The Government has done little to help victims and with prosecuting traffickers, according to a US State Department report.
The 2019 Trafficking in Persons report, released this morning, also demoted Saudi Arabia and Cuba to the worst human traffickers list for failing to meet US anti-trafficking standards.
According to the report, New Zealand fully met minimum standards for elimination of trafficking, but that the Government had initiated just two trafficking investigations and failed to identify or assist any sex trafficking victims.
"The Government reported identifying few victims and prosecuting low number of suspected traffickers," it said.
Despite being on the top tier, New Zealand remained a destination country for labour and sex trafficking, where domestic and foreign victims were being exploited by human traffickers.
"Young children and teenagers are recruited into prostitution by gang members, boyfriends, family members, or others," the report said.
"Foreign men from Fiji, Samoa, China, India, the Philippines and countries in Latin America are vulnerable to forced labour in NZ's agricultural, dairy, construction, viticulture and hospitality sectors, and as domestic workers."
It said unregulated and unlicensed immigration brokers, particularly in India and the Philippines, assisted victims of labour exploitation in New Zealand to obtain visas.
Women from Asia, South America and some international students were also vulnerable to forced labour and prostitution.
"The Government did not report any investigations, prosecutions, or convictions of government employees complicit in trafficking offences," the report said.
The report called for increased efforts to identify victims and amendments to trafficking laws on the definition of child sex trafficking.
Saudi Arabia and Cuba now join Russia, China, Iran, Venezuela, North Korea, Syria, South Sudan, Congo and Myanmar to be among the 21 Tier 3 countries.
These listed countries, according to the report, "do not fully meet the minimum standards for the elimination of trafficking and are not making any efforts to do so".
Inclusion on Tier 3 can bring restrictions on US non-humanitarian, non trade-related assistance.