Hot Topics in International Trade - August 2022 - Primer on Forced Labor Enforcement for U.S. Importers

Braumiller Law Group, PLLC
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Braumiller Law Group, PLLC

This Primer provides introductory guidance to complying with U.S. forced labor laws for importers, and includes an introductory overview to forced labor laws, U.S. Customs and Border Protection’s (CBP) authority to enforce forced labor laws, outlines importer requirements under The Uyghur Forced Labor Prevention Act, describes the detention processes for imported goods made with forced labor, lists key recommended compliance actions for adhering to U.S. forced labor laws, and provides helpful resources for complying with U.S. forced labor laws.

I. An Introduction to Forced Labor Laws and Enforcement for Imported Merchandise in the United States

The U.S. law prohibiting imports of goods made with forced labor is Section 1307 under Title 19 of the United States Code. Since the Trade Facilitation and Trade Enforcement Act in 2016 that repealed the statutory exception that allowed many products made using forced labor to enter the U.S., CBP has ramped up enforcement of products made using forced labor, which are primarily from China.[1] Since then, CBP has issued over 50 Withhold Release Orders (“WROs”), assessed millions in civil penalties associated with forced labor products, and detained over 900 shipments under the authority of those WROs and Findings. The major industry areas that are targeted for U.S. forced labor enforcement include cotton and other textiles, cell phones, computers, electronics, and foodstuffs and seafood.

1.1) Defining Forced Labor
Although forced labor is defined under U.S. law under 19 U.S.C. 1307, much of the terminology surrounding forced labor is defined by international law in the Forced Labor Conventions administered by the International Labor Organization (ILO).[2] The term “Forced labor” is defined as all work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily.[3] The term “forced labor” includes slave labor, but also includes forced or indentured child labor and indentured servitude.[4] As defined by the ILO[5], the phrase “menace of any penalty” refers to a wide range of penalties used to compel someone to work. The phrase “offered voluntarily” means the free and informed consent of a worker to take a job and his or her freedom to leave at any time.[6]

The ILO has published several indicators that forced labor is occurring, including debt bondage, abuse of worker vulnerabilities or disabilities, withholding of identity documents and wages, restriction of movement, intimidation and threats, physical and sexual violence, abusive working and living conditions, and excessive overtime.[7] However, certain types of nonconsensual labor do not fall under the ILO’s definition of “Forced Labor,” such as community service imposed by a court of law, work in an emergency (such as war, fire, flood, famine, or earthquake), prison labor under supervision and control of a public authority, and normal civic obligations (such as compulsory military service).[8]

2.2.) Penalties and Forced Labor Enforcement

Under U.S. law, penalties for importing goods made using forced labor are severe and can include issuance of new import restrictions (such as WROs and Findings), the detention/seizure/forfeiture of violative merchandise, civil penalties for entering merchandise contrary to law under 19 U.S.C. 1595a(b), up to 20 years of imprisonment for individuals under 18 U.S.C. 1589, and revocation of import privileges, such as bond or CTPAT privileges.

For an example of penalties for importing goods made using forced labor, in 2020, CBP collected $575,000 in penalties under 19 U.S.C. 1595a(b) from Pure Circle U.S.A., Inc., who was found to have violated a WRO targeting a Chinese company named Inner Mongolia Hengzheng Group Baoanzhao Agricultural and Trade LLC (“Baoanzhao”) after an investigation into twenty of Pure Circle’s stevia shipments. Another example includes a seizure at the port of New York/Newark of 13 tons of hair products worth over $800,000 in 2020 that were imported in violation of a WRO on hair products from Chinese company Lop County Meixin Hair Product Co. Ltd.

II. Withhold Release Orders (WROs) and Findings

CBP can issue WROs and Findings after investigating[9] foreign companies that use forced labor, which prohibit the goods made by those companies to enter the U.S. The goods that are subject to a WRO or Finding are subject to detention, seizure, and forfeiture by CBP if the goods are imported into the U.S.

