Homeland Security Joins in Broad Enforcement Effort Against Forced Labor in Apparel Supply Chains

ArentFox Schiff

Arent Fox

The Department of Homeland Security (DHS) blocked imports of cotton products from a major Chinese state-owned firm in the Xinjiang Uighur Autonomous Region (XUAR) on December 2, saying the company uses forced labor of ethnic Uighur Muslims.

In blocking allegedly forced labor imports, DHS joins the Trump Administration’s efforts to punish human rights abuses in the region. The Administration has also issued questionnaires to importers to gather more information on cotton imports from the region.

We discuss what happened, other recent enforcement actions in the forced labor area, and what it all means for apparel importers below.

What Happened

Specifically, Customs and Border Protection (CBP) issued a withhold release order (WRO) on all cotton products made by the Xinjiang Production and Construction Corps (XPCC). Although the WRO was announced on December 2, it was backdated to take effect on November 30, 2020. This move is not entirely unexpected, and we raised this possibility in a previous alert.

“The WRO applies to all cotton and cotton products produced by the XPCC and its subordinate and affiliated entities as well as any products that are made in whole or in part with or derived from that cotton, such as apparel, garments, and textiles," 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.

CBP says XPCC employs 12 percent of the Xinjiang population and produces 17 percent of its cotton products; the agency says the action could potentially affect “billions” in imports.

Effectively, the move acts as an import ban on the named items.

Recent Enforcement

The WRO stops short of a region-wide order on all cotton products from Xinjiang, which produces 85 percent of China’s cotton. DHS views this measure as having the practical effect of a regional ban but easier to enforce because it is taken against a single manufacturer and its affiliates. In announcing the measure, CBP indicated it is still considering a full regional WRO once it has determined practical steps to implement such an order.

In the past few months, there has been increasing pressure from labor and human rights groups, as well as members of Congress, to halt imports of cotton and agricultural products from Xinjiang.

Pending legislation: The House recently passed legislation similar to the new WRO that would require companies to provide “clear and convincing evidence” that any products imported or sourced from Xinjiang are not made with forced labor, thereby placing the burden of proof on the importer. The bill is currently in the Senate, but no actions are yet scheduled.

Importer Questionnaire: In the days leading up to the WRO, CBP also sent a lengthy questionnaire to a number of US apparel importers to gather information on supply chains in Xinjiang. The questionnaires include 36 in-depth questions on supply chains in Xinjiang from farming and raw materials to export. These questionnaires would help CBP assess risk among importers but may also herald future enforcement action by the agency.

What It Means for Apparel Manufacturers and Importers

Fashion and luxury goods companies need to be concerned about these actions, the pending legislation, and other recent sanctioning of Chinese companies in Xinjiang province by the US Departments of Treasury and Commerce and other CBP developments related to importing products that contain fabric made with prison or forced labor.

We discuss other steps importers can take to review their supply chain and other compliance steps — as well as a recent CBP enforcement case where CBP imposed half a million in penalties — in the following alert.

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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