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7 Oct 2020

Phil Bloomer, Executive Director

Europe’s new law to end corporate abuse should learn from Obama's legacy

Last week saw the announcement of one of the biggest-ever paybacks to migrant workers the world has ever seen. Kossan Rubber Industries announced they will re-pay €10mn (RM50mn) of recruitment fees over the next 18 months to migrant workers locked in debt-bondage. This, and similar unprecedented pay-outs to some of the world’s most vulnerable workers, may be more than mere coincidence with newly assertive action by the US Customs and Border Patrol (CBP) to impound suspect goods at port. The CBP is acting under a form of due diligence law – Section 307 of the US Tariff Act – which can prevent imports from companies suspected of using forced labour until they can demonstrate otherwise. This was made effective by President Obama who closed glaring loopholes which had previously made it ineffective.

As the pandemic continues to destroy worker’s jobs worldwide, millions more desperate people are vulnerable to the predations of recruitment agencies. They seek migrant workers for cheap labour in the global supply chains of food, phones and clothes bound for the lucrative markets of Europe and North America.

To expunge this kind of egregious abuse of workers and communities from European supply chains, the European Commissioner for Justice, Didier Reynders, has promised new legislation next year. This will insist companies act to prevent human rights abuse, such as forced labour, in their operations and supply chains (‘human rights due diligence’) or face liability when things go wrong. The potential power of this broad legal initiative is huge and it has gained much support, including from business. But equally, there are many vested interests that issue dark warnings about the ‘cost-to-business’ and seek to eviscerate the legislation by promoting a toothless law.

For those in Europe seeking evidence that robust due diligence laws work both to end abuse in business and promote prevention, there are powerful lessons to learn from the new assertiveness of the Forced Labour Division of the Customs and Border Patrol (CBP).

Firstly, with legal ‘teeth’ to impose real costs to reckless business, it does not need many legal precedents to drive change. In the last 12 months, the CBP has issued just 13 ‘Withhold Release Orders’ (WROs) on imported goods (effectively impounding goods at port, though the company can re-export them). But this is up from just two WROs in 2018.

Secondly, the financial losses can stimulate rapid company remedy. For instance, On 15 July, CBP issued a WRO to stop imports of rubber gloves produced by two subsidiaries of Top Glove of Malaysia, the world’s largest manufacturer. Corporate Accountability Lab in the US reports that “by early August…Top Glove started to state publicly that it would remediate recruitment fees – as much as $12.65 million (53 million ringgit) to be paid to 10,000 workers – and would improve workers’ accommodations. (The amount actually owed to workers could be higher. Andy Hall, a migrant workers’ rights advocate, estimates that Top Glove owes its workers closer to $100 million.)”

Thirdly, the stimulus to move away from corporate abuse is not only felt in the company affected, but may generate rapid ‘anticipatory’ reform and remediation from competitors across the sector. The announcement by Kossan Rubber Industries came a day after the US banned imports of palm oil from FGV Holdings Bhd, following into an investigation into allegations it uses forced labour, and only six weeks after CBP’s prohibition on Top Glove’s subsidiaries.

Finally, Corporate Accountability Lab, which has helped lead civil society action on Section 307, highlights vital lessons which would ensure the emancipatory power of legal action is achieved and perverse outcomes from WROs are avoided, such as mass lay-offs of already-vulnerable migrant workers leaving them stranded and destitute in a foreign land.

Lest we forget, Andy Hall reminds us that “such [a] long repayment period [18 months] decided upon by Kossan can but prolong debt bondage of its…workers” and that “the 4,000-plus migrant worker recipients of this reimbursement are, however, just a minority of an estimated 45,000 foreign workers that continue to toil in debt bondage and at high risk of forced labour in the Malaysian rubber glove industry.”

The US Tariff Act is not the equivalent of the legislation planned for the EU, which should be much broader in scope than forced labour, and with more far-reaching consequences for reckless companies which tolerate abuse in Europe or outside the internal market. Nevertheless, the Tariff Act has important insights for Europe’s efforts to successfully wipe out the worst of abuse attached to the food in our cupboards, the clothes in our wardrobes and the phones in our pockets.

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