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Let\u2019s imagine this. A European importer asks its supplier about its upstream suppliers. The importer wants to know where the raw material came from, who produced it, where the production took place, and whether any forced labour was involved. The supplier refuses to answer.<\/p>\n
The supplier may give excuses such as commercial confidentiality, its suppliers refusing to provide the information, or local laws restricting foreign companies from carrying out investigations.<\/p>\n
What can the European importer do? This could be the most difficult issue under the EU Forced Labour Regulation (EU-FLR). The Regulation prohibits products made using forced labour from entering or remaining on the EU market, but the importer cannot investigate what it cannot see.<\/p>\n
The EU-FLR requires companies to understand the risks in their supply chains. What happens when another country\u2019s laws, suppliers, or business practices make this difficult or impossible?<\/p>\n
We need to bear in mind that refusal does not mean that there is proof of forced labour. There could be valid reasons for not providing the information. Maybe it is due to contractual commitments or because the supplier does not have the information. Another reason could be that foreign laws make social audits, questionnaires, site visits, or information requests difficult to carry out.<\/p>\n
This puts the European company between two legal environments. The EU expects supply chain due diligence, while the supplier\u2019s country may restrict or prohibit these activities.<\/p>\n
The big question is not whether the supplier refuses to cooperate. It is why the supplier refuses, what information is missing, and how the company handles potential risks that it cannot see.<\/p>\n
There could be a supplier who is willing to cooperate but cannot do so because of the law. China is a good example. It has introduced a measure that restricts certain forms of foreign supply chain investigation or information gathering, which could include questionnaires, social audits, site visits, or information requests.<\/p>\n
When this happens, a new question arises. Who bears the risk when two legal systems are involved? The European company could be at risk for importing products potentially made using forced labour, while the supplier could be at risk of breaking local law by cooperating with the European company. What should happen next?<\/p>\n
Will the EU authority treat the company\u2019s supply chain due diligence efforts as having done what it could reasonably do in such circumstances? Or will this lead to greater scrutiny? The EU authority will have to operate in this difficult situation.<\/p>\n
The restriction is not limited to suppliers. It may cover a wider ecosystem that includes auditors, certification bodies, NGOs, data providers, traceability platforms, and other specialists. If they face restrictions, it will be very difficult for European companies to obtain independent evidence.<\/p>\n
Here are a few possible responses.<\/p>\n
Continue Sourcing and Document the Limitation<\/strong><\/p>\n There could be a situation where a company decides that the risk is manageable even though some information is missing. If so, the company should document:<\/p>\n The main objective is to show that the company does not accept the information gap without questioning it.<\/p>\n Seek Alternative Evidence<\/strong><\/p>\n If a supplier is unable to provide one form of evidence, the company should seek another form of evidence.<\/p>\n For example, it might consider:<\/p>\n By gathering information from several sources, the company could obtain a more credible picture than by relying on just one form of evidence.<\/p>\n Increase Monitoring<\/strong><\/p>\n If a company decides that a supplier can remain in the supply chain, it should increase its monitoring by carrying out more reviews, imposing additional contractual requirements, and enhancing traceability. This is appropriate if the risk is more significant but manageable.<\/p>\n If the evidence gap is simply too large, the company should consider changing its source. Engaging with a supplier that supplies high-risk products or raw materials while being unable to assess the risk is too risky.<\/p>\n When a supplier refuses to cooperate, it does not mean that forced labour was involved in the production. It also does not mean that European companies can ignore the problem. The burden is on companies to understand why the information is not available, what the risks are, and whether there is an alternative way to obtain the information.<\/p>\n It is crucial for companies to document their findings to show the authority the efforts they made to identify whether any form of forced labour took place in the production of the goods. They must also show that action was taken where necessary. Where local laws come into play, there are limitations on what a company can do. Therefore, when a company cannot obtain enough information to assess the risk, continuing to use the supplier could be too risky.<\/p>\n Under the EU-FLR, the challenge is not about getting the supplier to cooperate; it is about how companies are going to meet their obligations when information cannot be obtained. The EU authorities must consider this aspect when assessing companies.<\/p>\n Trustnet.Trade helps you close critical sanctions compliance gaps by going far beyond basic name screening. With instant KYB and UBO checks, real-time monitoring, and global sanctions screening including AMS and PEP, Trustnet.Trade helps you identify indirect ownership risks. Its automated alerts, visual ownership mapping, and compliance widgets give you continuous monitoring and transparency. Combined with risk-based questionnaires, and whistleblower modules, it keeps companies of any size up to date with evolving regulations, preventing reputational and financial risks from escalating into significant problems.<\/p>\n","protected":false},"excerpt":{"rendered":" Let\u2019s imagine this. A European importer asks its supplier about its upstream suppliers. The importer wants to know where the raw material came from, who produced it, where the production took place, and whether any forced labour was involved. The supplier refuses to answer. The supplier may give excuses such as commercial confidentiality, its suppliers […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-9083","post","type-post","status-publish","format-standard","hentry","category-uncategorised"],"yoast_head":"\n\n
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Change the Source<\/h2>\n
No Information, No Easy Answer<\/h2>\n
How Can Trustnet.Trade Help<\/strong><\/h2>\n