Mexico′s new forced labor regulations.

On February 17 of 2023 the Mexican government through the Ministry of Economy published in the Federal Official Gazette a decree whereby an administrative regulation to restrict the importation of certain goods into Mexico was enacted. This decree (“Forced labor regulation”) ?became effective on May 19, 2023 and seeks to ban the import of goods into Mexico that are subject to regulation by the Ministry of Labor and Social Welfare ("MLSW”) applicable to those goods produced in whole or in part under forced labor conditions as well as those produced with child labor. The forced labor regulation is the result of Mexico′s commitment under the United States-Mexico-Canada Free Trade Agreement. ("USMCA"), to ban forced and compulsory child labor.

The forced labor regulations complete the applicable domestic legislation on foreign trade and sanction those who do not comply, following the commitments assumed by Mexico previously, such as the fundamental conventions on forced labor of the International Labor Organization ("ILO"), specifically Convention No. 29, as well as Convention No. 105 on the Abolition of Forced Labor and Convention No. 182 on the Worst Forms of Child Labor. The ILO considers forced labor or exploitation to be "any work or service that is required of an individual under the threat of punishment and where that individual does not volunteer himself."

USMCA Compliance

Under USMCA provisions, Article 23.6 requires that Mexico must have a procedure to receive, analyze, and respond to scenarios of the use of Forced labor, including forced child labor by companies located outside USMCA′s territory, and thus prevent any merchandise from such forced or compulsory labor from being imported into Mexico.

Proceedings.

The Forced labor regulation implements two types of verification procedures; whereby the MLSW has the authority to initiate proceedings to investigate labor standards in place in the companies producing goods at the time of investigation. The types of verifications are: a) In collaboration with foreign authorities, the MLWS will decide if the imported goods are produced with the use of the labor of workers in a situation of forced or compulsory labor, following international parameters on the matter, and, b) Procedure to request information directly from importers.

Under Article 23.6 of the USMCA, an investigation into whether goods were produced using forced labor can be initiated by MLSW ex officio or by any private party. The request must be in writing and should, if initiated by a private party, provide specified information, including evidence supporting the forced labor allegation.

Should MLWS find enough evidence to initiate proceedings, it can coordinate with authorities from the country where the alleged forced labor merchandise comes from to investigate whether the goods were produced under forced labor conditions. On the other type of verification, MLSW must notify the importer about the proceeding so that he may respond accordingly.

The request for an investigation by a private party may be submitted at the offices of the MLSW or through the Digital Window. The MLSW might request the importer further information if necessary. After the initial proceedings, the MLSW might discard the proceeding if there is a lack of evidence to support the claim, and the file will be archived.

Whatever the determination of the MLSW turns out to be, it will be listed in the secretariat's portal′s list of current resolutions issued by the authority. When sufficient elements to investigate are found, the MLSW will notify the importer who has twenty working days to respond. The authority must issue a resolution within 180 working days that will be published on its website. Provided that it is proven that the use of labor by workers in that situation has ceased or that the determination in this regard has been rendered ineffective by the authorities of other countries, the importers or any private person can request that the resolution is annulled or, where appropriate, request an updated to the WLSW′s aforementioned list.

Recommendations for companies

• Companies should conduct analyses of their suppliers of goods and, where appropriate, determine whether they come from jurisdictions, markets or companies that have forced or child labor practices.
• Companies must implement effective due diligence practices and adopt appropriate controls to ensure that the entire supply chain is compliant with these new regulations.
• We recommend that Mexican companies adopt new traceability systems in the entire supply chain to duly comply with regulations.
• Importers must maintain Files with information and backing documents that demonstrate that the importer's merchandise is not covered by the lists on the MLSW site.
• We recommend that at-risk companies be prepared and take the necessary measures to deal with the possible consequences of an investigation procedure, which in this case, can range from reputational impact to stopping import activities, breaching contracts with current suppliers, and looking for new suppliers/manufacturers that operate under legal and acceptable working conditions.
• Companies must continue to comply with any other import requirements or regulations in addition to what is provided for in the Forced labor regulations.

?Our Business Law and Labor Law practice group has extensive experience in these matters.? For further information please contact us at [email protected]

This note does not constitute legal advice. You should consult a specialist before making any decision.