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Questions Remain About Enforcement of EU Forced Labor Rules, Panelists Say

The auto industry is grappling with a range of questions about how the EU’s upcoming forced labor-related rules will affect their supply chains, especially for individual car components, an auto industry official and lawyer said this week.

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The EU reached a deal earlier this month on a new set of rules to ban imports suspected of being made with forced labor, outlining how the bloc will investigate possible violations, penalize violators and more (see 2403050035). But Tom Plotkin, an environment, social and governance compliance lawyer with Covington & Burling, said questions still remain on how the ban will be enforced. He said industry is awaiting government guidance to better understand "what they need to look for in order to comply.”

"This is a major disruption and puts a lot of urgency and pressure on companies to try to identify and mitigate these issues before they find themselves in an enforcement posture," Plotkin said during a webinar hosted by Lexology and PricewaterhouseCoopers.

Roberto Berry, Stellantis vice president of compliance, said the auto industry has questions about the steps it’s required to take if just a single component of a car is determined to be made with forced labor. He said the industry is relatively new to forced labor due diligence, and companies that don’t yet have compliance procedures should start putting them in place. Auto companies should be prepared to provide documentation of their compliance efforts if they are subject to a detention action, Berry said.

Plotkin said the EU forced labor law is expected to be formally adopted soon, but he noted that countries will have time to figure out enforcement. The rules will take effect three years after being published in the Official Journal of the EU.

Stellantis is focusing its compliance efforts on speaking with its direct suppliers and asking them to produce information about the tier two suppliers, Berry said. He also said the company tried to use artificial intelligence with "various service providers" to help its compliance efforts, but said it wasn't ready to provide Stellantis with the information needed.

Stellantis took a supply chain, "ran it through the AI filter, and we just did not get the quality feedback that we needed to get. So for the moment, that put AI on pause," Berry said. "No doubt it'll continue to evolve and improve," and then, he said, Stellantis "probably will return to that."

The car company also is exploring new organizations that offer supply chain mapping services, Berry said. These services can input supply chain information from a foreign supplier and provide it to "a variety of entities that purchase from that supplier," he said. That supplier is then incentivized to provide information about their products "because they will only have to do it once as opposed to numerous times with different purchasers," he said.

Berry also pointed to isotopic testing, a method used by CBP to identify cotton linked to forced labor in Xinjiang (see 2401220005). But he noted that testing is best for organic matter used in the textile industry and is more difficult to do for metal or plastic products. He said he looks forward to the day there is a "scientific solution" for isotopic testing of metal and plastic products for cars.