New Forced Labor Legislation Set to Have an Impact on Global Supply Chains

President Obama signed into law the Trade Facilitation and Trade Enforcement Act of 2015. The new legislation now officially prohibits the importation of goods produced by forced labor or child labor, closing an 86 year old loophole and reauthorizing the Customs and Border Protection Agency to seize any imports suspected of being produced by forced labor.

The International Labor Organization estimates forced labor fuels $51 billion a year in profits in international trade and more than 14 million people worldwide work as a result of force, fraud or deception in homes, factories, mines, and farms.

“If the US government works to really keep out goods made with forced labor, this change will have a profound ripple effect on supply chains worldwide,” said David Abramowitz, vice president of Humanity United and a major advocate of the Act.

A report released today by Resilinc, a California-based cloud provider of supply chain resilience and risk management intelligence and analytics, concurs that forced labor produced goods are common across industries, and the new law has the potential to significantly impact global trade.

(SCMR has noted in past postings that California represents a special concern for human rights advocates. Indeed, The California Transparency in Supply Chains Act of 2010 may still cause problems for some managers)

Specifically, the report entitled “New Forced Labor Legislation to Impact Global Supply Chains” finds that forced labor hidden in the supply chain presents a palpable, three-pronged risk to companies, irrespective of industry or company size. These include business continuity risk, brand or reputation risk, and compliance/legal risk.

“Companies may be inadvertently linked to sub-tier suppliers that may engage in unethical, and now, purely illegal, business practices,” said Neil Shenoi, the lead analyst and primary author of the report.  “Clean companies may still be at risk due to increased scrutiny of US imports and newly implemented import regulations. Regardless, the new law will inadvertently require companies to achieve a greater degree of supply chain visibility to assure both the government and the public at large that forced labor has no role in their supply chains.”

The Resilinc analysis provides:

•   An overview of the Trade Facilitation and Trade Enforcement Act
•   Why SCM practitioners and stakeholders should care about the new law
•   An examination into how the legislation will be implemented and enforced
•   An assessment of key regions, industries and goods impacted by the new law
•   Tactical and strategic recommendations on how to prepare for the foreseeable supply chain impacts

The report concludes that it is critically important not to think about supply chain risks in isolation.

“Companies need to think strategically about supply chain risks in the context of the broader array of risks that they face every day,” said Shenoi. “Supply chain risks should be addressed as part of a comprehensive resiliency strategy and not a “one off” risk mitigation exercise. This is because the processes associated with risk mitigation and the treatment options available are common across a wide variety of risk types.”