We can all agree that goods made from forced labor, indentured
labor or child labor should not be introduced into the U.S. market.
Indeed, U.S. law prohibits the entry of goods made from forced
labor. The Uyghur Forced Labor Prevention Act
(“UFLPA”) which went into effect as of June 21, 2022,
expands on this prohibition by placing a ban on goods from the
Xinjiang Uyghur Autonomous Region (“XUAR”) where ethnic
minorities are being exploited or certain specified entities that
are involved in using forced labor. This ban consists of a
rebuttable presumption that goods imported form the XUAR or a
listed entity are made in whole or in part using forced labor. This
presumption can only be overcome by clear and convincing evidence
which will require a detailed supply chain tracing (discussed
below). Where goods are made using forced labor, but they are not
produced in the XUAR or by a listed entity, U. S. Customs and
Border Protection (“CBP”) can issue a Withhold Release
Order (WRO) or a Finding to prevent merchandise produced in whole
or in part in a foreign country using forced labor from being
imported into the United States. Since October of 2021, CBP has
issued 54 Withhold Release Orders (“WRO’s”)
9 Findings and over 2,000 detentions of merchandise. Additionally,
with forced labor regulations from the Department of Homeland Security
(“DHS”) on the horizon, enforcement of forced labor laws
in the United States will only continue to escalate.
CBP Enforcement of U.S. Forced Labor Laws is Going Strong (And
Here to Stay)
U.S. Customs and Border Protection (“CBP”) is not shy
about enforcing forced labor requirements. For example, in July 2022, CBP began detaining large shipments
of solar cells and solar panels possibly from the XUAR, which are
made of polysilicon, and which are now subject to the UFLPA. In
February and March of 2022, CBP in Baltimore seized several shipments of palm oil because the oil
was manufactured in Malaysia subject to a Finding, which was estimated to be worth $2.5
million. Similarly, in May 2021, CBP seized multiple shipments of
plastic gloves, including a shipment of 3.97 million nitrile disposable gloves and a
shipment of 4.68 million latex gloves, from Malaysia that
were made by subsidiaries of Top Glove Corporation Bhd. (Top
Glove), which are subject to another Finding. With more products rumored to be
detained pursuant to the UFLPA, importers must be putting in the
time and documentary burden of conducting forced labor due
diligence in their upstream supply chains.
Key Guidance from CBP and DHS to Comply with Forced Labor
Requirements
On June 13, 2022, CBP released its Operational Guidance for Importers re the
UFLPA. This guidance lists the documentation required to comply
with the UFLPA, including specific documents required for cotton,
tomatoes, and polysilicon, as well as methods of tracing and supply
chain mapping, as well as the detention, seizure, forfeiture,
exclusion, and protest processes for the disposition of potentially
violative merchandise. This CBP guidance followed the Updated Guidance Document for Industry Hoshine
Withhold Release Order (March 1, 2022), which also provided a
list of documents and compliance measures required for tracing
merchandise to show no evidence of forced labor. The FLETF, headed
by the DHS and authorized pursuant to the USMCA, published its UFLPA
Strategy on June 17, 2022, which contains operation guidance
for importers regarding documentary requirements and tracing origin
for imported goods. As part of this strategy, FLETF started the UFLPA
Entity List, which contains dozens of Chinese entities
identified as using forced labor in the production of products. It
is crucial for importers to screen their vendors and upstream
supply chain using this UFLPA Entity List, and to gather the
information and documents listed in the guidance.
What is Forced Labor Due Diligence?
Forced Labor Due Diligence is vetting new and existing
suppliers and upstream supply chain for use of forced labor.
Prior to initiating a relationship with a new supplier, request
that the new supplier answer a forced labor questionnaire, add
terms and conditions prohibiting use of forced labor in sales
contracts, welcome unannounced on-site visits, and sign
certificates that verify that no forced labor is used. CBP is also
looking for video interviews from company representatives or
private investigators with foreign factory workers that show the
absence of duress, restraint, coercion, or other signs of
involuntary work, such as the absence of handcuffs or physical
evidence of violence, like cuts or bruises. If your foreign
suppliers push back or refuse to provide this type of information,
CBP has advised importers to not import goods from those foreign
suppliers. (The problem here is that China has established a myriad
of sanctions or blocking statutes to prevent what it considers to
be illegal extraterritorial application of foreign laws that harm
the Chinese economy, thus, suppliers who push back may not being do
so due to actual forced labor in their supply chain but rather due
to a fear of being subjected to various penalties available under
Chinese laws).
Forced Labor Due Diligence includes documenting the materials
and labor use of a product’s entire upstream labor and
material production. Importers should trace the origin of the
goods and their components by compiling a detailed document trail
including, but not limited to, the following types of documents and
information.
- A list of suppliers associated with each step of the production
process, including names and contact information (addresses, email
addresses, and phone number), with affidavits from each that no
forced labor was used. - Bills of material for every component of the imported
article. - Certificates of origin.
