Forced labour: avoiding the risk in international trade

The European Commission has proposed banning all products made using forced labour from the EU market, whether produced domestically or imported. If the proposal introduced in late 2022 comes into force, it will impact many labour-intensive industries and related foreign trade and investment worldwide, creating new challenges for Chinese enterprises trading with Europe.

Several Western countries, including the US, have already restricted trade of products from certain regions in China on the grounds of “forced labour” in recent years.

In December 2021, the US government passed the Uyghur Forced Labour Prevention Act, which prohibits US importers from importing products manufactured in Xinjiang unless clear and convincing evidence can be produced proving that forced labour was not involved in the production. Unfortunately, forced labour may remain one of the most problematic issues in Sino-US trade for some time to come.

This article addresses anti-forced labour issues from the perspective of corporate environmental, social and governance (ESG) compliance, helping enterprises chart the best path forward.

WHAT IS FORCED LABOUR?

“Forced labour” is any work in which people are employed against their will by unlawful means. The most authoritative definition may be that of the International Labour Organisation (ILO) in article 2 of the ILO Forced Labour Convention, 1930: All work or service which is exacted from any person under the menace of any penalty, and for which the said person has not offered himself/herself voluntarily.

Under this definition, the ILO further set out 11 indicators of forced labour, designed to help identify persons who are possibly trapped in a forced labour situation. In particular, they are: abuse of vulnerability; deception; restriction of movement; isolation; physical violence; intimidation and threats; retention of identity documents; withholding of wages; debt bondage; abusive working and living conditions; and excessive overtime.

RELEVANT LAWS IN CHINA

China has long attached great importance to the issue of forced labour. While there is not yet a separate set of laws dedicated to its prevention, relevant provisions can be found in myriad laws and regulations. First and foremost, the Constitution provides (under chapter II – The Fundamental Rights and Duties of Citizens) that the freedom and personal dignity of Chinese citizens are inviolable.

In terms of labour-related laws, article 32 of the Labour Law provides that, “where the employer forces the employee to work by means of violence, intimidation or illegal restriction of personal freedom” the employee may unilaterally terminate the labour contract immediately without having to notify the employer in advance.

Echoing this article, article 96 of the Labour Law stipulates that employers committing the act of forced labour may be held administratively or even criminally liable. Furthermore, articles 31, 38, 84 and 88 of the Labour Contract Law also contain elements forbidding forced labour, insisting that employers may not enforce any form of mandatory overtime work, and strictly execute the criterion on labour quota.

In the Criminal Law, relevant crimes include those of “forced labour” under article 244, and “employing child labour for dangerous or hazardous work” under article 244.1.

Apart from these direct provisions, sporadic rules are also found in numerous other laws and regulations. These include: article 40 of the Law on Administrative Penalties for Public Security; articles 19 to 21 of the Law on the Protection of Rights and Interests of Women; article 6 of the Employment Promotion Law; article 40 of the Law on the Protection of the Disabled; article 6 of the Regulations on Paid Annual Leave of Employees; and article 11 of the Provisions on the Prohibition of Using Child Labour.

RECOMMENDATIONS

Forbidding forced labour is also one of the key indicators of ESG compliance. This means that Chinese enterprises must dedicate sufficient attention to the matter of forced labour to meet the increasingly complex challenges of competing in the international markets.

For this purpose, this key advice is offered:

1. Improve construction of a labour compliance system. From the perspective of internal compliance management, the construction of a pre-emptive labour compliance system remains a top priority.
   Enterprises are required to not only establish basic internal labour regulations under domestic laws, but also actively take steps to improve compliance on labour and human rights protection. Particular emphasis should be on implementing principles that protect labour rights, such as anti-forced labour, anti-child labour, anti-employment discrimination, fair compensation, fair working hours, and occupational health and safety.
2. Enhance compliance throughout supply chains. Enterprises, especially exporters to the US or EU, should screen their supply chains for any activities or potential risks of forced labour, or violations of human rights. The authors recommend establishing a supply chain compliance management system, and formulating and enacting labour compliance and human rights policies as codes of conduct for suppliers to follow.

In addition, supply chain management may benefit from preserving traceable documents, production certification documents, labour human rights commitments and other material from suppliers, which effectively ensures that suppliers abide by the relevant labour standards.

Patrick Gu is a partner at Llinks Law Offices. He can be contacted by phone at +86 21 3135 8722 or by e-mail atpatrick.gu@llinkslaw.com
Theo Ju is a associate at Llinks Law Offices. He can be contacted by phone at +86 21 6043 3938 or by e-mail at theo.ju@llinkslaw.com