The EU Forced Labour Regulation: What does it mean for companies trading in the EU?

From December 14, 2027, companies that place products made with forced labour on the EU market will face penalties. This regulation (the Forced Labour Regulation or the Regulation) supplements other EU human rights- and supply chain-related regulations, such as the Corporate Sustainability Due Diligence Directive (CS3D) and the Deforestation Regulation. However, it has a much broader scope than its counterparts.

The Regulation applies to all companies operating in the EU, regardless of where they are incorporated (EU operator), and prohibits EU operators from placing or making available products on the EU market, or exporting from the EU, any product that was made in whole or in part from forced labour. EU and national authorities have broad powers to investigate suspected forced labour. Breaches can trigger corrective measures—including supply restrictions—and penalties.

The Forced Labour Regulation does not create new due diligence obligations or require companies to implement human rights policies. Still, adopting them helps spot and tackle forced labour risks, and not doing so heightens the risk of liability for placing, making available, or exporting forced labour-made products from the EU market.

We explore below the scope of the Forced Labour Regulation prohibitions, the nuances in its enforcement regime, and how it interacts with other human rights regimes.   

Why should businesses take note?

1. A broad scope

The Forced Labour Regulation prohibits the placing and making available on the European Union market, and export from the European Union market, of products made with forced labour, including (forced) child labour. It entered into force on December 13, 2024, but most of its provisions will only start applying from December 14, 2027. 

The Regulation applies to “any item that can be valued in money and is capable, as such, of being the subject of commercial transactions, whether it is extracted, harvested, produced or manufactured.” This includes items that are targeted at end users in the EU through online sales and other distance sales. This contrasts with other EU due diligence laws that only apply to specific products and sectors, such as the Conflict Minerals Regulation.

It aims to prohibit dealings within the EU of products for which forced labour has been used, in whole or in part, at any stage of a product’s development, including during its extraction, harvest, production or manufacture, as well as in the working or processing related to a product at any stage of its supply chain.

Unlike other EU sustainability regulations such as the Corporate Sustainability Reporting Directive (CSRD) and the CS3D, there are no turnover, balance sheet or employee thresholds to determine whether businesses are in scope of the Forced Labour Regulation. Instead, the Regulation applies to all natural or legal persons or association of persons (whether EU or non-EU) placing or making available products on the EU market or exporting products from the EU. Therefore, small- and medium-sized companies not in scope of the CSRD’s reporting obligations or the CS3D’s due diligence obligations will nevertheless find themselves caught by this regime.

The European Commission is required to publish guidelines by June 2026 on a range of forced labour-related topics, giving companies 18 months to review those guidelines before prohibitions under the Regulation enter into force in December 2027.

2. A risk-based approach

Although the Forced Labour Regulation casts a wide net, enforcement is risk-based. Authorities must triage cases by weighing the scale and severity of suspected forced labour, the volume of products at issue, and how much of the final product is likely tainted. This is designed to focus enforcement efforts where the identified harms and market impacts are most severe.

Crucially, authorities can reach findings even without definitive proof, including where operators refuse to cooperate or withhold information during EU investigations. While this raises evidentiary challenges, it prevents actors from frustrating inquiries through non-cooperation or by hiding behind limited access to third-country sites.

3. Broad investigatory powers and enforcement based on corrective actions

EU authorities are granted broad investigatory powers under the Regulation. Before opening a case, they may compel suspected economic operators to disclose what steps they have taken to identify, prevent, mitigate, end, or remediate forced labour risks across their operations and supply chains. 

Investigations follow a risk‑based assessment: authorities proceed where there is a substantiated concern of a violation and the contributing factors have not been eliminated. Cases may also originate from whistleblower submissions, with third parties able to file information through a dedicated online portal.

Crucially for companies, a substantiated concern can be extinguished where authorities are satisfied that appropriate measures are in place to prevent, mitigate, and remediate forced labour concerns through a company’s human rights due diligence programme.

Throughout an investigation, authorities may request supply‑chain and product information, interview relevant third parties, and conduct field inspections. Where suspected violations arise in third countries, they may also engage local authorities.

If a violation is found, authorities can prohibit the placing or the making available of the products in the EU, and their export; order the withdrawal of products already on the EU market (including online); and require the disposal of products or components made with forced labour. In addition, non‑compliance may also attract penalties. The regime is, in this sense, corrective: its aim is to keep products made with forced labour out of EU markets.

