We are entering a new era of penalty, forfeiture and seizure of goods produced with the use of modern slavery across the world. Business models are about to change by necessity. Cheap is no longer cheerful. Are these risks featuring in your corporate risk assessment? Can you quantify the potential impact? How wouldyou mitigate this risk? What can you do? – 5 min read.    

Global action to address and eradicate Modern Slavery and Forced Labour in companies’ supply chains is rapidly gaining speed. Governments are increasingly implementing the United Nations Guiding Principles on Human Rights and Business.

Countries are getting deadly serious.  The red highlights represent mandatory hard law whilst the yellow highlights represent guidance documents or laws that are currently in consideration or are hard law yet to be passed. As you can see, so much has developed in a short time and whilst guidelines and legislation tend to commence as ‘toothless tigers’, the imposition of penalties and non-compliance measures are on the rise… Australia’s Modern Slavery Act is growing teeth and soon. Amendments to the Customs Act are expected to pass when parliament resumesin the new year, which will allow for the seizure of goods, similar to the Brightway case in the US.

Current Review of Australia’s Modern Slavery Act

As promised at the outset, a review of the Modern Slavery Act is underway to identify, after a soft start, how to drive home its intentions. Doing a skeletal and shallow risk-based assessment and writing a modern slavery statement with little to back it up has always been a risky strategy. If I was the ACCC, I would be starting with the modern slavery register in my new prohibition of greenwashing agenda. However, if the election policy of the recently elected labour party is implemented as expected, major changes are on the horizon which are said to involve:

1. Lowering of the reporting threshold below turnover of $100M per annum to catch more companies;
2. Actual due diligence to be conducted by companies;
3. Introduction of penalties for non-compliance, in addition to the powers of seizure that are in parliament right now.

The passage of the Autonomous Sanctions Amendment (Magnitsky-style and Other Thematic Sanctions) Act 2021 in December 2021 could provide a basis for these kinds of sanctions in the future as it established thematic sanctions regimes in relation to serious violations or serious abuses of human rights. The associated Regulations allow the Minister for Foreign Affairs to impose targeted financial sanctions on persons/entities that have been engaged in, responsible for, or complicit in serious violations or abuses of three human rights relating to physical integrity [rights to life; not to be subjected to torture or cruel, inhuman or degrading treatment or punishment; and to be free from slavery, servitude or forced or compulsory labour].

And the teeth are showing: Australia’s New Customs Amendment Bill 2022 and seizure of goods

The Customs Amendment (Banning Goods Produced by Forced Labour) Bill 2022 was introduced in the Senate on 22 November 2022. This will act to introduce a prohibition into the Customs Act which reads:

The importation into Australia of goods produced or manufactured, in whole or in part, through the use of forced labour (within the meaning of the Criminal Code) is prohibited absolutely.

As goods produced through the use of forced labour would be defined as ‘prohibited imports’, Customs will be given the power to require the surrender or seizure of these goods and penalties of up to 2,500 penalty units or 10 years imprisonment, or both, could be imposed.

And the rest of the world is doing similar things…

Abandoning a ‘soft law’ approach is not just taking place in Australia but can be seen developing all over the world:

Country	Approach
	In the USA, where reasonable evidence of forced labour in the production or manufacturing of goods imported into the country exists, these goods can be stopped from hitting the docks and where an actual finding exists… they will be detained. In the fourth quarter of 2021 over 900 shipments were detained.
	The European Union followed the USA’s approach in June of this year and in September issued a legislative proposal to prohibit products made with forced labour anywhere in the supply chain from entering the EU market and that, if a violation was established, the affected product would be disposed of.
	New Zealand released a draft Modern Slavery Act in April of this year which effectively skips the ‘soft-launch’ approach taken in Australia and implements penalties for non-compliance as soon as the Act comes into effect.
	The New German Supply Chain Act will apply from January 2023 and requires companies to establish a risk management system to identify, prevent or minimise human rights violations that take place in their supply chain – failure to comply will come with administrative fines.

What does this mean for your business? It means that if you are operating globally you need to be very aware that conducting ineffective modern slavery due diligence or none at all is quickly becoming a poor business decision – beyond simply being a poor moral one.  

What do you need to do?

It has been reported that over 90% of Australian Businesses have identified potential slavery risks in their supply chains, but nearly 85% of 404 company statements submitted under the Modern Slavery Act failed to show any response to actual or alleged slavery in supply chains. This simply will not be able to continue once these laws are passed.

Your company:

1. must understand its supply chain on a deeper level;
2. must conduct a risk assessment based on factors from reliable sources;
3. must map the supply chain, physically monitor it, and know exactly where each element of its products has come from; and
4. must be confident in the extent to which it has investigated each supply chain and be able to defend its efforts.

Gone are the days of grandiose statements of efforts being undertaken with little to back them up. The risk in not taking these actions is becoming dangerous to ignore. The legislative framework is shifting, and your company must shift with it.

If you need assistance in identifying the risk and conducting due diligence on your company’s supply chain, get in touch. natalie@hikarisolutions.com.au