New Zealand's failure to prosecute human trafficking offences for the past seven years has been criticised by the United States State Department.

For the second time running, New Zealand has been criticised over the treatment of low-wage, mainly Asian crews in the fishing industry.

The department's latest report on human trafficking, released by US Secretary of State John Kerry in Washington today, downgraded the ratings of China, Russia and Uzbekistan.

The three-tier ranking put Russia and China on a list of the world's worst offenders, such as North Korea and Saudi Arabia, and below second-tier countries such as Rwanda, described in the report as a destination for "women and children subjected to forced labour and sex trafficking".

New Zealand remained a "tier one" or best-rated country and was described as a "destination country for foreign men and women subjected to forced labour and, to an extent, a source country for underage girls subjected to sex trafficking within the country".

The report said foreign men on foreign-flagged fishing vessels in New Zealand waters, mainly from Indonesia, "are subjected to conditions of forced labour, including debt bondage, underpayment of wages, and some cases of physical and sexual abuse".

"Conditions experienced by workers on these boats include confiscation of passports, imposition of significant debts, physical violence, mental abuse, and excessive hours of work," it said.

The report said the Government had prosecuted fishing companies for environmental offences.

"Although the Government investigated allegations of forced labour on the same boats, despite allegations of underpayment of wages, physical abuse, and threats against the crewmen, no prosecution resulted..." it said.

"The Government did not report any efforts to investigate or prosecute public officials for alleged complicity in trafficking-related offences."

The report said New Zealand fully complied with minimum standards for the elimination of trafficking.

"However, the Government has not prosecuted or convicted any trafficking offenders under its trafficking legislation in the last seven years, nor has it identified or certified any trafficking victims in the last nine years," the State Department said.

A legal review of the law had gone to the Cabinet, but no decisions had been made, and three trafficking investigations in the past year had not formally identified any people.

"The Government of New Zealand demonstrated modest efforts to investigate suspected trafficking offences – an increase from six reported last year to eight this year – but failed to convict and punish any trafficking offenders for a ninth consecutive year," the report said.

New Zealand did not have a comprehensive anti-trafficking law and the report said the Government "demonstrated limited efforts to protect trafficking victims".

On sex trafficking, the report repeated Washington's irritation at New Zealand's decriminalised sex industry.

It said the Government "did not take significant steps to reduce the overall demand for commercial sex acts".

It said foreign women, some from China and Southeast Asia, could be recruited from their home countries by labour agents for the purpose of prostitution and might be at risk of coercive practices.

"A small number of girls and boys, often of Maori or Pacific Islander descent, engage in street prostitution, while some are victims of gang-controlled trafficking rings," the report said.

"The problem of street prostitution of children in South Auckland continues, in which some children were recruited by other girls or compelled by family members."

The report said about 27 million men, women and children were trapped in some form of slavery around the world.

Ambassador Luis CdeBaca, who headed the State Department's Office to Monitor and Combat Trafficking in Persons, said identifying victims was a key to fighting the abuses.

"Everything we do is driven by finding and identifying these people," he said.

Last year, 46,500 of the world's 27 million victims were identified, he said.

Of 188 countries examined, 27 were downgraded and 14 moved up in rankings that assess their commitment and success in stopping human trafficking.

The report was mandated by Congress and based on information provided by non-profit organisations, reports from embassies and activists.