2.1) Withhold Release Orders (WROs)

When CBP determines that there is a reasonable suspicion that a company is using forced labor in its foreign factory, supply chain, or geographic region, the agency may issue a WRO. The WROs will list the foreign company that is using forced labor, provide a product description of the prohibited goods, and provide the ILO indicators of forced labor present. WROs are posted to the forced labor page on CBP’s website at https://www.cbp.gov/trade/programs-administration/forced-labor. At the request of an interested petitioner, WROs and Findings can be modified (suspended) if the forced labor indicators are remediated at the foreign company, and revoked if there is proof the foreign company is no longer engaged in forced labor.

The most notable[10] and comprehensive WRO in effect is the Hoshine Silicon Supply Chain WRO, which applies to “silica-based products made by Hoshine Silicon Industry Co. (Hoshine) and its subsidiaries as well as to materials and final goods derived from or produced using those silica-based products, regardless of where the materials and final goods are produced.” The WRO further specifies that the prohibition applies to all products in the company’s supply chain, including component materials (such as silicon, including metallurgic grade silicon, silicon oxide and certain silicones in primary forms), intermediate goods (such as additives for aluminum alloys and concrete, integrated circuits, and semiconductor devices), and finished Hoshine goods (such as adhesives, electronics, lubricants, photovoltaic cells, solar generators, solar panels, and parts thereof). The most guidance on forced labor compliance comes from this WRO, including a highly detailed WRO description, frequently updated FAQs, and a detailed importer guidance document.

2.2) Findings

Different from a WRO, a Finding is a determination made by the CBP Commissioner that information conclusively demonstrates that merchandise is produced by forced labor. This is different from a WRO in that a Finding requires probable cause that forced labor is being used, while a WRO merely requires a reasonable suspicion that forced labor is being used. Findings also contain a list of the foreign company that is using forced labor, provide a product description of the prohibited goods, and provide the ILO indicators of forced labor present. Findings are published in the Customs Bulletin, Federal Register, and are posted to the forced labor page on CBP’s website at https://www.cbp.gov/trade/programs-administration/forced-labor. Like WROs, Findings can be modified or revoked if there is evidence no forced labor is being used by the foreign company.

2.3) Disposition and Proof of Admissibility

Unlike the detention process used for most imported merchandise under 19 U.S.C. § 1499 and 19 C.F.R. 151.16, merchandise detained under a WRO or Finding is subject to the detention process under 19 C.F.R. 12.42-45 as merchandise produced by convict, forced, or indentured labor.[11]

When merchandise is detained under a WRO, it must be exported within three months after the date of importation, or the importer must prove that the goods were not made using forced labor. If the detained goods are not exported or sufficient proof is not offered related to forced labor used in the production of the goods, the merchandise will be deemed abandoned and destroyed by CBP. Merchandise detained under the authority of a Finding cannot be exported to comply, and the importer must prove admissibility or abandon for destruction.

Under 19 C.F.R. 12.43, to prove that goods were not made using forced labor under a WRO or Finding, the importer must provide the following two documents within three months of the date of importation.

1) Certificate of Origin that No Forced Labor was Used – The importer must submit a certificate of origin that must be signed by the foreign seller or owner of the article and provided to CBP within three months of the date of importation. The certificate of origin must contain the following language:

Certificate of Origin

I, ________________, foreign seller or owner of the merchandise hereinafter described, certify that such merchandise, consisting of ________________ (Quantity) of ________________ (Description) in ____________________ (Number and kind of packages) bearing the following marks and numbers ____________ was mined, produced, or manufactured by ________________ (Name) at or near ________________, and was laden on board ____________________ (Carrier to the United States) at ________________ (Place of lading) (Place of final departure from country of exportation) which departed from on ____________; (Date); and that ____________________ (Class of labor specified in finding) was not employed in any stage of the mining, production, or manufacture of the merchandise or of any component thereof.

