Key Takeaways:
- Congress recently passed, and President Biden signed, bipartisan legislation targeting the use of forced labor in the Xinjiang region of China.
- The Uyghur Forced Labor Prevention Act requires Customs & Border Protection to apply a presumption that goods from the Xinjiang region may not be imported to the United States absent “clear and convincing evidence” that such goods were not produced with forced labor.
- On the heels of this Act’s passage, Senators from both parties introduced additional legislation that would require businesses with annual, worldwide gross receipts exceeding US$500 million to conduct annual audits of their supply chains to detect any use of forced labor.
- Under the proposed Slave-Free Business Certification Act, business would have to publicly report and certify their supply chain audits annually with possible non-compliance penalties of up to US$600 million in the case of willful violations.
- Given the recent bipartisan interest in curtailing the use of forced labor and the variety of civil and criminal tools available to penalize companies that benefit from it, the time is more than ripe to for businesses to ensure their supply chains are free of forced labor.
Senators Josh Hawley and Kristen Gillibrand re-introduced new legislation on February 3, 2022, aimed at combatting the use of forced labor in supply chains worldwide.1 This move comes on the heels of the December 2021 passage, on an overwhelmingly bipartisan basis, of legislation specifically targeting the use of forced labor in the China’s Xinjiang region.2 Taken together, these actions show that, as we have previously predicted in our August and October 2020 OnPoints, combatting modern-day slavery is likely to be an ongoing priority for the United States government, regardless of which party is in control, such that companies and their executives should be prepared to carefully scrutinize—and, if necessary, clean up—their supply chains.3
The Slave-Free Business Certification Act
The newest proposed legislation, The Slave-Free Business Certification Act, would require businesses with annual, worldwide gross receipts exceeding US$500 million to conduct annual audits of their supply chains to investigate the use of forced labor by suppliers.4 The law would require these audits to include interviews with a diverse cross section of the workforce and the review of relevant documents—including but not limited to pay stubs, age verification procedures, recruitment procedures, worker contracts, any labor broker contracts, and time records.5 Following the audits, businesses would have to prepare reports disclosing their audit findings and their policies to prevent the use of forced labor. And each report would include a certification from the CEO that, to the best of the CEO’s knowledge, the business “found no instances of the use of forced labor” or “disclosed every known instance.”6 The reports would be submitted to the Secretary of Labor and published on the businesses’ websites.7 The Secretary could assess civil damages of up to US$100 million against companies that violate the Act’s requirements, with the possibility of an additional US$500 million in punitive damages for willful violations.8
When introducing the Act, Republican Senator Hawley described it as taking “important steps to make American supply chains slave-free, protect American workers, and end labor exploitation across the globe.”9 Senator Gillibrand, the bill’s Democratic co-sponsor, similarly described the bill as “an important step towards ending the use of forced labor by holding businesses accountable for the workers used throughout their supply chains.”10
The Uyghur Forced Labor Prevention Act
As The Slave-Free Business Certification Act works its way through Congress, a narrower bill targeting forced labor passed with widespread bipartisan support and was signed into law by President Biden in December 2021.11 The Uyghur Forced Labor Prevention Act requires the Forced Labor Enforcement Task Force (“FLETF”) to seek public comment and hold hearings to develop a strategy to “best ensure that goods mined, produced, or manufactured wholly or in part with forced labor in the People’s Republic of China . . . and especially in the Xinjiang Uyghur Autonomous Region, are not imported into the United States.”12 More concretely, the Act creates a rebuttable presumption that the importation of goods from the Xinjiang region is prohibited under Section 307 of the Tariff Act of 1930.13 The Commissioner of U.S. Customs and Borer Protection (“CBP”) is to apply this presumption to bar the entry of such goods unless the Commission determines that the importer has complied with FLEFT guidance and fully responded to CBP inquires about forced labor and “clear and convincing evidence” shows that those goods were “not mined, produced, or manufactured wholly or in part by forced labor.”14
The Act does not specify what constitutes clear and convincing evidence that goods were not produced with forced labor, but CBP has provided guidance on these issues in the past. For example, with regard to a Withhold Release Order applicable to certain silica-based products produced in Xinjiang due to indicia of forced labor, CBP identified the following types of evidence as potentially helpful to importers seeking the release of their shipments:
- an affidavit from the provider of the product about its origin and components;
- purchase orders, invoices, and proof of payment;
- a list of production steps and records;
- transportation documents;
- daily manufacturing process reports;
- a list of entities that supplied inputs for the products; and
- evidence regarding the importers anti-forced labor compliance program.15
As this list suggests, the process is designed to be rigorous and tilted strongly in favor of exclusion.
