How to Comply With Supply Chain Forced Labor Regulations

The prevalence of forced labor and human trafficking in supply chains has drawn increased scrutiny from regulators in the United States and Canada. Understanding how to detect and address these risks is crucial for responsible businesses.

Let’s explore the steps you can take to ensure your supply chain is forced labor free in alignment with both US and Canadian legal requirements.

A brief overview of US and Canadian forced labor laws

Forced labor is a serious violation of human rights and is expressly prohibited under various global laws.

In the United States, Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307) prohibits the importation of goods into the United States that have been mined, produced, or manufactured, wholly or in part, using forced labor. The law empowers U.S. Customs and Border Protection (CBP) to detain shipments suspected of being produced with forced labor and bring enforcement actions against businesses that attempt to import such goods into the United States. The importer bears the burden of proving that their goods were not made with forced labor to avoid detention or other penalties.

In Canada, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (S-211) went into effect in January 2024. This new law imposes financial penalties on companies that fail to file reports disclosing information about their supply chain, including its structure, policies, and risk assessments.

American and Canadian businesses must analyze the risks in their supply chains to satisfy their compliance requirements under these laws.

A five-step process to eliminate forced labor in your supply chain

Ensuring your supply chain is forced labor-free is challenging due to the complex and often opaque nature of many supply chains. These five steps can help businesses overcome those challenges and implement a defensible due diligence process.

1. Map your supply chain

Start by mapping your supply chain for all indirect sourcing. Identify every tier of suppliers and subcontractors involved in producing your products. Understanding the breadth and depth of your supply chain is essential for pinpointing potential risks of forced labor.

Traditional, static supply chain maps capture only a moment in time. Fortunately, new technology enables supply chain mapping software that can handle the volume of data necessary to oversee indirect suppliers continuously.

Supply chain mapping tools with API capabilities can seamlessly integrate with enterprise databases, offering up-to-the-minute insights into inventory and other critical data. This real-time synchronization can also incorporate external data sources, such as emergency alerts and vessel locations, to enhance decision-making and risk management.

Some solutionscan even leverage enterprise-wide collaboration to trace a product all the way from raw material to finished goods while accounting for every material, process, and shipment along the way.

Unlike traditional methods that rely on in-person verification, modern supply chain mapping uses GPS and satellite imagery to pinpoint locations like mines, farms, factories, and distribution centers. Verification is achieved by cross-referencing supply chain maps and transaction records against authoritative databases and statistics to root out fraud, waste, and abuse. 

2. Monitoring goods, nations, and suppliers for risk

Next, you should delineate a risk assessment process to identify potential red flags in your supply chain.

Start with online databases, such as the U.S. Department of Labor’s List of Goods Produced by Child Labor or Forced Labor, to identify both categories of goods that are likely to be produced by forced labor and countries where the risk of forced labor is high. The Better Trade Tool from the U.S. Department of Labor’s Bureau of International Labor Affairs (ILAB) enables searching by country, good, type of labor exploitation, and year from a series of dropdown lists. You should also routinely check CBP’s Withhold Release Orders (WROs) and Findings List to discover merchandise that may be subject to exclusion and/or seizure.

You may also want to engage a watchlist provider. These providers continuously sift through vast datasets of entity lists to help companies quickly spot suppliers with suspicious activity or affiliations. Watchlist providers may use more traditional approaches, including market intelligence providers and research desks, or newer approaches that rely on big data and artificial intelligence to parse data.

Watchlists can save companies time by screening thousands of suppliers, especially as suppliers build maps of their supply chains and reveal more connections and more entities that they do business with. The full benefit of a watchlist is only realized once you’ve also mapped your entire supply chain, as you’ll then be able to screen all of your suppliers for potential risks.

3. Tracing the chain of custody

It’s one thing to know who’s supplying you with materials; it’s another to precisely track the movement of a specific batch of goods from their point of origin to their destination in your factory or warehouse. While chain-of-custody tracing was once incredibly labor intensive, today’s technology allows shipments to be tracked every step of the way, from the farms and mines where raw materials originated to the finished goods on store shelves. These tools range widely, from traditional solutions like barcodes and RFID tags to emerging technologies such as digital twins and blockchain tracing.

Whatever solution you choose, it must be capable of ingesting and analyzing records such as packing lists, bills of lading, shipping manifests, invoices, contracts, purchase orders, and payment receipts. The resulting data must be produced in a format that can be uploaded into supply chain mapping databases, where it can be combined with similar data from other vendors to flesh out the full chain of custody.

4. Reviewing documents

To comply with global forced labor regulations, importers must collect proof that each step within their supply chains is compliant with the law. This includes ensuring that each sub-supplier has a valid license to operate, relevant certifications, and up-to-date audits, in addition to collecting transaction traceability documentation for high-risk products.

Scrutinize all contracts, invoices, and certifications provided by suppliers. Look for any inconsistencies and red flags that may indicate the use of forced labor, such as unusually low prices or vague sourcing information.

5. Surveying suppliers

Large and evolving supply chains pose challenges that surpass the capabilities of traditional methods. Instead of grappling with constant updates and shifting data, look for modern tools that enable suppliers to respond to information requests with data that you can easily import into your system to generate automated analyses and reports.

It may be necessary to reach out directly to those suppliers that are difficult to engage online. A versatile supply chain mapping vendor can help you communicate effectively with suppliers by reaching out to nonresponsive suppliers through emails and phone calls.

Proactive due diligence can strengthen your supply chain

Identifying and addressing forced labor in your supply chain requires a proactive, multifaceted approach. By leveraging modern detection tools and technologies and partnering with an advanced supply chain mapping provider, businesses can establish a due diligence process that keeps them in compliance with legal and ethical sourcing practices.

To learn more about Sourcemap’s capabilities and how they can help your business, get in touch.