However, there are several nuances with regards to enforcement: 

1. A varied penalty regime: Operators that ignore EU authorities’ decisions may face penalties, but member states set the scope, type, and size of such penalties. This means that sanctions may differ based on where an enforcement action is brought. It is unclear whether countries will mirror higher ceilings like CS3D and the Deforestation Regulation that currently link fines to turnover thresholds.
2. A dependence on third country cooperation: If alleged forced labour occurred outside the EU, authorities will look to work with local authorities and can proceed only if those countries do not object. Even so, authorities do not need complete information or evidence to issue enforcement decisions.
3. A different treatment for critical goods: Where destroying goods would disrupt a supply chain of strategic or critical importance, authorities may  pause disposal. Goods can be withheld for a set period while the operator eliminates forced labour within their supply chain.

What can businesses do?

There are various measures businesses can take to prepare for the Forced Labour Regulation:

1. Review and update existing guidelines and policies: While the Regulation does not require companies to develop internal policies and guidelines relating to forced labour in supply chains, investigators will assess whether in-scope companies have them. To enhance their ability to identify forced labour concerns in supply chains, companies should review and reinforce their existing supply chains and human rights due diligence programme to ensure consistency with existing EU, national, UN, ILO and OECD due diligence standards and to ensure existing procedures are designed to prevent, detect, and remediate forced labour in supply chains. Companies should also map existing policies and procedures against Commission guidance, once published (anticipated by June 2026). Companies with a developed human rights due diligence programme will be better placed to mitigate risk and respond to inquiries than those that do not have one.
2. Provide human rights and forced labour awareness training: Companies should consider providing human rights and forced labour awareness training to employees, subsidiaries and key suppliers. In respect of key suppliers, this would help demonstrate a company’s efforts to exercise leverage in its supply chains by better equipping suppliers to identify and seek to address red flags relating to forced labour concerns and other adverse human rights impacts.
3. Review existing supply chain arrangements: Prioritise salient human rights issues. Companies should map their supply chains and prioritise high‑risk products and geographies. The Commission’s upcoming risk database may help to focus resources on where forced labour concerns are likely to be most severe. Enhanced due diligence, especially for complex, international supply chains, will materially reduce the risk of breaching the Regulation.
4. Responsible contracting in supply chains: Companies should review and enhance relevant contractual provisions in their supply chain arrangements, including Supplier Codes of Conduct.  This could include requiring supply chain participants to comply with international standards such as the UNGPs and OECD Guidelines as well as incorporating a mechanism for forced labour concerns to be escalated and a corrective action plan to be adopted, where appropriate. 

How does the Forced Labour Regulation interact with other human rights instruments?

As the EU’s human-rights rulebook grows, there’s a clear upside for in-scope companies: interoperable frameworks mean less duplication and lower compliance costs. The Commission’s forthcoming forced labour risk database should be a practical starting point for identifying CS3D risks, given that the CS3D’s due diligence obligations come into force on July 26, 2029. 

Compliance under one regime will reinforce compliance under another. Risk identification, prioritisation, and remediation are common building blocks across these laws. The CS3D’s risk‑based due diligence, covering a company’s own operations and those of its subsidiaries, aligns with the Forced Labour Regulation’s focus on detecting and excluding forced labour‑linked products from EU markets. In both regimes, companies will need traceability that extends throughout the supply chain, as well as clear remediation pathways, and internal controls capable of withstanding regulatory scrutiny.

Practically, this means that smart design choices, such as harmonised supplier codes, integrated questionnaires, consistent red‑flag taxonomies, and shared escalation protocols, can serve both frameworks at once. Where local rules diverge, companies can layer jurisdiction‑specific add‑ons without rebuilding the core.

Companies subject to multiple regimes should map obligations early and design policies and procedures that satisfy them all, especially those operating across several jurisdictions. A pragmatic approach is to (i) build a consolidated obligations tracker tool, (ii) align policies to the strictest overlapping requirement, and (iii) roll out a single operating playbook for scoping, due diligence, remediation, and reporting which can thereafter be tailored for local law. 

Find out more

Should you have any questions on the EU Forced Labour Regulation, please get in touch with the authors or your global key contacts at A&O Shearman. For more detailed information on how businesses can prepare for the CS3D, see The EU corporate sustainability due diligence directive is final: how can companies prepare?, and for information on the latest updates to the CS3D as part of the EU’s sustainability "Omnibus," see CS3D - Ten questions on the Omnibus.