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An introduction to modern slavery and human trafficking

The emergence of modern slavery and human trafficking concerns as essential elements of overall environmental, social and governance (“ESG”) considerations is a relatively recent phenomenon. Precipitated in large measure by an reinvigorated international focus on human right abuses, modern slavery and human trafficking prohibitions have their genesis in the Protocol to the UN Convention Against Transnational Organized Crime (“Palermo Convention”), which is widely recognized as containing the first definition of human trafficking.

Adopted by the UN General Assembly in November 2000, the Palermo Convention contained a specific “Protocol to Prevent, Suppress, and Punish Trafficking in Persons,” (“TIP Protocol”) particularly in relation to women and children. Under Article 2 of the TIP Protocol, UN Member States are broadly obliged to prevent and combat trafficking of persons, protect and support victims of human trafficking, and coordinate with other Member States to align efforts to accomplish these objectives. Article 3 of the TIP Protocol specifically defines human trafficking as the “act of recruit[ing], transport[ing], transfer[ing], harboring, or receiving persons … by means of the threat or use of force or other forms of coercion … abduction … fraud … deception … [or] abuse of power … or the giving or receiving of payments or benefits to achieve the consent of a person having control over another person … for the purpose of exploitation … including prostitution or other forms of sexual exploitation, forced labor or services, slavery or practices similar to slavery, servitude or the removal of organs.” In addition to criminalizing human trafficking and modern slavery, Article 6 of the TIP Protocol broadly requires Member States to furnish active assistance to victims of exploitation in the form of legal protection, psychological and physiological recovery aid, assurance of physical security, and the ability to seek monetary damages from the perpetrators of the underlying offense.

Subsequent to the ratification of the Palermo Convention, a number of transnational governmental organizations adopted their own voluntary frameworks respecting human trafficking and modern slavery concerns. These regimes consist chiefly of the Council of Europe Convention on Action Against Trafficking in Human Beings (2005), and European Union (“EU”) Directive 2011/36 on Preventing and Combatting Trafficking in Human Beings and Protecting its Victims.

From voluntary to mandatory: the UK Modern Slavery Act

By far the most consequential development in the human trafficking and modern slavery space was the enactment of the UK Modern Slavery Act (“MSA”), which received Royal Assent on 26 March 2015 following passage by both houses of the Westminster Parliament. Unlike the voluntary frameworks promulgated by international organizations, the MSA is compulsory with respect to its requirements. Among other things, the MSA expressly criminalizes the offenses of slavery or servitude, forced or compulsory labor, human trafficking, and committing an offense with the intent to commit human trafficking. The commitment of an offense with the intent to commit human trafficking generally includes any efforts to aid, abet, counsel or otherwise procure a human trafficking offense.

Criminal penalties for violation of the MSA’s slavery, servitude and forced or compulsory labor provisions—MSA section 1 and 2 offenses—can be severe. Pursuant to section 5(1) of the MSA, a person convicted of any of these offenses is liable to imprisonment for life if convicted on indictment, or for imprisonment for a term not exceeding 12 months on summary conviction. Conversely, conviction of a human trafficking offense in contravention of MSA section 4 exposes a person to the potential for a term of incarceration not to exceed 10 years if convicted on indictment and 12 months on summary conviction.

Most significant for commercial organizations is the MSA’s requirement that any entities that conduct business in the UK and that have an annual turnover of £36 million or more prepare and publish a slavery and human trafficking statement on an annual basis. While the MSA imposes no requirement with respect to the overall structure or content of such statements, in 2017, the UK’s Home Office promulgated industry guidance that contains a number of useful points to consider when authoring the required statement. While the Home Office guidance emphasizes that the list of considerations is not exhaustive, section 5.2 provides a general framework for reporting organizations to utilize in connection with their obligations. This framework includes: (a) information concerning the organization’s structure, its operations and its supply chains; (b) the organization’s policies in relation to slavery and human trafficking; (c) a description of its due diligence processes in relation to slavery and human trafficking in its supply chains; (d) identification of the parts of its business and supply chains where there is a notable risk of slavery and human trafficking activity taking place and the steps the organization has taken to manage that risk; (e) an assessment of the organization’s overall effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains (measured against performance indicators it considers appropriate); and (f) an overview of the organization’s training and capacity building concerning human trafficking that is made available to its staff. A suggested format for utilization by an organization in connection with its annual reporting responsibilities is contained in Annex E to the Home Office guidance.

Two additional critical components relevant to the reporting process are: (1) the MSA’s requirement that each annual slavery and human trafficking statement be approved and signed by an appropriate senior person in the business; and (2) that the statement be publicly disseminated. According to the Home Office, the former component of the MSA is intended to ensure “senior level accountability” as well as leadership and responsibility for implementation of measures designed to prevent slavery and human trafficking from occurring in the first instance. But the compilation of annual statements alone is insufficient to satisfy an organization’s MSA obligations. As the Home Office guidance emphasizes, senior management officials are charged with leading and driving operational measures required to address the root cause of exploitation throughout the business. Finally, the MSA is specific in requiring that an organization’s annual slavery and human trafficking statement be published to its website with a link to the statement placed in a prominent position on its homepage. Commercial enterprises with complex structures are encouraged to place the statement on the “most appropriate website relating to the organization’s business in the UK.” Where there is more than one relevant UK-facing website, the Home Office recommends that the statement be placed on each such website.