Signs Point to Further Enforcement to Prevent Forced Labor
The Uyghur Forced Labor Prevention Act received broad bipartisan support, ultimately passing the House on a voice vote and the Senate by unanimous consent.16 Democratic co-sponsor Senator Jeff Merkley denounced how “Uyghurs and other predominantly Muslim ethnic minorities in Xinjiang are being forced into labor, tortured, imprisoned, forcibly sterilized, and pressured to abandon their religious and cultural practices by the Chinese government.”17 Republican co-sponsor Senator Marco Rubio similarly pledged that the United States “will not turn a blind eye to the ongoing crimes against humanity, and we will not allow corporations a free pass to profit from those horrific abuses.”18
This legislation and the strong statements from members of both political parties suggest the continuation of the trend towards bipartisan (and indeed international) efforts to combat slave labor.19 As we have previously explained, recent legislation like the California Transparency in Supply Chains Act and the U.K. Modern Slavery Act highlight the priority that policymakers are giving this issue.20
At the same time, the U.S. government has long had the tools—both civil and criminal—to aggressively combat forced labor in U.S. supply chains and otherwise. For example, Section 307 of the Tariff Act of 1930 proscribes the “entry at any of the ports of the United States, and the importation” of any merchandise “mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor.”21 A federal criminal statute also states that “[w]hoever knowingly benefits, financially or by receiving anything of value, from participation in a venture which has engaged in the providing or obtaining of labor or services by,” among other things, “means of force, threats of force, physical restraint, or threats of physical restraint” commits a felony punishable by up to 20 years’ imprisonment.22 And, yet another criminal statute grants prosecutors broad authority to prosecute “those who import merchandise contrary to law” as well as anyone in the supply chain who “receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of such merchandise after importation,” knowing the same to have entered the country “contrary to law.”23
Thus, U.S. and multinational companies would do well to re-examine (or examine, as the case may be) their supply chains for potential signs of forced labor. Failure to do so could be a source of significant civil and even criminal liability, not to mention public opprobrium. And with prominent members of both major U.S. political parties focusing on the issue, additional legislation imposing due diligence requirements on companies doing business internationally could be on its way.
Conclusion
As we have warned repeatedly, combatting forced labor is and will likely continue to be a top priority for policymakers and the Executive branch with many different ideologies all over the world. Recent bipartisan legislation signed into law by President Biden targeting the use of slave labor in the Xinjiang region of China—as well as past Executive Orders by President Trump24—underlines the prominence of these issues. The even more recent introduction of additional bipartisan legislation to combat forced labor all around the world shows that Congress believes this battle is not at its end but just beginning. Corporations should get on the right side of the fight by pro-actively utilizing their resources to investigate their supply chains and root out any possible signs of slave labor before they are mandated to do so and before they are punished civilly, criminally, and/or reputationally for not doing so.
Footnotes
1) Allan Smith, Senators Introduce Bipartisan Bill Targeting Forced Labor in Supply Chain, NBC NEWS (Feb. 8, 2022); Slave-Free Business Certification Act of 2022, S. 3578 (introduced Feb. 3, 2022).
2) Daniel Flatley, House Approves Bill Targeting China Over Uyghur Forced Labor, BLOOMBERG (Dec. 14, 2021).
3) Andrew Boutros et al., Corporate America Can Be a Powerful Force for Good to Root Out Modern-Day Slavery (Aug. 12, 2020); Andrew Boutros et al., U.S. Executive and Legislative Branches Raise the Heat on Slave Labor and Trade Law Violations (Oct. 5, 2020).
4) Slave-Free Business Certification Act of 2022, S. 3578, §§ 2(a)(1) & 2(b)(1).
5) Id. § 3(a).
6) Id. § 2(b)(2).
7) Id. § 2(b)(1).
8) Id. § 4.
9) Senator Josh Hawley, Hawley Leads Bipartisan Legislation to Purge Slave Labor from Corporate Supply Chains (Feb. 8, 2022).
10) Mychael Schnell, Bipartisan Bill Would Require Audits to Detect Forced Labor in Companies’ Supply Chains, THE HILL (Feb. 8, 2022).
11) Secretary of State Antony J. Blinken, The Signing of the Uyghur Forced Labor Prevention Act (Dec. 23, 2021).
12) P.L. 117-78 (Dec. 23, 2021) § 2.
13) Id. § 3.
14) Id.
15) Id.
16) Actions Overview, H.R. 6256 – 117th Congress (2021-2022).
17) John Feng, Democrats & Republicans Team Up to Punish China Over Xinjiang Forced Labor Products, Newsweek (July 15, 2021).
18) Id.
19) Boutros et al., supra note 3.
20) Id.
21) 19 U.S.C. § 1307.
22) 18 U.S.C. § 1589.
23) 18 U.S.C. § 545.
24) President Donald J. Trump, Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws, 82 FR 16719 (Apr. 5, 2017); President Donald J. Trump, Omnibus Report on Significant Trade Deficits, 82 FR 16721 (Apr. 5, 2017).
