One of the most significant trade issues businesses need to be aware of today is the increased focus on forced labor compliance. Most companies understand that goods made by forced labor are not allowed in their supply chain. The US government prohibits the importation of such goods and will stop them at the border.
What happens if a company imports goods made with forced labor in its supply chain?
If a company attempts to import goods made by forced labor within its supply chain, US Customs and Border Protection (CBP), a part of the US Department of Homeland Security, will likely prevent those goods from entering at the border. CBP has statutory authority to enforce all prohibitions against the importation of goods with any forced labor in the supply chain.
CBP enforces these prohibitions through two mechanisms.
- A Withhold Release Order holds suspect goods at their point of entry (e.g., airport, harbor, etc.) for days, weeks, or even months until all questions related to the supply chain and the creation of those goods are addressed. It’s up to the company to provide this information or re-export the detained shipments. The importer is also responsible for storage costs of their detained shipments – leading to some costly expenses in some circumstances.
- If the company provides insufficient evidence to demonstrate their compliance, CBP will issue a Finding, a formal determination that merchandise is produced by forced labor If a Finding is issued against those goods, the government will formally seize them, and future goods will be excluded until the Finding is lifted. In recent years, we’ve seen an increase in WROs, Findings, leading to more seizures and exclusions. Additionally, legislative action has increased CBP’s authority and willingness to look into these issues.
What triggers an investigation into forced labor in trade practices?
Investigations into trade practices or concerns related to forced labor can be triggered in multiple ways. CBP accepts allegations from the public related to forced labor concerns and coordinates with other US law enforcement entities to address and investigate all such claims. CBP’s actions are also heavily influenced by existing legislation and sanctions.
For instance, the Uyghur Forced Labor Prevention Act creates a rebuttable presumption against any goods manufactured within the Xinjiang Uyghur Autonomous Zone in China. If a company can’t provide clear and convincing evidence to CBP that those goods have no forced labor in the supply chain, CBP will stop those goods from entering the US.
How is the government enforcing the Uyghur Forced Labor Prevention Act (UFLPA)?
The government is aggressively enforcing the UFLPA. Since the law went into effect in June 2022, we’ve seen over 9,000 shipments stopped at the border. Half of those have been released after weeks or months of review. However, over 4,000 shipments have been detained and have not been allowed to enter the US because of some finding that forced labor was involved at some point in their supply chain. This has impacted many consumers and industries, including electronics manufacturing, industrial apparel, pharma, and consumer products.
Legislative efforts are underway to increase the government’s ability to scrutinize and aggressively pursue trade violators. This issue can severely disrupt a company’s ability to do business in the United States and worldwide.