced labor risks – such as cotton production or cobalt mining in certain regions. While the database will not name individual companies, those whose supply chains intersect with identified risk areas should expect heightened scrutiny.

The United States's UFLPA was signed into law on December 23, 2021, with overwhelming bipartisan support in the U.S. Congress, in response to human rights allegations pertaining to China's Xinjiang province. The UFLPA provides U.S. Customs and Border Protection (CBP) with a powerful, expansive tool to prohibit the entry of products made in whole, or in part, with forced labor. Entered into force in June 2022, the UFLPA imposes a rebuttable presumption that any goods made, wholly or in part, in Xinjiang or in connection with any firm on the UFLPA Entity List are “presumed” to be made with forced labor and thus prohibited from entry into the United States.

Importers can only overcome this presumption by providing “clear and convincing” evidence that the product is not made with forced labor—a difficult task that has yet to be achieved more than four years after the UFLPA's entry into force—or that the product was wholly manufactured and supplied from outside of Xinjiang. Within thirty (30) days of goods being detained, importers must provide CBP with documentation to substantiate a finding that neither the goods, nor any of their upstream inputs including raw materials, were produced with forced labor, were located in Xinjiang, or were produced/supplied by a firm on the UFLPA Entity List. Such a response typically requires extensive supply chain mapping and supplier due diligence. 

To date, CBP has examined more than 18,000 shipments, valued at over $3.8 billion, pursuant to the UFLPA. The automotive and aerospace, electronics, and apparel, footwear, and textile industries have seen the most rigorous enforcement. Under the Biden Administration, the UFLPA was vigorously enforced with particular attention paid to high value shipments, including solar panels. More recently, the Trump Administration's enforcement has increasingly focused on lower-value shipments and has broadened to additional countries, including several that previously have not been the focus of robust enforcement (e.g., Indonesia, Laos, and South Korea).  

In August 2025, the Trump Administration published its 2025 UFLPA Implementation Strategy summarizing the past year's enforcement activity and charting its path forward. Notably, the strategy document identified five additional “high-priority sectors”: (1) caustic soda; (2) copper; (3) lithium; (4) red dates (jujubes); and (5) steel. These additions bring the “high-priority sector” list, which previously included tomatoes, polysilicon, cotton, aluminium, apparel, polyvinyl chloride, and seafood, to a total of 12 sectors. The report also highlighted the large number of entities added to the UFLPA Entity List over the past year—78—though the Trump Administration has not yet added more entities. 

In recent years, the PRC has introduced a series of countermeasures in response to foreign allegations of so‑called “forced labor,” addressing these claims through both institutional initiatives and enforcement actions.

Respect for and protection of human rights has long been a cornerstone of China's constitutional framework. In 2004, the principle that “the state respects and safeguards human rights” was formally enshrined in the Constitution of the People's Republic of China, underscoring the essential requirements of socialist democracy. To further articulate China's position and to respond to external allegations of “forced labor,” the Chinese government has issued a series of authoritative documents. Notably, on 24 June 2021, the State Council released the White Paper The Great Practice of the Communist Party of China in Respecting and Protecting Human Rights. On 2 October 2023, the Ministry of Foreign Affairs (MFA) published the draft report China's Promotion and Protection of Human Rights. Both documents provide a systematic account of China's achievements and ongoing efforts in advancing human rights protection.

While China acknowledges the principle of opposing forced labor, tensions arise when EU and U.S. regulations specifically target Chinese companies and certain regions within China under the pretext of forced labor, or when such regulatory measures are used as tools to impose trade restrictions on selected Chinese suppliers and goods. In response, China has implemented targeted legal countermeasures against certain foreign parties that have advanced human rights-related allegations against China.

