Confronting Slavery in the Supply Chain – the US Approach
Modern slavery is an escalating problem in our supply chains.
Numerous industries, including textiles, furniture, food & agriculture, electronics, sports, construction, hospitality, and housekeeping, have been implicated in this illegal trade, which is said to be worth around USD 150 billion. It affects millions of individuals, who experience mental, physical and/or sexual coercion. To address the problem, the US Government has implemented legislation that requires businesses to ensure their supply chains are free from prohibited practices, such as forced labor and forced child labor.
What is Modern Slavery?
Modern slavery, human trafficking and trafficking in persons are umbrella terms used to refer to instances of exploitation where a person cannot leave or refuse to work due to threats, violence, coercion, deception, and/or abuses of power.1 According to the International Labor Organization, in 2016 around 40.3 million people across the world were victims of modern slavery, with about 25 million in forced labor. Women and girls accounted for about 71% of victims, with one in four being children.2
Forced labor is defined by the ILO Forced Labor Convention, 1930 (No. 29), as “all work or service that is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.”3 Out of the 24.9 million people trapped in forced labor, 64.2% people are exploited in the private sector, for example in domestic work, construction or agriculture, 19.2% are in forced sexual exploitation, and about 16% are in forced labor imposed by state authorities.4
While most victims are part of domestic and informal settings, many modern slaves are still found in our global supply chains. The 2018 report “List of Goods Produced by Child Labor or Forced Labor”, issued by the US Department of Labor, showed that 148 different goods, originating in 76 different countries, were being made using child labor or forced labor.5 These included gold being mined by children as young as seven in Nigeria and Uganda, and artificial flowers and Christmas decorations being made by forced labor in China.
Brands and retailers that are independent or contracted by government procurement agencies, have been making significant efforts in recent years to ensure the first-tier of their supply chain complies with international standards and local laws. Beyond the first-tier, however, it can become difficult for them to fully monitor working practices. This situation is made harder by the complexity of global supply chains, the lack of appropriate legislation, corrupt officials, reduced border controls and the increased vulnerability of migrants’ due to social and cultural factors. Businesses may, therefore, be contributing to this USD 150 billion illegal economy, either directly or indirectly, without being cognizant of it.
It is also possible that some businesses operating in the US may not be aware of their full responsibilities and liabilities with regards to human rights and their supply chains.
Ignorance is No Longer an Adequate Defense
Recognizing the realities of modern supply chains, the US has begun to place legal requirements on companies to ensure their products are not made using forced or child labor. These laws call for complete supply chain transparency, making brands, retailers and federal contractors culpable for the actions of all economic operators in the supply chain – an approach that many other countries have adopted.
Companies operating in the US need to heed three pieces of legislation:
- The Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) – Section 909 prohibits the importation of products made using child, forced or indentured labor, with US Customs being given the power to seize suspect merchandize
- Federal Acquisition Requirements (FAR) – clause 52.222-50 effectively bans Trafficking in Person (TIP) in all companies and their complete supply chains, if they are servicing US Federal contracts. The recent strengthening of these rules means there is a chance any vendor or sub-contractor may find themselves indirectly affected by FAR
- Countering America’s Adversaries Through Sanction Act (CAATSA) – signed into law in August 2017 by President Trump, this covers sanctions for Russia, Iran and North Korea. Section 321 of the act amends the North Korea Sanctions and Policy Enhancement Act of 2016, creating the presumption that any item made using the labor of a North Korean citizen or national will automatically be categorized as being made using forced labor
Stakeholders need to be aware, therefore, that if a product is suspected of benefiting from the labor of North Korean workers, then US Customs will automatically seize it. Since there is a presumption of guilt, the onus will then be on the importer to prove innocence before the shipment can be released. Stakeholders should also understand that US Customs will refer these matters to Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), with a request to initiate a criminal investigation for violation of US law.
There have recently been reports of North Korean workers being found in factories in various countries in Eastern Europe, Asia and Africa. Since risk in the supply chain cannot be readily discerned without transparency, businesses must implement a program of due diligence to safeguard themselves and ensure their supply chains do not incorporate involuntary labor. Due diligence will provide them with a measure of defense against the legal liabilities associated with the actions of economic operators at any point in the supply chain.
SGS Solutions: Due Diligence
SGS can help businesses gain insight into the risk of modern slavery in their supply chains and provide them with simplified and practical action plans to address the issue. With a global network of subject matter experts and seasoned auditors, SGS helps businesses in all sectors ensure their supply chains are free from prohibited practices, such as forced or child labor.
Using the Plan Do Check Act method, we help businesses identify, address and monitor all risks in the supply chain:
- Plan: We help ensure our client’s policies and code of conduct are compliant with regulations
- Do: We map their complete supply chain and perform risk analysis to identify high-risk sites
- Check: We then monitor compliance within the supply chain – high-risk sites are audited first, within three months
- Act: Following the onsite compliance audits, a review process is implemented allowing for continuous compliance and improvement in the supply chain
Implementing our pragmatic solutions will ensure a business’s commitment to its human rights obligations and give businesses the confidence they need to ensure they comply with all regulations relating to modern slavery. With the right checks and balances in place to address modern slavery and forced labor violations in the supply chain, these businesses can secure further contracts and avoid penalties and shipment seizures.
Working with SGS helps businesses understand and comply with their legal requirements in relation to modern slavery, including forced and child labor.
To learn more about SGS modern slavery services, contact:
Corporate Responsibility Associate
Supply chain Assessment & Solutions
t: +1 (973) 461 7920
1,2 Report on Global Estimates of Modern Slavery: Forced Labour and Forced Marriage
3 Reference: International Labor Organization, Forced Labor Convention, 1930 (No. 29).
4 Forced Labour, Modern Slavery and Human Trafficking
5 List of Goods Produced by Child Labor or Forced Labor