By: Amy Rhoades
The International Labor Organization and World Bank estimate that more than 168 million children are engaged in child labor around the world.[1] To help tackle this insidious practice, the Netherlands adopted the Child Labor Due Diligence Act (“Act”), which creates a duty of care for companies selling goods within the Netherlands to research their supply chain sources and begin establishing action plans to remove child labor when found.[2] The Act promotes corporate compliance by requiring in-depth research practices, submitting detailed disclosure statements, and imposing both monetary fines and criminal penalties for violations.[3]
Under the new law, companies selling goods within the Netherlands will be required to submit a disclosure statement indicating the due diligence measures taken.[4] By requiring companies to research and identify child labor within their supply chains, the Act places responsibilities on companies to prevent goods sourced from child labor from entering Dutch market.[5] Unlike measures taken by other European countries, the Act requires companies to submit disclosure reports that “categorically affirm child labor inputs are not part of its supply chain.”[6] Furthermore, if a company determines that child labor occurs within its supply chain, it must create an action plan to mitigate or prevent the risks of child labor.[7] Companies that fail to comply with the disclosure requirement are subject to a fine of €4,100, and companies with inadequate due diligence reports can face fines up to €750,000 or 10% of the companies’ annual turnover.[8] Moreover, executive directors of companies found to commit multiple offenses within a five-year period can face imprisonment of up to four years.[9]
Before taking effect in January 2020, the Act caused businesses in the cocoa industry to change course.[10] Accordingly, some countries, like Ghana and the Ivory Coast, began implementing minimum floor pricing to combat child labor.[11] Together, the countries produce 65% of the cocoa supply, with much of it travelling to the Netherlands as the world’s largest cocoa port.[12] This Act may provide a model for the United States and other Western countries to follow in tackling child labor by increasing transparency and requiring more in-depth disclosure reporting and strong financial penalties. Current U.S. legislation has failed to stop the use of child labor for cocoa imports.[13] In 2018, the United States imported more than $700 million in cocoa products from the Ivory Coast, with a substantial amount sourced from child labor.[14] In 2001, large U.S. chocolate companies pledged to eradicate child labor for sourcing cocoa; however, companies have failed to meet the pledge’s deadlines and have scaled back the pledge to only targeting a 70% reduction in child labor.[15] U.S. companies state that a critical factor in failing to end child labor is their inability to identify farms where the cocoa is sourced.[16] In 2019, the Washington Post reported U.S. chocolate companies could only trace a quarter to half of their global cocoa supply to known farms.[17]
Unlike the proactive Dutch law requiring companies to investigate and disclose information themselves, the United States actions to end child labor are reactive, relying on evidence from outside sources. Under federal law, Customs and Border Patrol (“CBP”) can issue a withhold release order to prevent goods made with forced child labor from entering the United States.[18] Absent a current order, a collection of human rights groups filed a petition with CBP in February 2020 to block the import of cocoa from the Ivory Coast unless companies can provide evidence showing products are not supplied through forced child labor.[19] The petition takes a similar mindset as the Dutch Act by requiring companies to hold the responsibility of researching and disclosing sourcing information for their supply chain. Today, it’s all but certain that U.S. companies will fail to meet the self-imposed deadline for eradicating child labor in cocoa production and will have to settle for incremental decreases in imports sourced from child labor as global corporations selling goods in the Netherlands adjust for the Act’s disclosure requirements.[20]
[1] See Hogan Lovells, Dutch Child Labour Due Diligence Law, JD Supra (July 8, 2019), https://www.jdsupra.com/legalnews/dutch-child-labour-due-diligence-law-45835/; see also International Labor Office, Marking Progress Against Child Labor: Global Estimates and Trends 2000-2012 4 (2013) (reporting a global trend in child labor decreasing to 168 million in 2012 but, even with previous progress rates, the report estimates more than 100 million child workers today).
[2] See Child Labor Due Diligence Act, Voorstel van wet 7 februari 2017, Stb. 2016-2017, 34 506; see also Gautam Naik, Dutch Raise the Bar in Chocolate Industry’s Fight Against Child Labor, S&P Glob. (Oct. 28, 2019), https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/53739456 (summarizing the Act and the effect it is beginning to have on suppliers and manufacturers use of child labor).