Notably, however, there are no criminal penalties for failing to publish an annual slavery and human trafficking statement. Pursuant to MSA section 54(11), the Secretary of State may enforce the duty to prepare and publish the statement by means of an injunction or specific performance of a statutory duty. An organization that fails to comply with the terms of the injunction is liable for contempt of a court order and may be subject to an unlimited fine. The lack of specific reporting requirements, criminal penalties for non-compliant organizations, and proactive support for victims of human trafficking and compulsory labor have caused HM Government to announce its intent to modernize the MSA with the introduction of a new Modern Slavery Bill on the occasion of the Queen’s Speech delivered on 10 May 2022. Among other things, the Government contends that the new bill would mandate specific reporting areas to be covered in modern slavery statements published by reporting organizations, and enshrine in domestic law, the Government’s internationally-recognized obligation to victims of modern slavery, including their rights to assistance and support.

Modern slavery developments in the United States

Unlike its overseas counterpart, the United States lacks a single statutory or legislative framework that addresses modern slavery and human trafficking. While a multitude of offenses typically synonymous with compulsory labor and human trafficking are criminalized by virtue of their inclusion in the U.S. Criminal Code (otherwise known as “Title 18”), the United States does not currently require businesses to report on the status of efforts taken to detect and prevent human rights abuses from occurring in their operations or supply chains.

Nonetheless, in December 2021, the Congress enacted—and President Joseph R. Biden, Jr. signed—the Uyghur Forced Labor Prevention Act (“UFLPA”), a federal law that marks a sea change in U.S. foreign policy with respect to human rights abuses occurring in China’s semi-autonomous Xinjiang Uyghur region. The UFLPA targets modern slavery in Xinjiang by creating a presumption—albeit rebuttable—that all goods mined, produced, or manufactured wholly or in part in Xinjiang are made with forced labor. To that end, the Act requires U.S. Customs and Border Protection (“CBP”) to identify, detain, exclude, and/or seize shipments that violate its forced labor prohibitions. The Act further empowers the federal Forced Labor Enforcement Task Force (“FLETF”) spearheaded by the U.S. Department of Homeland Security (“DHS”) to designate specific entities for inclusion on the UFLPA List—a list of entities in Xinjiang known by the U.S. government to rely on forced labor for productive outputs, that coordinate with such entities, or that source material from the Xinjiang region.

In the context of operational guidance released last year, CBP has emphasized that United States-based importers are charged with knowledge of the substantive prohibitions of the UFLPA and familiarity with procedures required to overcome the Act’s rebuttable presumption by clear and convincing evidence. Among other things, the operational guidance requires prospective importers to maintain a comprehensive system of due diligence, supply chain tracing information, and overall supply chain management measures. The most essential components of the required importer due diligence are a comprehensive mapping exercise that involves the assessment of forced labor risks from raw materials to production of imported goods, along with the adoption and enforcement of a supplier code of conduct, and ongoing training of an importer’s employees with respect to UFLPA compliance. Under the rubric of supply chain tracing information, an importer is required to maintain a detailed description of the totality of its supply chain including the tracing of imported merchandise and all components thereof for all stages of mining, production or manufacture and affidavits from each company or entity involved in the production process. The maintenance of this information is critical to satisfying CBP that goods sourced from Xinjiang were not made with forced labor. As such, importers are specifically encouraged to keep purchase orders, invoices, packing lists, bills of materials, certificates of origin, payment and inventory records on file when dealing with an entity based in Xinjiang. Finally, with respect to supply chain management, CBP’s operational guidance stresses that organizations must demonstrate the implementation of effective internal controls to prevent or mitigate an organization’s overall forced labor risk.

The degree to which the UFLPA is effective in preventing exploitation of minority populations in the Xinjiang region will largely determine whether the United States adopts a more comprehensive approach to combating forced labor and human trafficking on a broader basis. As such, organizations are encouraged to follow the guidelines issued by CBP and its task force partners as a best practice for assessing forced labor risks throughout their international supply chains-—as opposed to China only.

The bottom line for organizations

The proliferation of legislation and regulation concentrated squarely on modern slavery and human trafficking should guide trade and compliance practitioners to implement industry best practices to detect, prevent and/or mitigate the risk that their products are produced in whole or partial reliance on servitude of any kind. These measures include, but are not limited to, comprehensive due diligence of all vendors, suppliers, and raw materials providers; regular screening of contractual counterparties in regions known to pose an elevated forced labor risk against international governmental watch lists and sanctions lists; and a strategic assessment of whether the risk of doing business with suspected modern slavery perpetrators is outweighed by any pecuniary benefit an organization receives in the first place.