EU Forced Labor Regulation Moves Toward Implementation: How Companies Should Prepare

On June 26, 2026, the European Commission (Commission) published its long-awaited guidelines on the Forced Labor Regulation (FLR). The FLR, which entered into force in December 2024 (see Sidley Update of December 2024) and will apply in full from December 14, 2027, introduces a broad ban on products made, wholly or partly, with forced labor at any stage of the supply chain, regardless of product type, sector, or origin.

Companies should prepare now. FLR imposes strict liability and may require restructuring supply chains. The transitional period is intended to give companies time to take compliance measures. Once the transitional period has expired, companies should expect immediate enforcement. The EU is under pressure to quickly enforce FLR as the United States is conducting a Section 301 investigation into countries that fail to effectively prohibit imports of forced-labor goods, with the EU among 60 economies facing proposed additional tariffs of up to 12.5%. Moreover, FLR has a complaints mechanism under which any party may notify potential FLR violations through a dedicated portal.

FLR enforcement will be product-based, and any product incorporating the prohibited product could, depending on the scope of the enforcement decision, itself also become prohibited. Any prohibition decision will be of general application, affecting all operators dealing in the product(s) identified in the decision. Once a decision is issued, operators may have as little as 10 working days for perishable goods and 30 working days for nonperishable goods to comply with withdrawal, disposal, or other enforcement measures. Companies that have not implemented effective due diligence, established traceability systems, and put investigation response protocols in place before December 2027 risk being unable to meet those deadlines and being subject to operational disruptions and financial penalties.

Although the FLR does not create a formal presumption that products from particular regions or sectors are made with forced labor, the Forced Labor Single Portal and a forthcoming public risk database will identify products, sectors, and geographies deemed to present elevated forced labor risks and thus subject to enhanced scrutiny. Companies should closely monitor the forthcoming database to prepare for compliance.

What should companies do prior to December 2027?

EU and non-EU companies whose products are placed or made available on the EU market or exported from the EU should use the period before December 2027 to assess supply chain exposure, strengthen internal controls, and prepare for potential scrutiny and enforcement.

1. Assess exposure and prioritize high-risk products. Companies should map products, components, raw materials, suppliers, and sourcing regions to identify where forced labor risks may arise, including products that are already in the EU but have not yet reached end users. Resources, including tools for supply chain traceability on the Forced Labor Single Portal, may be useful for this assessment. The guidelines indicate that authorities will prioritize products with significant EU market exposure, high sales volumes or value, material inputs potentially linked to forced labor, and sourcing from regions or sectors associated with elevated forced labor risks, including state-related forced labor. Companies should assess their supply chains against these criteria and treat as immediate priorities any products where multiple risk factors converge.
2. Strengthen forced labor controls and due diligence. Although the FLR does not create a standalone due diligence obligation, the guidelines clarify that effective due diligence will be central to demonstrating compliance and managing enforcement risk. The guidelines expressly refer to the Organisation for Economic Co-operation and Development Due Diligence Guidance for Responsible Business Conduct as the recommended framework and note that compliance with due diligence obligations under adjacent EU regimes will be relevant evidence in an FLR investigation.
   
   Against that framework, companies should review whether their existing policies and procedures adequately address forced labor risks across governance, procurement, supplier onboarding and monitoring, contractual provisions, traceability, grievance mechanisms, remediation, training, and disengagement processes. Two areas warrant particular attention.
   
   First, companies are expected to identify affected stakeholders proactively, including workers as well as vulnerable or marginalized stakeholders, and to engage with them in a meaningful, timely, and inclusive manner. This point is reinforced by the guidelines’ treatment of state-related forced labor risks, where traditional social audits are not considered credible because workers cannot speak freely and facility access is restricted. In those contexts, companies will be expected to conduct independent research, monitor the forthcoming EU forced labor risk database, and rely on expert analysis and civil society reporting.
   
   Second, companies should also ensure that they can substantiate product traceability through bills of materials, chain-of-custody records, supplier documentation, and shipping and customs records.
3. Build an investigation response protocol. The FLR foresees an elaborate investigative and enforcement process, under tight timeframes, in which authorities have extensive powers to seek information. Noncooperation, including the failure to furnish information, can allow authorities to establish a violation on the basis of other available facts, including indirect or circumstantial evidence. To that end, companies should develop a response protocol, with responsibilities allocated and an ability to quickly retrieve relevant documentation. The guidelines indicate that authorities may request documents, such as bills of materials, purchase orders, shipping and customs records, production capacity evidence, traceability documentation, audit reports, worker interview transcripts, and even satellite imagery and isotopic test results in some cases.
4. Plan for remediation, sourcing changes, or responsible disengagement. Where forced labor risks are identified, companies should assess whether they can prevent, mitigate, or bring those risks to an end through supplier engagement, corrective action plans, enhanced monitoring, contract enforcement, sourcing diversification, or restructuring away from high-risk suppliers or geographies. Where risks cannot realistically be mitigated or remediated, particularly in state-related forced labor contexts, the guidelines identify responsible disengagement as the only available means to address forced labor.
5. Ensure consistency across public communications. Companies should ensure that their public statements on forced labor and human rights are consistent across all channels, including sustainability and annual reports; modern slavery statements; marketing materials; environmental, social, and governance (ESG) content on websites; and investor communications. Inconsistencies in what a company tells investors, regulators, customers, and the public can be scrutinized by authorities and may themselves constitute evidence of an FLR investigation.

How will investigations be conducted?

The Commission will act as the lead authority where the suspected forced labor occurs outside the EU, while designated member state authorities will lead investigations concerning suspected forced labor within the EU. The guidelines elaborate on the phased, product-focused process of investigations.

