Since August 2020, U.S. Customs and Border Protection (CBP) has initiated eight separate enforcement actions targeting goods from China’s Xinjiang Uighur Autonomous Region (XUAR) — none more sweeping than a January 13, 2021, withhold/release order (WRO) requiring the detention of all cotton and tomato products grown or produced by any entities operating in Xinjiang. Given the Biden administration’s firm stance on forced labor, as noted in the president’s newly released 2021 Trade Policy Agenda — which includes a commitment to “engage with allies to achieve commitments to fight forced labor and exploitative labor conditions” — CBP can be expected to be more steadfast in its commitment to eradicate human trafficking and indentured labor by leveraging its use of WROs and enforcement actions.
So, too, as demonstrated by the recent (and growing) flurry of activity in Washington surrounding forced labor and the U.S. supply chain, the January 13 WRO is likely a prelude to a broader enforcement regime on the horizon. Below is the latest.
As reported in our previous client alert, the congressional focus on forced-labor enforcement is mounting. On March 18, the U.S. Senate Finance Committee conducted a virtual hearing titled “Fighting Forced Labor: Closing Loopholes and Improving Customs Enforcement to Mandate Clean Supply Chains and Protect Workers.” In addition to receiving testimony from a variety of private-sector stakeholders, the committee displayed the broad and bipartisan support for strengthened enforcement measures.
In the near term, all eyes are on the Uyghur Forced Labor Prevention Act (UFLPA), a bill that passed the House of Representatives in the last Congress by a vote of 406 to 3, but ultimately stalled in the Senate. This Congress, Senators Marco Rubio (R-FL) and Jeff Merkley (D-OR) introduced a scaled-back version of the UFLPA, which is now co-sponsored by more than one-third of the Senate, including 21 Republicans, 14 Democrats, and one independent. Highlights of the bill include:
- Rebuttable Presumption: Within 300 days of enactment, all goods manufactured and/or produced in Xinjiang would be prohibited from importation into the United States unless CBP determines that: (1) the importer of record has fully complied with as-yet written guidance on forced-labor due-diligence measures; (2) the importer of record has “completely and substantively responded to all inquiries for information submitted by [CBP] to ascertain whether the goods were manufactured through forced labor”; and (3) the subject goods were not produced wholly or in part by forced labor, or the president of the United States certifies that the People’s Republic of China (PRC) is not impeding efforts to address forced labor in the PRC.
- New Sanctions Authority: The bill would amend the Uyghur Human Rights Policy Act of 2020 to add a sixth criterion (“serious human rights abuses in connection with forced labor”) to the existing list of conduct subject to U.S. sanctions.
- Congressional Report: The bill requires the U.S. Secretary of State, in coordination with other federal agencies, to issue a report to Congress outlining a strategy for promoting initiatives to enhance international awareness of and to address forced labor in Xinjiang.
Although companion legislation was introduced in the House, the trade community appears to be coalescing around the Senate version. Unlike the House version, which takes a more expedited and onerous approach to enforcement, the Senate version requires a public comment period and public hearings to solicit feedback from importers and other stakeholders prior to establishing an enforcement strategy. Notably, the Senate version also omits the House version’s disclosure requirements for publicly traded U.S. companies engaging in certain activities in Xinjiang.
According to recent reporting, Congress could move on the legislation by April, potentially in conjunction with a broader legislative package aimed at decreasing U.S. trade dependency on China.
In addition to congressional focus on forced labor, CBP has provided informed compliance detail to increase awareness and compliance, including enhancements to CBP’s Reasonable Care Informed Compliance Publication. CBP is also expected to add forced labor to its list of Priority Trade Issues (PTIs), to further its commitment to use enforcement actions potentially leading to a significant increase in investigations and penalties.
CBP’s investigations will undoubtedly expand outside of cotton and tomatoes (and their downstream products), which have received the most focus, as evidenced by CBP’s first enforcement action against stevia sweetener importer, Pure Circle U.S.A., Inc., last August 2020. While that was the first penalty-related collection that CBP has secured for forced labor under the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), it is unlikely to be the last. For example, polysilicon (a material used to make solar panels) recently reportedly was linked to forced labor in China, leading many to speculate that it and other critical minerals will be subject to a future enforcement action.
Industry Challenges and Uncertainty
As highlighted at the March 18 congressional hearing, CBP’s recent enforcement actions have exposed the challenges facing importers and other stakeholders in ensuring that existing supply chains — often multi-layered and highly complex — are disconnected from forced-labor activities.
At the hearing, several witnesses underscored the need for CBP to strengthen its coordination with industry, calling on CBP to: (1) disclose relevant detention data, including the number of detentions attributable to specific WROs, the evidence used by the agency to determine when a WRO is warranted and the evidence that triggers each detention under a WRO; and (2) establish a clear and uniform standard as to the type of data an importing company must collect from a particular country of origin to avoid supply-chain disruptions. Additional recommendations to improve CBP/industry coordination are also contained in a report issued by the Commercial Customs Operations Advisory Committee (COAC).
In response to industry uncertainty surrounding the January 13 WRO, CBP has continued to roll out guidance and other explanatory documents, including FAQs to clarify the agency’s enforcement approach and a Fact Sheet describing the process for obtaining a modification or revocation of a WRO. But as to the disclosure of detention data, the path remains uncertain, with CBP officials recently noting their concern that such disclosures may compromise the agency’s active investigations, which remain ongoing even following the issuance of a WRO.
It is anticipated that this tug-of-war between CBP and importers/stakeholders as to the logistics of enforcement will be a prominent topic of discussion in the days ahead.
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.