In Washington, D.C., the news this week focused on President Trump’s decision to designate (or redesignate) North Korea as a state sponsor of terrorism. For companies importing goods into the United States, developments this past August are likely to have more immediate impact.
On August 2, the United States enacted amendments to the North Korea Sanctions and Policy Enhancement Act of 2016. The amendments create a presumption that goods made by North Korean citizens or nationals, anywhere in the world, are made with forced labor.
With this change, any goods made in whole, or in part, by North Korean workers are now prohibited from entering the United States. This prohibition will stand unless U.S. Customs and Border Protection (“CBP”) determines, through clear and convincing evidence, that specific goods were not made with forced labor.
This comes at a time when news reports have focused attention on the extent to which North Korea is increasingly sending workers abroad to seek employment in countries, and in industries, around the world. Recent estimates suggest that there are more than 100,000 North Koreans working abroad.
On November 7, CBP issued a press release regarding its new enforcement efforts. The release noted that if CBP finds evidence indicating that a shipment contains made by North Korean workers, “CBP will deny entry, which may include seizure of the merchandise, and refer the issue to Immigration and Customs Enforcement (“ICE”) Homeland Security Investigations (“HSI”) with a request to initiate a criminal investigation for violation of U.S. law.”
Much remains to be seen in terms of how CBP’s enforcement efforts will move forward, but CBP’s recent release observed that it “is committed to preventing the importation of merchandise produced with …the labor of North Korean nationals or citizens anywhere in the world” and that it “can take a variety of actions to combat the entry of such merchandise, including issuing a CBP summons or Request for Information, and, where appropriate, detaining, excluding, seizing, or withholding release of merchandise that violates of applicable laws and regulations.”
Looking ahead, companies should incorporate consideration of these changes into their supply chain due diligence efforts. Due diligence seeking to identify potential indicators of forced labor is a different exercise from due diligence seeking to identify the nationality of specific workers. Companies will need to evaluate the location of their suppliers, tailor their due diligence efforts, and, as appropriate, determine how to assess risk without violating legal privacy protections in places like European Union.
Notably, companies must already assess the risks that forced labor exists in their supply chain as part of broader compliance efforts with new due diligence requirements and general prohibitions on the importation of goods made with forced labor into the United States. All companies need to assess their own supply chains and ensure that they have comprehensive due diligence measures in place that are both sufficient in scope to assess risks ranging from corruption to forced labor, while also responsive to specific compliance concerns, such as the presence of North Korean workers. Not an easy task.
