This follows months of increasing pressure from labor and human rights groups and members of Congress to halt imports of cotton and agricultural products from China’s Xinjiang Uyghur Autonomous Region (XUAR). Additionally, the US Government is considering seeking increased enforcement authority to prevent certain importers from being able to import at all into the United States.
What Is Happening?
On January 13, 2021, CBP issued a region-wide withhold release order (WRO) against all cotton products and tomato products produced in the XUAR. Although this follows a previous expansive WRO against the Xinjiang Production and Construction Corps, this is the first time that CBP has ever issued a region-wide WRO.
“This WRO will direct CBP personnel at all US ports of entry to detain cotton products and tomato products grown or produced by entities operating in Xinjiang. These products include apparel, textiles, tomato seeds, canned tomatoes, tomato sauce, and other goods made with cotton and tomatoes. Importers are responsible for ensuring the products they are attempting to import do not exploit forced labor at any point in their supply chain, including the production or harvesting of the raw material,” said CBP in a news release.
The authority for the action is provided in 19 U.S.C. § 1307, which prohibits the importation of merchandise mined, produced, or manufactured, wholly or in part, in any foreign country by forced or indentured labor — including forced child labor. Merchandise is subject to detention and rejection through CBP WROs.
In addition, recently the Department of Homeland Security (DHS) has proposed that “Congress should amend Section 526(f) of the Tariff Act of 1930 (19 U.S.C. 1526) to allow for the United States to seek an injunction against the importers of violative merchandise… and in addition, a civil penalty threshold to match the criminal penalty threshold should be created.”
What Does This Mean for Importers?
A region-wide WRO creates serious risk and has far-reaching implications for importers. In issuing the WRO, CBP has increased importers’ responsibility to ensure that the products they seek to import are not made using forced labor at any point in their supply chain, including the production or harvesting of the raw material. Given the industrial realities of these supply chains, such as lack of visibility in upstream harvesters, aggregation/comingling of raw inputs, and information asymmetry, CBP’s expanded enforcement posture will prove burdensome to importers that are caught off guard. It is now more critical than ever for importers to develop comprehensive compliance plans to reduce risk to operations.
Why Is This Happening Now?
According to the same press release, CBP issued this WRO against cotton products and tomato products produced in the XUAR “based on information that reasonably indicates the use of detainee or prison labor and situations of forced labor. The agency identified the following forced labor indicators through the course of its investigation: debt bondage, restriction of movement, isolation, intimidation, and threats, withholding of wages, and abusive living and working conditions.”
In addition to what may be the progression of a previously expansive WRO against XUAR-origin goods, CBP’s action occurs against a backdrop of pending legislation that would create a “rebuttable presumption” that any products imported or sourced from the XUAR are made with forced labor, extensive efforts by CBP to gather information on supply chains in the XUAR through Risk Analysis and Survey Assessments, and proposals to enhance penalties for forced labor violations.
Given the change in administrations, with Democrats controlling both houses of Congress, and President-Elect Biden appointing trade officials that may have an eye toward leveraging US international trade policy to address labor practices abroad, CBP’s WRO may be a harbinger of the incoming administration’s enforcement approach to forced labor.
What It Means for Apparel Manufacturers and Importers
Companies in the fashion, luxury, and agricultural space need to take concrete actions to mitigate exposure to risk, prepare for pending legislation, and ensure compliance with recent sanctions of Chinese companies in Xinjiang province by the US Departments of Treasury and Commerce. Make no mistake about it, reviewing supply chains, increasing visibility, and developing comprehensive compliance policies is now more important than ever.