New Labor Legislation Set to Impact Global Supply Chains
On February 24th, President Obama signed into law the Trade Facilitation and Trade Enforcement Act of 2015.
The legislation prohibits the importation of goods produced by forced labor or child labor, closing an 86 year-old loophole and authorizing U.S. Customs and Border Protection to seize imports suspected of being produced by forced labor.
The International Labor Organization, a UN agency, estimates forced labor fuels $51 billion a year in profits in international trade and that more than 14 million people worldwide work as a result of force, fraud, or deception in homes, factories, mines, and farms.
“If the U.S. government works to really keep out goods made with forced labor, this change will have a profound ripple effect on supply chains worldwide,” said David Abramowitz, vice president of Humanity United and a major advocate of the act.
A report released today by Resilinc, a provider of supply chain and risk management intelligence and analytics, concurs that forced labor produced goods are common across industries, and the new law has the potential to significantly impact global trade. Specifically, the report finds that forced labor hidden in the supply chain presents a three-pronged risk to companies, regardless of industry or company size. These include business continuity risk, brand and reputation risk, and compliance and legal risk.
“Companies may be inadvertently linked to sub-tier suppliers that may engage in unethical, and now, purely illegal, business practices,” said Neil Shenoi, the lead analyst and primary author of the report. “Clean companies may still be at risk due to increased scrutiny of U.S. imports and newly implemented import regulations. Regardless, the new law will inadvertently require companies to achieve a greater degree of supply chain visibility to assure both the government and the public at large that forced labor has no role in their supply chains.”
The report concludes that it is critically important not to think about supply chain risks in isolation.
“Companies need to think strategically about supply chain risks in the context of the broader array of risks that they face every day,” said Shenoi. “Supply chain risks should be addressed as part of a comprehensive resiliency strategy and not a one-off risk mitigation exercise. This is because the processes associated with risk mitigation and the treatment options available are common across a wide variety of risk types.”