Dated / Signature

2) Affidavit that No Forced Labor was Used – The importer must submit a statement from the ultimate consignee of the merchandise that must contain the following components within three months of the date of importation:

i) Describe in detail how the importer made every reasonable effort to determine the source of the merchandise and of every component to ascertain the character of labor used in the production of the merchandise,

ii) The full results of the importer’s investigations regarding forced labor, and

iii) A statement of the importer’s belief that no forced labor was used.

Under 19 C.F.R. 12.43(c), if CBP is satisfied with both documents described above, it will grant release of the goods to the importer. However, if CBP is not satisfied and continues to believe the goods were made using forced labor, the merchandise will be subject to seizure under 19 C.F.R. Part 162.

III. The Uyghur Forced Labor Prevention Act of 2022 (UFLPA)

The Uyghur Forced Labor Prevention Act (“UFLPA”), which took effect on June 21, 2022, bans the importation of all goods made in the Xinjiang Uyghur Autonomous Region (“XUAR”) in China. Goods imported from the XUAR or goods whose inputs, raw materials, or components are made from goods from the XUAR, CBP will presume that those goods were used using forced labor and is directed to seize the goods upon entry. The UFLPA tapped the Forced Labor Enforcement Task Force of the Department of Homeland Security to create a UFLPA Strategy for future enforcement actions pursuant to the UFLPA and maintain an UFLPA entity list, which can be found on the DHS website here: https://www.dhs.gov/uflpa.

3.1) The Presumption that goods made in the XUAR are made using forced labor

The UFLPA creates a statutory presumption that any good made in the XUAR is made with forced labor. This means that all goods made in the XUAR, including goods produced with raw materials, inputs, and subassemblies made in the XUAR are banned from entry into the U.S. This rule goes broader than the product specific Withhold Release Orders issued by CBP covering tomatoes and cotton products from the XUAR. Using the UFLPA presumption and its authority under 19 U.S.C. § 1307, CBP can now seize goods it believes were made in XUAR, destroy those goods if they are not exported (absent proof of no forced labor), issue penalties against the importer, revoke import privileges, and investigate and audit importers that it believes are importing goods from XUAR.[12]

3.2) Exemptions to the UFLPA Presumption

CBP can make an exception to the presumption if the importer proves the goods were not made using forced labor. Exceptions to the UFLPA presumption will be made on a case-by-case basis at the discretion of CBP. To prove that merchandise was not made using forced labor, the importer must prove the following are true:

  1. The importer fully complied with new guidance (see below) and all relevant regulations,
  1. The importer responded to all inquiries by CBP regarding the use of forced labor, and
  1. In this process, the importer provided “clear and convincing evidence” that the merchandise and its raw materials, inputs, and subassemblies were not mined, produced, or manufactured in whole or in party by using forced labor.

If CBP determines the importer has met all three elements above, CBP will grant the release of the merchandise as an exception to the presumption of forced labor used to produce the merchandise made in the XUAR. The information submitted by the importer is subject to public disclosure and must be reported to Congress under Section 3(c) of the UFLPA.

3.3) The Clear & Convincing evidence standard

Clear and convincing is evidence that is highly and substantially more likely to be true than untrue; the fact finder must be convinced that the contention is highly probable. There are two recent CBP Rulings that give us some insight as to what evidence CBP needs to determine that goods were not made using forced labor.

In Customs Ruling HQ H317249 (May 5, 2021), CBP determined the importer, Proof Apparel, did not provide clear and convincing evidence that its goods were not made by North Korean laborers in violation of the CAATSA. Proof Apparel provided an independent audit of the factory that produced the goods, photos of the employees, and photo-ID cards of the employees of the factory. However, CBP did not find this evidence creditworthy because the auditors only interviewed 10 out of the 49 workers during the audit, there were inconsistencies in the reports of the number of employees at the factory, CBP believed the photos provided showed conditions of Korean forced labor camps, and the photo-ID cards did not show the nationality of the workers.

