In September 2012, US President Barack Obama issued Executive Order 13627, "Strengthening Protections Against Trafficking in Persons in Federal Contracts," which gives federal contractors additional responsibilities designed to tackle human trafficking.
Human trafficking, or trafficking in persons, is an umbrella term used for “the act of recruiting, harboring, transporting, providing, or obtaining a person for compelled labor or commercial sex acts through the use of force, fraud, or coercion.” 1
The requirements outlined in the new executive order are (along with the anti-trafficking provisions of the 2013 National Defense Authorization Act) reflected in the 2015 amendments to the anti-trafficking provisions in the Federal Acquisition Regulation (FAR) (52.222-50: Combating Trafficking in Persons.1 The additional responsibilities apply to all federal contracts awarded after 2 March, 2015, and they also flow down to subcontractors including agents.4
Scope of the New Requirements
In accordance with FAR 52.222-50, if a contract is worth over $500,000; if it is performed outside the United States; and if it involves i) services or ii) products other than commercially available off-the-shelf (COTS) items, the contractor is required to publish a compliance plan detailing their efforts to identify human trafficking in their supply chains and eradicate it. Such contractors must also provide annual certification of compliance to procurement officers.
Contractors who do not fall into these categories are not required to publish compliance plans, but of course they must still comply with the law by avoiding having trafficked persons in their supply chains.
Fields associated with a high risk of labor abuses include electronics/electrical manufacturing; this, of course, has implications for manufacturers of all products that use electronic components, such as vehicles, defense systems, etc. Other fields identified as high risk include agriculture, construction, hospitality, and warehouse work. More information on risk by industry, product, or region is available in Verité’s report Strengthening Protections Against Trafficking in Persons in Federal and Corporate Supply Chains.2
The most important risk factor for human trafficking arises when firms outsource the recruiting function, for example hiring overseas labor agents to attract migrant workers to meet regional labor shortages. Labor agents may make false promises to prospective recruits, leading them to expect living and working conditions that are much better than the reality. Other labor agent practices prohibited by the new requirements include withholding workers’ documents, such as passports, and charging workers fees, which can take them years to repay.
Meeting the Challenge
Contractors of any size may have difficulty in ensuring they comply with the new requirements relating to human trafficking in the FAR and in subsequently demonstrating their compliance. Small and medium-sized firms that do not have large dedicated compliance teams may face particular challenges.
Failing to comply with the new FAR requirements could have serious repercussions for contractors. For some businesses, the loss of their government contracts would force them to close. Additionally, noncompliance may incur significant fines or imprisonment.
The new requirements necessitate proactive preventive measures from firms but also, crucially, transparency on outstanding issues. While it can be virtually impossible for US government contractors operating in some types of service provision and manufacturing to entirely eliminate dubious labor practices throughout their global supply chains, it is considered preferable for them to submit frank and detailed reports on their true performance regarding use of trafficked persons in their supply chains, rather than attempting to "whitewash" their performance by conducting superficial investigations and failing to report the truth of the situation.
Planning for Action
Further guidance has been issued to assist contractors and subcontractors to meet the requirements of the new executive order. Some of this is found in the final version of the FAR.1 In addition, responsiblesourcingtool.org was recently launched to support contractors to develop systems to adequately monitor their performance on the issue of human trafficking in global supply chains. It helps firms evaluate suppliers and manage risk by directing them to resources and information relevant to management systems, supply chain monitoring, and compliance.
Other measures that may be appropriate include retraining staff, inspecting facilities, and interviewing labor agents to assess their competence and integrity. Risk may also be significantly reduced if firms avoid outsourcing the recruitment function to labor agents altogether, where possible, and instead conduct recruitment themselves, ensuring they follow the FAR requirements for recruiting migrant workers.
In summary, while the new requirements for federal government contractors established in FAR 52.222-50 (and the penalties for noncompliance) may appear daunting to firms unused to monitoring their global supply chains closely for evidence of human trafficking or to preparing detailed compliance plans, support is nonetheless available from a range of sources to enable them to avoid penalties, retain government contracts and enhance their ethical performance.
What SGS Can Offer
SGS has been involved in social accountability since its inception and has been offering tailored audit services since 1996. SGS can support organizations with a range of services, including evaluating approaches to human trafficking and monitoring supply chains as part of an overall due diligence approach to responsible sourcing. SGS also helps companies understand the product and labor supply chain, a critical step in the due diligence process, through use of the Transparency-One supply chain mapping platform. With the largest networks of highly trained auditors and extensive experience of reviewing operations’ capabilities, labor standards, environmental compliance and business integrity, we can support your responsible purchasing policies.
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For further information, please contact:
Director, Supply chain Assessments & Solutions
SGS North America, Inc.
t: +1 973 461 7950
1 Acquisition (Federal Acquisition Regulation (FAR))
2 Strengthening Protection Against Trafficking in Persons in Federal and Corporate Supply Chains (PDF 9.4MB)
3 US Department of State Diplomacy in Action
4 Acquisition (Part 44—Subcontracting Policies and Procedures)