Slave-Free Business Certification Act

Legal Alert

September 14, 2020

On July 1, 2020, the State Department issued new guidance on the alleged use of Uyghur forced labor in China.[1] This guidance comes in light of the increasing awareness that American companies, either knowingly or unknowingly, use forced labor in their supply chains. But the risks of forced labor use, including legal, ethical, and financial concerns, are not exclusive to supply chains flowing through China—countries in Central Asia, Africa, and the Middle East also allegedly use forced labor in export industries.[2]

In response to these global risks, Sen. Josh Hawley has introduced the Slave-Free Business Certification Act (the “Act”). If enacted, the Act will impose new audit and reporting requirements on business entities with world-wide gross receipts of at least $500 million (“Covered Business Entities”).[3]

What is the Slave-Free Business Certification Act?

The Act is the latest US attempt to regulate forced labor and trafficking in international supply chains. Under the Act, Covered Business Entities will need to audit their supply chains and “investigate the presence or use of forced labor” through, among other things, interviews with workers and reviews of documents such as employment agreements (the “Audit”). After completing the Audit, Covered Business Entities will be required to submit a report to the Department of Labor identifying any suspected or actual use of forced labor. The Covered Business Entity’s CEO will also be required to certify that the company has either found no instances of forced labor or reported all such known instances in said report.

How Will the Slave-Free Business Certification Act affect my business?

Though the Act is unlikely to pass during this term, its introduction indicates a possible coalition forming between Republicans concerned about trafficking and Democrats concerned about human rights abuses. The Act is also a sign of increasing social pressure on businesses to ensure their supply chains not only comply with domestic and international law, but also reflect modern values about international labor. Moving forward, businesses can mitigate these legal, reputational, and ethical risks by purchasing goods manufactured in counties, such as the United States, that enforce labor standards and good business practices.

If you need help questions concerning opening or expanding a domestic manufacturing facility, or have questions concerning onshoring your supply chain, the attorneys at Smith, Gambrell & Russell, LLP have the experience to assist with your business’s needs.

[1] More information is available at: https://www.state.gov/xinjiang-supply-chain-business-advisory/

[2] For more, see https://www.antislavery.org/slavery-today/slavery-in-global-supply-chains/

[3] A copy of the Act is available at: https://www.congress.gov/bill/116th-congress/senate-bill/4241/text.