In Customs Ruling HQ H318182 (May 10, 2021), CBP held that Uniqlo Co. did not prove that the product was made without using forced labor in accordance with the Xinjiang Production and Construction Corps (“XPCC”) WRO. CBP determined that a list of production steps and production records for the yarn, including records that identified the cotton and cotton producer of the raw cotton, transportation documents from the cotton grower to the yarn maker, supporting documents related to employees that picked the cotton, their timecards, wage payment receipts, and daily process reports that related to the raw cotton sold to the yarn producer would be required to prove the goods were not produced by means of forced labor. CBP held that, although Uniqlo provided documents of the sale, acquisition, source location, transportation, and delivery of the raw cotton used to produce the clothes, Uniqlo did not provide documents showing that no forced labor was used in the growing and harvesting of the cotton.

The above rulings demonstrate that it can be exceedingly difficult to prove that no forced labor was used by clear and convincing evidence if the goods are from the XUAR or if CBP has already made up its mind that the goods were made using forced labor given the current evidence. The burden of providing clear and convincing evidence could include obtaining lab testing reports of the contents of the products (such as type of cotton DNA) and intense upkeep of foreign factory documentation, such is not customary practice for many importers.

3.4) Procedures for obtaining exceptions to the UFLPA Presumption

When an importer receives a detention notice regarding their shipments, the importer may respond to the detention notice within 30 days, pursuant to 19 U.S.C. § 1499 and 19 C.F.R. 151.16. If a shipment of complaint goods is intermingled with non-compliant goods, then the importer can request CBP to manipulate the shipment and separate the complaint goods from the non-complaint goods. The importer may export non-compliant goods at anytime during the detention process. When issued a seizure notice, the importer must use the petition process in 19 C.F.R. Part 171 to request an exception to the UFLPA rebuttable presumption.[13]

IV. Recommended Actions for Importers to Comply with U.S. Forced Labor Laws

Below are the actions, measures, and documentary proof that Braumiller Law Group recommends for importers to prove to Customs that their imported merchandise was not made using forced labor and comply with U.S. forced labor laws:

  • Document the Upstream Labor and Material Production:

Trace the origin of the goods and their components by compiling a detailed document trail including, but not limited to, the following types of documents and information.

