In case there was any doubt as to where the Biden administration stands on forced labor enforcement, United States Customs and Border Protection (CBP) stated recently that its “message to the trade community is clear: Know your supply chains.” This renewed message comes amid the release of new CBP enforcement guidance and an ever-sharpening focus — both in Washington and the capitals of many of the United States’ top trade partners — on restricting imports from China’s Xinjiang Uighur Autonomous Region. Below is the latest.
New CBP Guidance
As explained in our previous client alert, 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 — and since 2016, CBP has ramped up its enforcement. Most recently, on January 13, 2021, CBP issued a withhold/release order (WRO) directing all personnel at all U.S. ports of entry to detain cotton and tomato products grown or produced by any entities operating in Xinjiang. In conjunction with the announcement, CBP cited examples of “downstream products” that are covered by the order including apparel, textiles, tomato seeds, canned tomatoes, tomato sauce and other goods made with cotton and tomatoes that are produced in whole or in part in Xinjiang.
In response to uncertainty within the trade community surrounding the application of the January 13 WRO, CBP recently issued a series of FAQs to clarify the agency’s enforcement approach. Highlights include:
- Detainment vs. Seizure: The FAQs clarify that shipments subject to the January 13 WRO will be detained by CBP — not seized. According to CBP, upon detention of the merchandise, importers have the option to export the goods or provide proof of admissibility to the port of entry where the shipment is being detained in accordance with 19 CFR § 12.43 (see below).
- Proof of Admissibility: Perhaps the most revealing (and impactful) guidance contained within the FAQs relates to an affected importer’s burden of proof. Per the January 13 WRO, to obtain the release of detained goods, the importer must submit evidence demonstrating that the imported merchandise was not produced in whole or in part in Xinjiang using forced labor.
- According to CBP’s new guidance, supporting documentation should “trace the supply chain from point of origin of the cotton or tomatoes, to the production and processing of downstream products, to the merchandise imported into the United States.” Such tracing may be provided, for example, by submitting affidavits from the producer and source of the raw cotton or tomatoes, along with purchase orders, invoices, proof of payment, and other documents (e.g., employee time cards, wage payment receipts) to establish the source of the cotton and/or tomatoes and the lack of forced labor use. If the importer fails to submit sufficient evidence within three months of entry, the merchandise will be excluded from the U.S.
- Partial Detention: CBP also clarified that in circumstances where goods subject to the January 13 WRO account for only a portion of a shipment, the importer may file a request for a manipulation permit with the port of entry. Upon issuance of a manipulation permit, the importer may then choose to amend the entry to secure the release of the non-subject goods. Moreover, if the importer intends to contest that certain goods are subject to the WRO, those goods may be entered into a bonded warehouse.
In the backdrop of these regulatory developments, Congress is continuing its push to tighten forced labor enforcement measures even further. On February 18, 2021, a bipartisan group of lawmakers — led by Representatives Jim McGovern (D-MA) and Chris Smith (R-NJ) — reintroduced 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. Like the previous legislation, the newly introduced UFLPA would:
- Prohibit the import of goods manufactured and/or produced in Xinjiang unless CBP (1) determines by “clear and convincing evidence” that the goods were not produced wholly or in part by convict labor, forced labor or indentured labor under penal sanctions; and (2) reports such a determination to Congress.
- Establish new disclosure requirements for publicly traded U.S. companies knowingly engaging with entities involved in certain activities in Xinjiang.
- Require the Forced Labor Enforcement Task Force — which was established by the United States-Mexico-Canada Agreement Implementation Act — to issue a strategy report and provide regular updates to Congress on the steps taken to enforce the import prohibitions from Xinjiang.
Senator Marco Rubio (R-FL) introduced companion legislation that is co-sponsored by nearly 1/3 of the Senate, including 16 Republicans and 15 Democrats. Given the broad and bipartisan support for stiffer forced labor enforcement measures, it is anticipated that this legislation will move quickly.
The recent actions in Washington are not in isolation. As explained in our January 15, 2021, client alert, some of the United States’ top trading partners — including Canada and the United Kingdom — have recently announced their own measures targeting goods in Xinjiang.
More recently, on February 23, 2021, Josep Borrell, the European Union’s High Representative for Foreign Affairs and Security Policy, called on China to allow “meaningful access to Xinjiang for independent observers” for purposes of facilitating “an independent, impartial and transparent assessment” as to the reported use of forced labor. This statement comes as the European Parliament debates whether it will approve the Comprehensive Agreement on Investment (CAI), a bilateral investment accord agreed to in principle by the European Commission and China on December 30, 2020. As a pre-condition for ratification, a group of European Parliament members (including some allied with French President Emmanuel Macron) are calling on China to sign on to two conventions on forced labor under the International Labour Organization (ILO).
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.