Despite giving itself good marks for efforts to combat human trafficking in a State Department report released Tuesday, the United States still has a problem with modern day slavery.

While it received a tier 1 rating - the highest possible - the US often fails to protect victims of human trafficking, defined as coercion into sex work or labor.

The annual Trafficking in Persons report, which rates anti-trafficking efforts of countries worldwide with a tier 1 to tier 3 ranking, said the US complies with the minimum standards for eliminating human trafficking, but that improvements are needed.

"Trafficking in persons can occur in many licit and illicit industries or markets, including in brothels, massage parlors, street prostitution, hotel services, hospitality, agriculture, manufacturing, janitorial services, construction, health and elder care, and domestic service, among others," the report said.

While the US does more than many other countries to combat human trafficking, Bangkok-based EPCAT International published a report in March saying the US is only making "some progress" in protecting children from sex trafficking.

And while the State Department report focuses on the federal government's anti-trafficking efforts, a number of US states fail to provide victims -- both children and adults -- with the full legal protection that activists say they need.

According to the anti-trafficking group Polaris Project, 42 states lack "safe harbor" laws, which recognize that minors trafficked into commercial sex are victims and prevent them from being prosecuted for prostitution.

Activist groups are also pushing more states to implement "vacating conviction" laws - the majority of states have not yet done so -- which ensure that sex trafficking victims are not treated as criminals and that prostitution convictions be expunged from their records.

"Trafficked persons are rarely recognized as victims by the police and prosecutors, and are thus pressured into pleading guilty and/or do not understand the consequences of the charges," according to the website of the Sex Workers Project at the Urban Justice Center.

Multiple arrests, incarceration, police violence, deportation and social stigma are just a few of the barriers faced by those who have been forced into prostitution, the site said.

Crystal DeBoise, co-director of the Sex Workers Project, said criminalizing sex work, which is punishable by incarceration in the US, spurs it to go underground, and argued that the more secret the location, the less access health workers and others will be able to help potential trafficking victims.

Others say that stopping demand for commercial sex is the key to halting trafficking.

The report also noted allegations last year, brought to light in a New Yorker article that made international waves, that tens of thousands of workers from Fiji and elsewhere recruited by US government subcontractors were tricked into working in war zones in Iraq and Afghanistan. They were forced to live in squalid conditions resembling indentured servitude while working on US bases, according to US media reports.

And in another horrific case that came to light last year, authorities charged two Ukrainian brothers with smuggling young Ukrainian men and women to the US and forcing the illegal immigrants to work long hours for little or no pay. The brothers used threats and force, including rape, to keep them from fleeing.

The report added that non-governmental organizations noted "increasing reports" of children recruited into criminal activity at the US-Mexico border, as well as traveling sales crews peddling rings that used forced labor.

In another shortcoming, state and federal funding for victim services decreased since last year, the report said.

The report made a number of recommendations for the US including improving data collection and analysis on human trafficking, offering comprehensive victim services to all victims and increasing outreach to local, federal and state law enforcement.

Some experts contend that the US is the only developed country in which its own citizens comprise a disproportionately large chunk of victims, although precise figures on the number of victims are difficult to nail down.

Also notable in this year's report is that Thailand, which was placed on the tier 2 watch list for the last two years, escaped a downgrade to tier three, as US Secretary of State Hillary Clinton granted the Southeast Asian nation a waiver on grounds that it has penned a new anti-trafficking plan and is "devoting sufficient resources to implement that plan."

Meanwhile, neighboring Myanmar, which previously held a tier 3 ranking, the lowest possible, was upgraded to tier 2 watch list. While the government has failed to meet the minimum standards, it is making "significant efforts" to comply, the report said.