  • A list of suppliers associated with each step of the production process, including names and contact information (addresses, email addresses, and phone number).
  • Commercial invoices.
  • Affidavits from each company or entity involved in the production process that no forced labor was used.
  • Purchase orders.
  • Packing lists.
  • Bills of material for every component of the imported article.
  • Certificates of origin.
  • Payment records.
  • Seller’s inventory records, including dock/warehouse receipts.
  • Shipping records, including manifests, bills of lading (e.g., airway/vessel/trucking).
  • Buyer’s inventory records, including dock/warehouse receipts.
  • Wage documents such as timecards or pay stubs from the factories showing the time workers entered and left the factory.
  • Videos and photos of the goods or parts of goods being made in the factories abroad.
  • Videos and transcripts of interviews with workers at the foreign factories showing proof that the worker is not working under duress, such as proof of no handcuffs, consent to labor, and acceptable living conditions.
  • A visual graphic of the importer’s Supply Chain map identifying all entities involved in production of the goods.
  • Vet New and Existing Suppliers and Vendors: When initiating a relationship with a new supplier, request that the new supplier answer a forced labor questionnaires, welcome on-site visits, and sign certificates that verify that no prison labor was or is being used, no indentured servitude (labor recruiters) was or is practiced, and that no child labor or other forced labor was, or is, being used. This can be done by sending a company representative or hiring a private investigator to physically go to the foreign factory and take videos of the working conditions, the workers, the living areas of the workers (if any), the management of the workers, and the factory in production. Additionally, CBP will accept video interviews with workers that show the absence of duress, restraint, coercion, or other signs of involuntary work, such as the absence of handcuffs or physical evidence of violence, like cuts or bruises. If your foreign suppliers push back or refuse to provide this type of information, CBP has advised importers to not import goods from those foreign suppliers.
  • Maintain and monitor a company-wide Forced Labor Compliance Manual: Maintain forced labor procedures for detainments and other CBP actions pursuant to WROs, including proof of admissibility statements and certificates of origin. Adopt or amend written compliance manuals, procedures, and other action-oriented written guidance, which should include a high-level statement of policy from senior management demonstrating the company’s commitment to not using forced labor it its supply chain. This includes hiring a trade compliance manager or expert team and providing training for employees and subcontractors regarding forced labor compliance. These forced labor procedures operate effectively as a portion or section of the company’s greater trade compliance manual.
  • Conduct periodic Forced Labor Supply Chain Audits: Conduct periodic supplier audits for forced labor using independent auditors to ensure forced labor compliance in a constantly changing global supply chain and increasing CBP enforcement. When conducting post-entry audits, the auditor should search for factors such as the country of origin of the merchandise declared, the names of the foreign manufacturers and vendors, and the dates that the merchandise was produced, shipped, and entered. Periodic auditing requires effectively monitoring the company’s supply chain for possible discrepancies with an eye for forced labor.
  • Include Forced Labor Terms and Conditions in Contracts: Include forced labor terms and conditions in operations and sales contracts that requires that goods purchased in the supply chain be made without forced labor. Add language in buying contracts that prohibits forced labor products and for products to be sourced from the XUAR and extend the language to include materials and services from subcontractors. Although adding terms and conditions alone will not get an importer off the hook, it is evidence that the importer is undertaking reasonable care to avoid buying products made with forced labor and allows the importer to recover losses associated with forfeiture or destruction of merchandise made using forced labor.
  • Obtain a Customs Ruling in Advance: CBP has advised importers that they should consider obtaining an advanced ruling to determine if a product or supply chain is using forced labor or not under 19 CFR Part 177. These agency rulings carry the force of law and may be applied to subsequent importations that are substantially similar to the specific facts as outlined in the ruling. To obtain a ruling, an importer must submit a request describing the product and supply chain in detail to the CBP Office of Trade, Regulations and Rulings Directorate, Cargo Security, Carriers and Restricted Merchandise branch for a Headquarters ruling.
  • Beware and Avoid Hotspot Industries for Forced Labor: Importers should beware of the risks of the industries in China, North Korea, Malaysia using forced labor, such as industries for quartz, cell phones and similar tech, tomatoes and downstream products of tomatoes (like tomato sauce), other vegetables and food products, computers, hair products, peeled garlic, cotton and downstream products of cotton, silicon products, handbags and leather accessories, rubber gloves, stevia, tea, palm oils, semiconductors, engines, pipes, hand tools, chemical compounds, and textiles.
V. Resources for Forced Labor Compliance

Below is a comprehensive list of web links to resources concerning compliance with U.S. Forced Labor laws for imported merchandise.

[1] Prior to 2016, Section 1307 contained an exception that allowed for the importation of merchandise produced with forced labor if the goods were not produced in sufficient quantities in the United States to meet the consumptive demand of the United States.

[2] https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C029.

[3] https://www.ilo.org/global/topics/forced-labour/definition/lang–en/index.htm.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] For more on the investigation timeline and process for WROs and Findings, visit CBP’s at https://www.cbp.gov/sites/default/files/assets/documents/2021-Sep/Slicksheet_Forced_Labor_timelines_investigative_benchmarks_508Compliant_Pub_2.pdf.

[10] The UFLPA superseded the WROs related to XUAR for goods imported after June 21, 2022. See below.

[11] If CBP excludes the merchandise, rather than detains and seizes the merchandise, the importer must protest the exclusion under 19 C.F.R. Part 174 in order to prove the goods were not made using forced labor.

[12] The UFLPA is not the first forced labor statute to establish a presumption that goods in a geographic region are made with forced labor. For example, in 2017, Congress enacted a presumption of forced labor for North Korean labor via the Countering America’s Adversaries with Sanctions Act (“CAATSA”).

[13] If CBP excludes the merchandise, rather than detains and seizes the merchandise, the importer must protest the exclusion under 19 C.F.R. Part 174 in order to request an exception to the UFLPA Presumption.

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