U.S. Customs and Border Protection ("CBP") enforcement into forced labor practices continues into 2021, as CBP has detained 1,213 shipments that contained approximately $ 414 million of goods suspected to be made by forced labor this year.1 On August 29, CBP issued a list of Ten Frequently Asked Questions regarding forced labor ("the FAQs") through its annual Virtual Trade Week. CBP continues to publish FAQs related to forced labor, including those products in the Hoshine Silicon Industry Co. Ltd supply chain, on its website at: https://www.cbp.gov/trade/programs-administration/forced-labor. Below are the key takeaways from the FAQs:
- Enforcement of forced labor by CBP is ramping up significantly. Since the Trade Facilitation and Trade Enforcement Act enacted in 2016, which repealed the consumptive demand exception that allowed many products made using forced labor to enter the U.S., CBP issued 13 Withhold Release Orders ("WROs"), issued an $8.4 million civil penalty associated with one WRO, detained numerous shipments under the authority of the WROs, and more. CBP is currently enforcing 50 active Withhold Release Orders ("WROs") and eight active forced labor findings.
- CBP and the Department of Labor now advise that social compliance audits are no longer an effective means of eliminating forced labor in a supply chain. CBP advises that importers should adopt compliance procedures that evaluate worker agency, which investigates whether workers have "collective bargaining" rights and "freedom of association."
- Importers should consider filing prior disclosures related to entries of products that were potentially made using forced labor. CBP can assess monetary penalties against companies that enter merchandise made using forced labor that do not disclose that information to CBP because it is considered a false statement or omission under 19 U.S.C. § 1592.
- To be excluded from a WRO, foreign companies can submit specific information regarding their production process, such as evidence refuting each identified indicator of forced labor, evidence that policies, procedures, and controls are in place to ensure that forced labor conditions are remediated, evidence of implementation and subsequent verification by an unannounced and independent third-party auditor, and supply chain maps that specify locations of manufacturers, factories, farms, and processing centers.
- CBP will consider any information, including laboratory reports that provide "cotton-DNA" testing, to support the claimed admissibility of detained goods that are detained under a WRO. However, the Xinjiang Uyghur Autonomous Region ("XUAR") WRO covers downstream products, so additional information will likely be required.
- CBP is not seeking to petition Congress for an expansion of statutory authority for the enforcement of forced labor of U.S. imports beyond the recent Trade Facilitation and Trade Enforcement Act.
- CBP issued an FAQ series specific to the Hoshine Silicon Industry Co. Ltd WRO, which can be found on the CBP website at here,2 and an FAQ series specific to the XUAR, which can be found here.3
- When targeting forced labor shipments for WROs, CBP will use a slew of resources, including the Department of Labor's List of Goods Produced by Child Labor or Forced Labor, nongovernmental and civil society organizations, open-source information, witness testimony, trade data, records of importers, and tracing measures.
In light of these recent trade enforcement developments, companies should bolster their compliance programs to include standard procedures for products and their components that CBP alleges were made using forced labor. To comply with forced labor laws, importers should develop a risk mitigation strategy with its stakeholders, partners, and suppliers by assessing the risks of forced labor in their supply chains, develop standards of procedure in the form of compliance manuals, and train employees and contractors how to implement those standards of procedure.
To adapt to CBP's growing enforcement of forced labor laws, importers should integrate the following procedures into their compliance programs:
- When initiating a relationship with a new supplier, request that the new supplier answer a forced labor questionnaires, welcome on-site visits, and sign certificates that verify that no prison labor was or is being used, no indentured servitude (labor recruiters) was or is practiced, and that no child labor or other forced labor was or is being used.
- Include forced labor terms and conditions in operations and sales contracts that requires that goods purchased in the supply chain be made without forced labor.
- Conduct periodic supplier audits for forced labor using independent auditors to ensure forced labor compliance in a constantly changing global supply chain and increasing CBP enforcement.
- Maintain forced labor procedures for detainments and other CBP actions pursuant to WROs, including proof of admissibility statements and certificates of origin.
Penalties for violating U.S. forced labor laws can be severe, and include issuance of new WROs, seizure and forfeiture of violative products, civil penalties of up to $250,000 per violation, up to 20 years of imprisonment for individuals, and revocation of import privileges. Compliance should be closely monitored by conducting independent supply chain reviews for forced labor and deliberately addressing CBP actions, such as CF-28s (Requests for Information). Importers with supply chains in China have the greatest risk of civil penalties, criminal enforcement, and reputational harm under U.S. forced labor laws, and should devote more resources and attention to this area of their product lines.
As an integral legal resource for forced labor and other import compliance, Braumiller Law Group has professionals with extensive experience in tailoring forced labor compliance procedures for a wide variety of importers, and when needed, responding to CBP actions, such as detainments and forced labor audits.
Below is a list sources for information on forced labor compliance:
- CBP's Informed Compliance Publication on Reasonable Care, which has a forced labor section starting on Page 14.
- CBP's homepage for forced labor enforcement.
- CBP's FAQs released on August 29, 2021.
- CBP's FAQs regarding the XUAR.
- CBP's FAQs regarding products in the Hoshine Silicon supply chain.
- CBP's Responsible Business Practices on Forced Labor.
- Other BLG Articles focused on forced labor compliance.
- Department of Labor's List of Goods Produced by Child Labor or Forced Labor.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.