Forced Labor Enforcement: CBP’s Latest Seizure Sends “Strong Message” to the Trade Community

Faegre Drinker Biddle & Reath LLP

On May 4, 2021, U.S. Customs and Border Protection (CBP) announced the seizure of a shipment containing 3.97 million nitrile disposable gloves that, according to CBP, is directly linked to forced labor practices in Malaysia.

Per the announcement, the seizure of these products — which were produced by a subsidiary of Top Glove Corporation Bhd. and were, presumptively, intended for use as personal protective equipment (PPE) — sends a “clear message” to the trade community that, when it comes to imports connected to forced labor, CBP is maintaining a zero-tolerance policy.

WRO and Investigation Related to Top Glove

Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307) prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labor. Since 2016, CBP has ramped up its enforcement of Section 307 — and, in particular, its use of withhold/release orders (WROs), which may be issued when information “reasonably but not conclusively” indicates to CBP that goods are made, in whole or in part, using forced labor.

On July 15, 2020, CBP issued a WRO on “disposable gloves” from two subsidiaries of Top Glove, located in Malaysia, based on information reasonably indicating that such gloves were manufactured using forced labor. The WRO then led to a nearly nine-month investigation, culminating in CBP’s formal Notice in the Federal Register, dated March 29, 2021, formally authorizing the seizure of certain disposable gloves produced by Top Glove in Malaysia for violation of 19 U.S.C. § 1307. According to CBP, Top Glove’s violations include debt bondage, excessive overtime, abusive working and living conditions, and retention of identity documents.

The May 4 seizure, which flows directly from CBP’s March 29 seizure authorization, is significant in several ways. Aside from the nature of the merchandise (PPE) and its estimated value ($518,000), the seizure involves disposable gloves produced by a Top Glove subsidiary that was not named in the July 15 WRO. This indicates that the March 29 seizure authorization — and perhaps, more broadly, future seizure authorization following a forced labor finding — can extend beyond the predicate WRO. In the case of Top Glove, this means that the March 29 seizure authorization is potentially applicable to dozens of subsidiaries operating in Malaysia; some of which are operating under a business name that contains no readily apparent connection to Top Glove.

Industry Challenges and Uncertainty

As explained in our most recent client alert on this issue, CBP’s heightened enforcement actions have exposed many challenges facing importers and other stakeholders in ensuring that existing supply chains — often multi-layered and highly complex — are disconnected from forced-labor activities. In recent months, stakeholders have continued to underscore the need for CBP to strengthen its coordination with industry by, for example, disclosing (1) relevant detention data including the number of detentions attributable to specific WROs; (2) the evidence used by the agency to determine when a WRO is warranted; and (3) the evidence that triggers each detention under a WRO (including the release of manufacturer IDs).

In response, CBP officials continue to note their concern that such disclosures may compromise the agency’s active investigations, which remain ongoing even following the issuance of a WRO. As to the release of manufacturer IDs specifically, current and former CBP officials have recently admitted that, while such information may be helpful to the private sector’s compliance efforts, such information is “law enforcement sensitive.” And according to these officials, in the case of a regional WRO (e.g., the January 13, 2021, WRO related to cotton and tomato products produced in China’s Xinjiang Uyghur Autonomous Region), the release of such information would likely violate federal trade secret laws.

It is anticipated that this tug-of-war between CBP and importers/stakeholders as to the logistics of enforcement will continue to play out in the days ahead; and may, eventually, prompt meaningful statutory and/or administrative reforms for the purpose of facilitating private sector compliance.

For More Information

The increasing U.S. (and global) focus on forced labor practices continues to underscore the need for both U.S. importers and exporters to carefully review and potentially reassess their supply chains. Faegre Drinker has assisted clients at all stages of government trade inquiries and assessments, from responding to questionnaires to successfully implementing strategies to protect supply chains and ensure regulatory compliance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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