Investigations can be triggered by information submitted through a single information submission point, accessible via the Forced Labor Single Portal, from December 14, 2027. Any natural or legal person, including victims of forced labor, businesses, nongovernmental organizations, consumer organizations, and trade unions may submit information, and submissions can be made anonymously.

1. Initial risk assessment. Authorities will first assess whether there is a likelihood that the forced labor ban has been violated and collect and assess available information. This assessment will be risk-based, with priority given to cases based on (i) the scale and severity of the suspected forced labor, with state-related forced labor likely to rank particularly high; (ii) the quantity or value of affected products placed on, made available on, or exported from the EU market; and (iii) the significance of the allegedly tainted input in the final product. Authorities will target not only priority products but also operators, focusing on those closest to the stages of the value chain where forced labor is suspected; those with the greatest leverage to prevent, mitigate, and end it; and those with significant size and resources.
2. Preliminary phase to determine a “substantiated concern.” If the initial assessment indicates a likelihood of a violation, authorities may initiate a preliminary investigation to determine whether there is a “substantiated concern” — that is, a reasonable indication, based on objective, factual, and verifiable information, that the forced labor ban may have been violated. During this preliminary phase, authorities may request information from operators they consider linked to potential forced labor and generally have 30 working days after receiving the response to decide whether to open a formal investigation. Authorities may allow additional time where an operator is taking appropriate remedial measures but may also forgo contacting the operator where doing so could compromise the assessment, such as by risking the loss of evidence or harm to victims. Information requests should be proportionate to the operator’s size and resources and should avoid requesting information already provided to authorities, in line with the once-only principle.
3. Formal investigation. Where a substantiated concern is established, authorities must open a formal investigation, which will be notified to other competent authorities (including the Commission, where applicable) through the Information and Communication System for Market Surveillance. Investigated operators must be informed within three working days, given an opportunity to submit observations, and generally afforded 30 to 60 working days to respond to information requests, subject to possible extension. There is no obligation for competent authorities to announce the initiation of a formal investigation to the public. Formal investigations should, in principle, be completed within nine months. During the investigation, authorities may request extensive information and evidence on an operator’s forced labor due diligence and remediation measures, including copies of internal policies, supplier codes, contract clauses, training materials, due diligence and audit reports, and corrective action plans. Member state authorities may conduct inspections at business premises within their territory, including unannounced inspections when permitted under national law, while the Commission may, in exceptional circumstances and with the necessary consents, carry out inspections outside the EU.
4. Decision. If a violation is established, authorities must adopt a decision (i) prohibiting the affected products from being placed on, made available on, or exported from the EU market by any operators, regardless of whether they were involved in the investigation; and (ii) requiring the investigated operators to withdraw and, where appropriate, dispose of the products or affected components. The decision will be published on the Forced Labor Single Portal and identify the products in scope and specify a compliance deadline of at least 10 working days for perishable goods and 30 working days for nonperishable goods. For products of strategic or critical importance to the EU, authorities may permit the operator to withhold (rather than dispose of) the products for a defined period while the forced labor is remedied. The products may then reenter the market if the operator demonstrates that the issue is resolved or may need to be disposed of.
   
   Given these compressed timelines, operators should consider preparing by mapping stock locations, distribution channels, and disposal options to be significantly better placed to comply within these timelines. Economic operators will be able to directly and individually seek review or withdrawal of a decision on the basis of new evidence that forced labor has been eliminated and may appeal decisions before the competent courts.
   
   All decisions will be published on the Forced Labor Single Portal and may name the operator concerned, along with the product suppliers and manufacturers involved, where necessary to identify the banned product. Beyond the direct commercial consequences of the decision itself, publication creates significant reputational risk and may expose the operator to follow-on litigation.

How will decisions be enforced?

Decisions will be enforced both within the EU market and at the EU border.

Within the EU, competent authorities will require affected products to be withdrawn and disposed of, including products offered online. Where only a replaceable part or component is affected, operators may replace that part and return the remediated product to the market. Importantly, the guidelines confirm that the FLR applies not only to the initial placing of products on the EU market but also to any subsequent making available of those products on that market. As a result, stockpiling products in the EU before the FLR becomes applicable will not avoid its application.

At the border, customs authorities will monitor imports and exports against ban decisions adopted under the FLR. If customs identify a product potentially banned, they may suspend its release and refer the matter to the relevant competent authorities. If the product is confirmed to be banned, customs must refuse its release and arrange for disposal. Reexport will not be possible, and the operator will bear disposal costs.

What penalties can be imposed?

Penalties will apply for failure to comply with a decision adopted under the FLR rather than for the underlying forced labor violation itself. Examples include continuing to place banned products on the market, failing to withdraw or dispose of such products, failing to replace affected parts, and failing to withhold strategically or critically important products when ordered.

Member states must adopt rules on financial penalties and notify them to the Commission by December 14, 2026. The guidelines do not prescribe a specific calculation method but set out a methodology for calculating the appropriate penalty amount and add that member states must take “utmost” account of this guidance. In particular, authorities should identify the relevant facts, assess the gravity and duration of the violation, adjust for mitigating or aggravating factors, apply any national legal limits, and ensure that the final penalty is effective, proportionate, and dissuasive.

We stand ready to assist

Sidley’s EU trade and ESG practice has extensive experience in advising clients on the complex and rapidly evolving cross-jurisdictional regulatory landscape of trade and sustainability, including its implications for global supply chains. Our team stands ready to assist operators to assess FLR exposure, strengthen forced labor compliance and due diligence programs, prepare for potential investigations, and engage with relevant stakeholders, investigative authorities, and customs authorities.