US Announces New Strategy to Combat Forced Labor in US Imports

The strategy will build on current efforts on interdicting imports of goods made with forced labor that US Customs and Border Protection (CBP) has been enforcing since the passage of the Trade Facilitation and Trade Enforcement Act (TFTEA) in 2016.

Notably, CBP has taken a number of steps to detain merchandise that violates the ban on forced labor, and has expanded their enforcement efforts regarding imports that used forced labor to industry outreach and audits of importers. In this Alert, we outline the actions taken as part of this recent crackdown and where to find additional information in this alert.

DHS notes that it is already taking steps to prevent the importation of goods produced with forced labor, including inspecting imports, investigating suspicious trade activity, issuing notices to detain or seize particular goods at US ports, and pursuing criminal prosecutions against individuals and companies. In its new strategy, DHS announced it intends to take additional steps including:

• Increasing Investigative and Enforcement Capacity. DHS will expand its capacity to assess civil penalties and pursue criminal prosecutions against US importers for violations of forced labor authorities.

• Improving Education and Outreach to Industry Partners. DHS will educate industry on the threat of goods produced with forced labor destined for US importation and improve trade alert reporting, due diligence policies, and compliance assistance tools.

• Encouraging International Partners to Adopt Reciprocal Safeguards.

Forced Labor Ban on Imports

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 child labor – including forced child labor. Subject merchandise is subject to exclusion through withhold release orders (WROs) enforced by CBP and/or seizure, and may lead to criminal investigation of the importer(s).

When WROs are issued, importers of all sizes are often faced with the difficulty of having to prove a negative; i.e., that their goods are not made with forced labor. According to CBP, importers should update their practices, procedures, and documents to address forced labor and the nationality of workers with respect to not only immediate vendors but also suppliers of materials further back in the supply chain.

DHS/CBP Guidance

CBP has published some guidance to use as a starting point to develop procedures.

• CBP’s Informed Compliance Publication (ICP) on Reasonable Care. 
• CBP’s “Forced Labor” webpage, including the active, withhold release orders and findings, OECD guidance on multinationals on forced labor prevention measures, and forced labor fact sheets.

In order to demonstrate that reasonable care was exerted, importers are expected to have documented controls in place that can mitigate the risk of importing merchandise made with forced labor, as well as a comprehensive and transparent social compliance system. The ICP lists 12 questions to indicate that an importer has exercised “reasonable care” for forced labor.  The expectation is that importers (at a minimum) have taken reliable measures to ensure imported goods are not produced wholly or in part with convict labor, forced labor, and/or indentured labor (including forced or indentured child labor).

DHS has provided additional guidance on due diligence steps to take in regarding to use of North Korean labor in the supply chain on its website.

• The answer to Question 8 in particular provides steps that DHS agencies will likely review when reviewing imports or importers for forced labor issues.  These steps include among others:
  • a high-level statement of policy demonstrating the company’s commitment to respect human rights and labor rights;
  • a rigorous continuous risk assessment of actual and potential human rights and labor impacts or risks of company activities and relationships, which is undertaken in consultation with stakeholders, including governments, local business partners, and members of civil society such as local communities, workers, trade unions, vulnerable groups, and non-governmental organizations.;
  • integrating these commitments and assessments into internal control and oversight systems of company operations and supply chains; and,
  • tracking and reporting on areas of risk.

• Importers should also monitor recent reports on child labor or forced labor.  For example, the International Labor Organization recently published a child labor and forced labor monitoring report on the Uzbekistan cotton harvest.

CBP Expands Enforcement

The enforcement effort recently has expanded from WROs to include a review of forced labor procedures by CBP’s Office of Regulatory Audit. According to CBP:

Audits can reveal an importer’s knowledge of forced labor and the steps being taken to oversee its supply chain.  For example, auditors check records and related documents, interview company officials and look for clauses in vendor contracts warning against forced labor.

Importers should have a comprehensive and transparent social compliance system in place to combat child and forced labor.

Other enforcement measures taken by CBP include:

• Adding a Forced Labor Division in November 2017 to develop enforcement cases for the Office of Field Operations. At the same time, the division reaches out to stakeholders with webinars and other tools that help importers operate within the law.
• Actively pursuing tips from the public, stakeholders and other agencies since goods made by forced labor look the same as legitimate shipments.
• Gathering forced labor intelligence by building relationships with those close to the issue—sales representatives, lawyers, account managers and associations.

Conclusion

This increase in enforcement measures indicates forced labor will be a DHS/CBP priority going forward.  Importers need to be prepared for the resulting expansion of a broad range of enforcement efforts, particularly when sourcing high-risk goods or from high-risk countries. Companies that have a robust compliance process are more likely to detect risk of forced labor and answer those critical questions. Importers should review existing processes and assess practices along the supply chain, as well as conduct employee training. Arent Fox can help with those efforts.