- Seller’s inventory records, including dock/warehouse
receipts. - Shipping records, including manifests, bills of lading (e.g.,
airway/vessel/trucking). - Buyer’s inventory records, including dock/warehouse
receipts. - Wage documents such as timecards or pay stubs from the
factories showing the time workers entered and left the
factory. - Videos and transcripts of interviews with workers at the
foreign factories showing proof that the worker is not working
under duress, such as proof of no handcuffs, consent to labor, and
acceptable living conditions.
Forced Labor Due Diligence includes maintaining a
company-wide Forced Labor Compliance Manual and conducting periodic
supply chain audits for forced labor. According to the CBP
guidance, importers must be conducting periodic audits with an eye
for imports of goods made using forced labor. Importers should
maintain forced labor procedures for detainments and other CBP
actions pursuant to WROs, including proof of admissibility
statements and certificates of origin. This should include a
high-level statement of policy from senior management demonstrating
the company’s commitment to not using forced labor in its
supply chain and training for employees and subcontractors
regarding forced labor compliance.
Forced Labor Due Diligence can mean obtaining an advanced
ruling from CBP as to whether a particular supply chain is using
forced labor or not. CBP has advised importers that they should
consider obtaining an advanced ruling to determine if a product or
supply chain is using forced labor or not under 19 CFR Part 177.
These agency rulings carry the force of law and may be applied to
subsequent importations that are substantially similar to the
specific facts as outlined in the ruling.
Product-Specific Supply Chain and Tracing Evidentiary
Requirements – Cotton, Tomatoes, and Polysilicon
For certain industries or products from the XUAR, CBP and DHS
provided specific requirements for tracing and supply chain mapping
for cotton products, tomato products, and polysilicon products.
Although applicable to the UFLPA, these instructions provide
guidance for proving similar products from China or other countries
are not made using forced labor.
Cotton – Specific documentary evidence must
include documents that show the entire product’s supply chain,
from the origin of the cotton at the bale level to the final
production of the finished product. Importers must provide a flow
chart of the production process and maps of the region where the
production processes occur, and this chart must number each step
along the production process and number any additional supporting
documents associated with each step of the process. The chart must
also identify all the entities involved in each step of the
production process, with citations denoting the business records
used to identify each upstream entity – even if they did not have
contact with the importer. Based on the Proof Apparel and Uniqlo
rulings, cotton DNA lab testing and tracing, though complex and
expensive, is also highly recommended.
Tomatoes – Specific documentary evidence must
include supply chain traceability documents, such as lot codes
assigned based on the commodity, variety, location, and harvest
date, which demonstrate the point of origin of the tomato product.
The importer must identify the tomato processing facility,
including both the parent company and the estate that sourced the
tomato seeds and/or tomatoes. These documents must contain records
for the tomato seeds, tomatoes, and/or tomato products that
identify all steps in the production process, from seed to finished
product, from the farm to shipping to the U.S. The importer must
also provide a list of all entities associated with each step of
the production process, with citations denoting the business
records used to identify each upstream party – even if they did not
have direct contact with the importer.
Polysilicon – Specific documentary evidence must
include documents that show all entities involved in the supply
chain and the country of origin of each material, and a flow chart
mapping each step in the procurement and production of all
materials and identify the region where each material originated
from location of the quartzite used to make polysilicon, to the
location of manufacturing facilities producing polysilicon, to the
location of facilities producing downstream goods used to make the
imported good. Importers must also provide a list of all entities
associated with each step of the production process, including
upstream partners not in contact with importer – even if they did
not have direct contact with the importer.
Conclusion
With the UFLPA in force, along with dozens of WRO’s, new
Findings, and recent seizures, being unprepared for a forced labor
inquiry by CBP is going to be costly – not just for an immediate
shipment, but for future shipments in your upstream supply chain.
Do not wait until CBP has determined that your supply chain
contains evidence of forced labor. Due diligence means researching
and vetting the upstream supply chain of your company’s
products and verifying whether forms of slave labor are used.
Forced labor audits are no longer only a humanitarian or social
responsibility concern – they are required by CBP to prove that
imported merchandise into the U.S. was not made using forced labor,
or you risk seizure or other consequences. Importers should act now
and implement compliance measures immediately to account for the
growing concerns of forced labor enforcement. For importers with
complex supply chains, with a multitude of levels or multiple
parties, you should seek the advice and assistance of Outside
Customs Counsel to navigate the traceability requirements, develop
forced labor procedures, and possibly obtain an advanced ruling.
Importers whose merchandise is detained for suspected use of forced
labor should not hesitate to contact Outside Customs and Trade
Counsel as soon as possible.
Resources for Forced Labor Compliance
Below are links to helpful resources for importers as guidance
for forced labor due diligence and compliance with U.S. forced
labor laws.
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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.
