Kharon compliance experts break down the EU Forced Labour Regulation after European Commission publishes guidance

Regulators around the world are cracking down on forced labour activity within global supply chains. In the US, the Uyghur Forced Labor Prevention Act (ULFPA) – passed into law in 2021 – targeted goods coming out of China's Xinjiang province, an area well known for forced labour practises. Forced labour was even cited by the White House as the reason for the latest round of US global tariffs, although critics have speculated this was just the latest legal instrument used to impose global tariffs since the US Supreme Court ruled the International Emergency Economic Powers Act (IEEPA) does not allow a president to impose such measures.

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In Europe, it is through the EU Forced Labour Regulation (EUFLR) that the trade bloc is addressing the presence of forced labour in the supply chains of goods that enter the EU. First adopted in November 2024, the EUFLR will be enforced from December 14, 2027 – when the regulation becomes applicable.

Towards the end of June this year, the EU reached a milestone in the EUFLR's implementation roadmap when it published its official EUFLR implementation guidelines and launched its its Forced Labour Single Portal. After Ethan Woolley, global director of strategy at compliance and supply chain risk management platform Kharon, delivered a presentation comparing the US and the EU's approach to forced labour regulation at the European Association of Automotive Suppliers' (CLEPA) Materials, Regulations and Sustainability Event in May, Automotive Logistics caught up with experts at Kharon to get their perspective on what the guidelines have revealed about the EUFLR's implementation and what this might mean for automotive supply chains.

Automotive Logistics: What does the now-published EUFLR guidance reveal about how regulators are likely to enforce the EU Forced Labour Regulation in practice?

Ethan Woolley, global director of strategy at compliance, Kharon: Enforcement follows a risk-based, two-phase investigative process: authorities first conduct a preliminary assessment to determine whether there is a substantiated concern, to prioritise (based on the scale and severity of the suspected forced labour, the volume of the affected products on the EU market, and the share of the part suspected of being made with forced labour in the final product). If those concerns remain, authorities will open a formal investigation. But the mechanics that matter most for automotive companies are what happens once a violation is actually established.

Once authorities conclude that a product has been made wholly or in part with forced labour, they must adopt a decision prohibiting the product from being placed or made available on the EU market or exported from the EU. Authorities will also order the product’s withdrawal and, unless it is of strategic or critical importance to the EU, to dispose of it. Crucially, the prohibition applies to every operator dealing in that product, not only the one investigated, and compliance deadlines are short: at least 30 working days for non-perishable goods and 10 working days for perishable goods.

Enforcement then runs on two tracks: within the EU market, competent and market surveillance authorities oversee withdrawal and disposal; at the border, customs authorities must suspend, and ultimately refuse entry or export of, any shipment covered by a decision.

Importantly, the regulation’s penalties relate primarily to non-compliance with an authority’s decision – such as continuing to market a banned product, failing to withdraw or dispose of it or failing to withhold products subject to a strategic-importance withholding order. Member states must establish a mechanism and notify the European Commission of their national penalty regimes by 14 December, 2026.

Automotive Logistics: What, in your opinion, are the biggest surprises in the EUFLR guidance?

Woolley: Perhaps the biggest surprise is the operational mandates of the EU’s guidelines. Rather than focus primarily on legal principles, they provide a detailed roadmap of the evidence that authorities may request – from supply chain maps and chain-of-custody records to ownership information, logistics documentation and transactional data.

Another notable point is the emphasis on traceability. Although the regulation does not mandate supply chain mapping, the guidelines make clear that companies should expect to demonstrate how products and raw materials move through their supply chains.

Finally, the guidelines reinforce that enforcement will be intelligence-led and risk-based rather than random. Authorities are encouraged to prioritise the most serious cases, particularly those involving widespread or state-imposed forced labour.

Automotive Logistics: Are there any areas of uncertainty surrounding the EUFLR that the guidance failed to sufficiently clarify?

Woolley: The guidelines confirm that due diligence remains voluntary, with the Organisation for Economic Co-operation and Development's (OECD) six-step framework offered only as a reference point. The uncertainty comes from what sits alongside it: several other EU laws impose mandatory due diligence covering forced labour risk, each with its own scope and timing (CSDDD, Batteries Regulation, Conflict Minerals Regulation etc).

The guidelines say that compliance with these other regimes can help showcase efforts to comply with the forced labour ban, but they stop short of saying how much due diligence is enough, or how findings under one regime should be weighed in an EUFLR investigation.

Automotive Logistics: As you referenced earlier, although the regulation doesn't explicitly require supply chain mapping, the guidance places considerable emphasis on traceability – how valuable is supply chain mapping in practice, and should companies see it as more than just a compliance exercise?

Alberto Ballesteros, manager of global outreach for EMEA at Kharon: While the regulation doesn’t mandate supply chain mapping, the guidelines make it one of the practical differences between an operator that can defend its products and one that can’t. During an investigation, authorities may request a full description of the supply chain, chain-of-custody documentation linking the finished product to its raw-material source, and supply chain maps covering tiers, sub-tiers, and both direct and indirect suppliers.

The stakes are raised by the non-cooperation rule: if a company can’t produce this information, or refuses to, the guidelines state that non-cooperation constitutes evidence in principle, and, combined with other indirect and circumstantial evidence, can be enough to establish a violation.

All in all, the practical reality is that companies unable to demonstrate where high-risk goods originate, or how they assessed and addressed those risks – may find it significantly more challenging to rebut a substantiated forced labour exposure concern during an investigation. In that sense, supply chain risk management then increasingly becomes a business resilience tool rather than a compliance exercise.

Automotive Logistics: What role will logistics providers, freight forwarders and customs data play in EUFLR compliance?

Ballesteros: Logistics data plays a dual role: it’s both a category of evidence authorities can request during an investigation and the mechanism through which decisions are physically enforced at the border.

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As evidence, the guidelines list shipping and transport documentation (bills of lading, manifests), purchase orders, invoices, packing lists and import/export records among the “transactional and logistics records” authorities may request, alongside information gathered via trade, customs and shipping data more broadly. Investigators may also draw on “desktop research and open-source analysis”, including on the “corporate ownership of relevant entities” to corroborate what those transactional and logistics records show.

On enforcement, customs authorities are responsible for identifying, at the border, products covered by a ban-violation decision using the Union Customs Code’s risk management procedures; they must suspend the release of a suspect shipment, and ultimately refuse and dispose of it once the ban is confirmed.

Freight forwarders and logistics providers aren’t directly liable under the regulation, but the transparency of their records (chain-of-custody certificates, storage locations, shipping documentation) will often determine how quickly a company can substantiate or rebut a suspicion if it faces an investigation.

Automotive Logistics: Looking ahead to December 2027, what do you think regulators are most likely to focus on in the first wave of enforcement?

Ballesteros: The European Commission's forced labour risk database is meant to flag "widespread and severe" risks by product and geography, drawing on International Labour Organization (ILO) data and independent research. However, as of now, the database is still listed as "in development," well past the regulation's original mid-2026 target, so the initial focus areas aren't locked in yet. 

That said, the guidelines suggest regulators will initially focus on cases combining scale and severity. Products linked to state-imposed forced labour are likely to receive particular scrutiny given the guidelines’ recognition that such cases often involve large-scale and severe abuses. Allegations of forced labour submitted to the EU will also drive investigations.