A recent Washington Post item on Child Labor in the Brazilian Acai Industry highlights the need for companies to develop compliance programs designed to identify and mitigate the risk of possible child labor in their supply chains.
Not only is Acai used in trendy health foods as discussed in the article, but Acai is also used as a base for other products. The article focuses on acai berries from two regions of Brazil that are said to be harvested from child labor and then exported from Brazil to various countries, including the United States. In the article, the acai harvest is described as “one of the most dangerous jobs in Brazil” in which young children can climb trees up to 65 feet tall. The article contains an image that appears to show a child maneuvering from tree to tree without descending to the ground.
The Washington Post article indicates that child labor in the acai industry is under investigation by US and Brazilian authorities. Below, we detail what this could mean for companies with Brazilian Acai in their supply chains, and what it means for companies looking to mitigate the risk of child labor in their chains. supply more widely.
What are the main legal risks in the United States?
The US Department of Labor’s Office of International Labor Affairs (“DOL”) may consider adding Brazilian Acai to the 2022 editions of one or more of the three reports it publishes on child labor. and forced labor. practices abroad. As we previously reported this blog, these reports constitute the principal public statements of the United States government on the issue of forced labor and child labor around the world. The DOL is currently accepting comments on these reports until January 15, 2022. The DOL reports do not automatically result in restrictions or bans on imports into the United States, but they could influence other actions of the United States government and increase the risk profile of companies whose supply chains may include products identified in the reports.
Another possible US government action could be the issuance of a Restraint Order (“WRO”) by US Customs and Border Protection (“CBP”) targeting imports containing Acai from certain companies. or regions of Brazil. CBP may issue a WRO if it has a “reasonable suspicion” that the goods that are (or are likely to be) imported into the United States are produced by forced or contract labor, including forced labor. or under contract of children.
In recent years, the US government has also increasingly used its commercial blacklists (the Entity List and the Specially Designated Nationals (“SDN”) List to target companies identified by the US government as having been involved in criminal acts. human rights violations. Such action may result in export bans and / or, in the most extreme circumstances, be completely cut off from the US market. These actions are not mutually exclusive. For example, Xinjiang Production and Construction Chinese state-owned Corps (“XPCC”) has been the target of a WRO and has also been added to both the Entity List and the SDN List.
Another possible risk is that companies involved in these supply chains could be prosecuted by complainants under the Trafficking Victims Protection Reauthorization Act (“TVPA”). So far, plaintiffs have struggled to persuade the courts to award damages under the TVPA. See our blog post on a recent court ruling in favor of several U.S. tech companies sued by a class of child laborers who deal with cobalt in the Democratic Republic of the Congo. That said, the right set of facts could lead to a different outcome, and in any case, litigation can require a significant amount of attention and resources.
What are the main Brazilian legal risks?
Brazilian labor authorities are increasingly investigating product supply chains in which forced labor and child labor are reported. As mentioned in the Washington Post article, this includes the acai industry.
The Amazon region, which is the largest producer of acai in the world, has particularly caught the attention of the Brazilian labor authorities. We are aware that since 2018 Brazilian labor authorities have been investigating large companies with Amazon acai in their supply chains, which is not an easy task due to local specifics. Acai typically grows wild in the forest, so there is no need to plant it, making it difficult for companies to identify specific properties to assess for indications of child labor. Companies that have acai in their supply chains are often several steps away from the source. Many families who harvest the fruits in the wild sell the product through individuals who act as intermediaries and sell the acai to a business or worker co-operatives. Additionally, many individuals in areas where Acai is harvested do not even have a birth certificate, so it can be difficult to identify the ages of the individuals involved in the harvest.
Since 2018, a task force has been led by the Ministry of Labor, the District Labor Prosecutor’s Office and the Federal Police to monitor the acai production chain and eradicate child labor. The working group seeks to map the supply chains of companies with Amazon acai as a raw or final product. It also aims to increase safety procedures and prevent child labor and forced labor when harvesting fruit.
When the involvement of children in labor is identified in the company’s supply chain, the consequences may include the signing of consent agreements with the district labor attorney, in which the company engages. to promote inspection and education initiatives for producers in order to prohibit child labor; public civil claims involving large penalty amounts as compensation for pain and suffering; and notices of violation from the Ministry of Labor for involvement in child labor.
If Brazilian authorities determine that a company’s supply chain includes children in forced labor, the company may be placed on a “dirty list” published by the Brazilian government. This can increase the risks for companies doing business in Brazil in several ways, such as:
- Reputational risk: The “Dirty List” being public, once disclosed and depending on the level of investigation carried out on the subject, the relations between the company and its investors, financiers, customers and other companies in general can be compromised;
- Notifications to public agencies and financial implications: The company may have difficulty raising funds from the National Development Bank and / or other private or public banks or entering into contracts with the government or companies owned or controlled by the government. Listing on the “Dirty List” also increases the possibility for public bodies to request additional information on the matter and to investigate the company. In our experience, many banks have internal lending regulations that prevent the loan from being granted when the business is included in the Dirty List. In addition, the government prevents businesses on the Dirty List from obtaining contracts with Government Financing Funds and is prevented from obtaining rural credit.
- Respond to criminal proceedings: Article 149 of the Penal Code criminalizes slavery based on working conditions, establishing a prison term of two to eight years and fines and pecuniary penalties. Sentences can be increased if they are committed against a child or adolescent or because of prejudices based on race, color, ethnicity, religion or origin.
What should businesses do to mitigate these risks?
Companies with Brazilian acai in their supply chains should take a close look at these risks and determine if there are opportunities to improve their supply chain compliance programs to help mitigate these risks. This is also a reminder for companies in other sectors to consider the risk of child labor in their supply chains and assess whether their compliance programs are sufficiently responsive to these risks, taking into account all jurisdictions. concerned. Additional compliance steps could include, among other things, third-party audits, contractual clauses and training, where applicable.