[3] See Hogan Lovells, supra note 1 (summarizing the requirements of the Act and penalties for failing to comply, including fines of up to 10% of company’s revenue for failing to comply with the due diligence requirements).
[4] Id.
[5] See id.; see also Joseph Wild-Ramsing, Going Dutch: Four Things You Should Know about the Netherlands’ New Law to Eliminate Child Labor, Bus. & Hum. Rts. Res. Ctr. Blog, https://www.business-humanrights.org/en/going-dutch-four-things-you-should-know-about-the-netherlands%E2%80%99-new-law-to-eliminate-child-labour (last visited on Mar. 29, 2020) (arguing that the Dutch law’s substantial enforcement measures provide a good stepping-stone to broader diligence legislation).
[6] See Isa Mirza, Pioneering Dutch Law Raises Global Standards for Eliminating Child Labor in Supply Chains: Understanding the Dimensions of Compliance, Corp. Soc. Resp. & L. (June 7, 2019), https://www.csrandthelaw.com/2019/06/07/pioneering-dutch-law-raises-global-standards-for-eliminating-child-labor-in-supply-chains-understanding-the-dimensions-of-compliance/.
[7] See Hogan Lovells, supra note 1 (reporting that companies are advised to begin discussions for action plans for suppliers to comply with the Act’s article 5(1), requiring companies to assess whether there is “reasonable suspicion” of child labor).
[8] See Mirza, supra note 6.
[9] See Lovells, supra note 1 (discussing penalties for companies that violate the Act’s article 5 requirements for taking due diligence measures).
[10] See Naik, supra note 2 (explaining the impact the Act is having on the chocolate industry by seeing countries setting minimum floor prices for cocoa for the first time in the summer of 2019).
[11] See id. (reporting that instead of accepting pricing set by buyers, Ghana and the Ivory Coast jointly proposed a minimum floor price of $2,600 for a ton of cocoa to combat the use of child labor by increasing revenue to farms to be able to hire adult workers).
[12] See id. (explaining the active role Dutch banking, shipping, and manufacturing industries play in trade of cocoa that flows through Amsterdam).
[13] See Letter from Sen. Sherrod Brown & Sen. Ron Wyden, to Kevin McAleenan, Acting Sec’y, Dep’t of Homeland Sec., (July 12, 2019) (on file with authors) (expressing concerns that the lack of action by corporations and CBP is permitting the ongoing importation of goods sourced by forced child labor and imploring CBP to utilize withhold release orders to prevent these cocoa goods from entering the United States).
[14] See id. (stating the United States imported $608 million of beans and $100 million of cocoa paste from the Ivory Coast in 2018).
[15] See Peter Whorsiskey & Rachel Siegel, Cocoa’s Child Labors, Wash. Post (June 5, 2019), https://www.washingtonpost.com/graphics/2019/business/hershey-nestle-mars-chocolate-child-labor-west-africa/ (critiquing top U.S. chocolate manufacturers for failing to meet the self-imposed pledge from 2001 to eradicate child labor sourcing of cocoa beans in West Africa).
[16] See id. (reporting that measures by U.S. companies to identify labor sources are inadequate, requiring third-party inspectors to visit less than 10% of cocoa farms).
[17] See id. (stating that large chocolate manufacturers Mars, Hershey, and Nestle could trace only 24–49 % of their cocoa back to farms).
[18] See 19 U.S.C. § 1307 (2018) (prohibiting the import of goods sourced by forced labor).
[19] See Peter Whoriskey, On Valentine’s Day, a Push to Keep Companies from Making Chocolate with Cocoa Grown with Child Labor, Seattle Times (updated Feb. 16, 2020, 3:02 AM), https://www.seattletimes.com/business/on-valentines-day-a-push-to-keep-companies-from-making-chocolate-with-cocoa-grown-with-child-labor/
[20] See Whorsiskey & Siegel, supra note 15 (predicting U.S. chocolate companies will fail to meet the 2020 deadline for reducing child labor sourcing).