Following the promulgation of the Anti-Foreign Sanctions Law (AFSL) in 2021, the Chinese government has imposed sanctions on foreign non-governmental organizations (NGOs) and associated individuals over human rights issues. For example, on 21 December 2024, the MFA announced sanctions measures under the AFSL against the Uyghur Human Rights Project (UHRP) and the Canada Tibet Committee (CTC), as well as related personnel, for “interfering in China's internal affairs and engaging in political manipulation under the pretext of human rights” and as “countermeasures against Canada's sanctions on Chinese individuals on the grounds of alleged human rights violations.” These measures included freezing movable and immovable property and other assets within China, prohibiting Chinese organizations and individuals from engaging in transactions or cooperation with them, and denying visas and entry into China, including the Hong Kong and Macao Special Administrative Regions.

In addition to sanctions under the AFSL, China has employed the Unreliable Entity List (UEL) mechanism, administered through the UEL Working Mechanism under the Ministry of Commerce (MOFCOM). The UEL is designed to restrict foreign entities that are deemed to endanger China's national sovereignty, security, or development interests; violate normal market transaction principles; disrupt legitimate dealings with Chinese enterprises, organizations, or individuals; or adopt discriminatory measures that seriously undermine the lawful rights and interests of Chinese stakeholders. Enforcement under the UEL has included actions against foreign entities alleged to have discriminated against products originating from Xinjiang on purported “human rights” grounds. For instance, at the end of 2024, MOFCOM initiated a UEL investigation into a U.S. apparel manufacturer following reports that the company had violated market principles and adopted discriminatory measures against Xinjiang-related products. In February 2025, the company was designated on the UEL.

Looking ahead, China's response to foreign allegations of so‑called “forced labor” will continue to underscore the constitutional and legal principle of respecting and safeguarding human rights, while at the same time deploying legal and policy instruments to counter discriminatory measures taken by foreign governments, organizations, and enterprises. On 10 December 2025, International Human Rights Day, an MFA spokesperson reaffirmed China's commitment to respecting and protecting human rights. The spokesperson criticized certain countries for politicizing and weaponizing human rights, urged them to address their own serious problems, engage constructively in international cooperation, and stop interfering in other states' internal affairs under the pretext of human rights.

Amid an increasingly complex and volatile global geopolitical landscape, with supply chain legislation in both the United States and the European Union directed at China, the Chinese government is expected to continue employing the AFSL and the UEL mechanism as integral components of its comprehensive response.

Given the complex multi-jurisdictional landscape, companies should develop a systematic approach to forced labor prevention. The following measures are best practice recommendations.

First, supply chain transparency is of central importance. Companies should invest efforts and resources to map their supply chains down to raw material sources, distinguishing between directly affected suppliers (Tier 1) and indirectly affected upstream stages (Tier 2, Tier 3, …). The deeper into the supply chain, the more difficult tracing becomes – but that is often where the highest risks are located. Companies should also work to develop strong relationships with suppliers to better inform forced labor risk profiles.

Second, companies should review and update anti-forced labor policies and processes. Existing policies should be examined for conformity with the EUFLR, CSDDD, LkSG and UFLPA. Clear responsibilities should be defined – ideally at management board level. These policies should include both internal policies that effectively deter and detect instances of noncompliance within the company and external supplier codes of conduct requiring compliance with applicable forced labor laws and regulations. In addition, companies should assess whether publishing such policies, especially those referencing restrictions related to specific regions, could give rise to regulatory, anti-foreign sanction, or other legal risks in certain local jurisdictions.

Third, companies should systematically use the EU Commission's risk database from June 2026 onwards. Their own supply chain map should be cross-referenced against the database to identify affected products. Enhanced due diligence should be conducted for these supply chains.

Fourth, companies should conduct mock investigations – simulated authority inquiries to test their own standard procedures. The 30-day deadline of the preliminary investigation phase is tight; companies that are not prepared will struggle to submit substantive information within the deadline.

Fifth, a three-stage prevention approach is recommended: Prevention through supply chain mapping, risk identification, transparent recruitment practices and training; Detection through worker-centered audits, whistleblower systems and grievance channels; Remediation through immediate termination of coercive practices, support for victims, and documentation of all measures.

For regulatory monitoring, active tracking of developments on both sides of the Atlantic is advisable, including regular exchange with industry associations and competent authorities.