The grammar of forced-labor regulation is changing. Over the past decade or so, regulation ran along two tracks. The UK and Australian Modern Slavery Acts and Canada's supply chain transparency law required companies to disclose forced-labor risks in their supply chains and their response efforts on their own. France's duty-of-vigilance law and Germany's Supply Chain Due Diligence Act imposed a duty to examine and remedy human rights violation risks, including forced labor. Both merely induced voluntary corporate improvement and did not block product distribution itself. But the recent trend is different. The US Uyghur Forced Labor Prevention Act (UFLPA) and the EU Forced Labor Regulation (FLR), which takes effect in December 2027, block products made with forced labor from entering the market at the source. Forced labor has now moved beyond a matter of disclosure and improvement to become a matter of market access tied to customs clearance and tariffs.
What accelerated this shift was the Section 301 trade law investigation result announced by the US Trade Representative (USTR) on June 2, 2026. The USTR investigated 60 economies accounting for 99.4% of US imports and determined that they either had not introduced forced-labor import bans or were not effectively enforcing them, proposing additional tariffs. Countries with an import-ban system or that pledged to introduce one face 10%, while those that do not face 12.5%. Korea, which lacks a dedicated import-ban system, was included in the 12.5% group.
Why did the US play the tariff card? The starting point is the recognition that forced labor operates like a "hidden subsidy." Companies using forced labor exploit wages and spend nothing on improving working conditions or inspecting partners, artificially lowering costs. The International Labour Organization (ILO) estimates such illegal profits at $63.9 billion a year. As a result, US companies that produce normally are disadvantaged in both domestic and overseas markets. For example, in third-country export markets, cheap forced-labor goods take the place of US-made products. A representative case is Malawian tobacco, which the US banned from import, flowing into Poland and eroding the market share of US tobacco.
Furthermore, in the US domestic market, forced-labor goods change their origin through transit or processing in third countries and ultimately enter the US, threatening the place of US products. A typical example is Chinese polysilicon, the core raw material for solar panels. After the US blocked imports over suspected forced-labor ties in the Xinjiang region, foreign companies processed Chinese polysilicon into cells and modules in Southeast Asia. Since a finished product's origin follows the processing country, the Chinese raw material enters the US hidden inside "Southeast Asian" products. The USTR diagnosed that, thanks to forced labor, Chinese polysilicon prices are only a quarter of non-Chinese prices, and that US solar products, facing circumvented imports made with this cheap material, lost out in price competition and saw production shrink.
Of course, almost every country bans forced labor domestically. But the US's core argument is that a domestic ban regulates only one's own producers and does not prevent cheap forced-labor "imports" from entering the market and competing with normal products. A country without an import ban becomes both a channel through which forced-labor goods flow and a "laundering hub" that erases origin, and then even if the US guards its border alone, it cannot completely block circumvented inflows. This is why the US demands that countries go beyond a "ban on the use of forced labor" to an "import ban on products linked to forced labor."
This measure immediately triggered a chain of legislation. Canada already had both a supply chain transparency law and an import ban, but between 2020 and 2026 it actually stopped only 2 shipments suspected of forced labor, prompting the USTR to designate Canada as a "re-export dumping ground" for forced-labor goods. In response, Canada introduced a bill (Bill C-35) sharply strengthening its import ban on June 12, just ten days after the determination. Countries that signed a Reciprocal Trade Agreement (ART) with the US moved even faster. Indonesia, in accordance with the agreement, enacted implementing rules for a forced-labor goods import ban this past April and was recognized as a "system-adopting country," and Taiwan, a semiconductor powerhouse, pledged to link US tariff law Section 307 determinations to its own import ban and then began by distributing a prevention guide for companies. All of these were assigned to the 10% tariff bracket. The EU also released FLR implementation guidelines on June 26, beginning enforcement preparations in earnest. By contrast, 46 countries including Korea, Japan, China, and India, lacking relevant systems, were placed in the 12.5% bracket.
What do these changes suggest for our companies? First, the number of regulated markets increases. As seen above, forced-labor import bans are expanding from a regulation of the US market alone to a regulation of markets worldwide. Now not only companies exporting to the US and EU, but exporters to every market that introduces an import ban, will undergo similar screening.
Second, the required obligations effectively grow heavier. Import-ban regulation demands not only the existing "due diligence" but also "traceability." The EU's FLR implementation guidelines, while stating that they do not impose a separate due diligence obligation, recommend voluntary due diligence. Companies that have conducted due diligence may be pushed back on the list of investigation targets or able to conclude procedures early. However, due diligence materials alone are not sufficient to determine whether a violation exists; a raw-material history that can answer whether forced-labor material went into the product is needed. So the guidelines state that for products that may contain high-risk materials, if a company cannot reveal the source with traceability materials such as certificates of origin and records linking raw materials to finished products, this will be treated as unfavorable evidence. The US UFLPA also allows customs clearance only if the absence of forced labor is proven with tracing materials from raw material to finished product, in addition to due diligence.
Third, this heavier obligation applies regardless of a company's size. Existing disclosure and due diligence laws targeted only companies above a certain size. But the import ban operates by product unit, not by company, and the EU FLR and UFLPA have no exemption for small and medium-sized enterprises. Small and medium exporters that were outside the threshold of disclosure and due diligence laws cannot avoid the threshold of the import ban.
Therefore, Korean exporters, regardless of size, need to trace and conduct due diligence on the raw materials of high-risk forced-labor products and prepare evidentiary grounds. The subjects of inspection are not only overseas supply chains. Domestically, criticism has long continued that the workplace-change restriction under the Employment Permit System carries the potential for forced labor, and the US State Department, in the Korea chapter of its 2025 Trafficking in Persons Report, pointed to the practice of migrant workers entering the country burdened with excessive fee-related debt during the recruitment process. The fact that US Customs the same year issued its first import ban measure (WRO) targeting a Korean company on salt from the Taepyeong Salt Farm in Sinan, South Jeolla Province, actually shows that labor problems at domestic workplaces can become customs clearance problems for export goods. We hope our exporters will steadily monitor each country's regulatory trends and respond calmly.
