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Slavery Law Enforcement Gets Serious

Nov. 14, 2023
Importers must focus on detailed information gathering.

Shippers, transporters and warehouse operators who handle goods coming into the United States from China need to be aware that the strict requirements of the Uyghur Forced Labor Prevention Act (UFLPA), enacted three years ago, continue to forbid bringing certain goods into this country and the government is stepping up its enforcement of the law.

The federal government has been enforcing the new law since its strictures went into effect in the middle of last year, with enforcement policy development proceeding in fits and starts, and much too slowly for the liking of some of the bill’s sponsors.

In fact, at the end of September the government added three more Chinese companies to its blacklist of those located in the People’s Republic of China (PRC) who were earlier put on the list because they were determined to have participated in China’s slave labor system. They are chemical producer Xinjiang Zhongtai Group Co., Xinjiang Tianshan Wool Textile Co. and Xinjiang Tianmian Foundation Textile Co.

As a result, there are now 27 Chinese companies banned from importing goods into the U.S. because they participate in the use of forced labor, under the UFLPA. When the latest companies were added to the list, Alejandro Mayorkas, Secretary of the Department Homeland Security (DHS), said, “We do not tolerate companies that use forced labor, that abuse the human rights of individuals in order to make a profit.”

DHS has issued a new list of the companies that are included on its list of banned imports. The department reported that since the CBP began enforcing the UFLPA in June 2022, it has reviewed more than 5,000 shipments valued at over $1.74 billion.

During the summer, federal officials also made public an updated strategy that lays out in detail how they intend to handle enforcement efforts in the future that will impact directly how importers do business going forward.

“The addendum contains information about the ongoing, widespread and pervasive risks in supply chains posed by PRC-sponsored forced labor and other human rights abuses in Xinjiang, as well as implementation and enforcement of the UFLPA that would be of particular interest to the business and importing communities,” CBP announced.

The law created a dedicated federal multi-agency group called the Forced Labor Enforcement Task Force (FLETF) to develop its complicated enforcement program and methods for identifying the products that are to be banned.

The new developments came at a time when the Biden administration was under fire for not doing enough to implement the law by leadership of the House Select Committee on the Strategic Competition between the U.S. and the Chinese Communist Party and Senate Republican sponsors of the original legislation. Some members of Congress have introduced new legislation intended to compel the administration to take stronger measures in the future.

Legislative critics also argue that the current list of banned products needs to be expanded. “Researchers have identified numerous PRC companies tied to forced labor that have not been included on this law’s Entity List,” the Select Committee reported.

The UFLPA was enacted after receiving strong bipartisan support in a divided Congress, and seeks to penalize the Chinese communist regime over its encouragement of the use of the country’s Uyghur Moslem and other ethnic and religious minorities as slave labor that is part of a widespread program of oppression described as genocide by human rights advocates and government officials in this and other countries.

Large numbers of these minority groups have been imprisoned in re-education camps under harsh conditions, particularly in the Xinjiang region of western China where Uyghurs have been incarcerated in a network of work and re-education camps, which resulted in reports of widespread death and torture. Those camp members who are eventually released face repressive supervision and control by the central government.

One highly sophisticated tool of repression involves the placement of advanced high-tech surveillance camera systems in cities capable of capturing individuals’ facial expressions. If caught frowning while walking on the street, the formerly imprisoned Uyghur will be apprehended and interrogated about why they appear to be unhappy. Companies that make these systems are among those whose products have been banned by the U.S. government.

Regardless of critics’ complaints about the slowness and shape of enforcement policy following enactment of the law, U.S. government officials have proven that they take the UFLPA seriously and actively engage in enforcement of its requirements. At its most painful for importers, this involves the impound of imported freight containing the products of companies identified as using Chinese slave labor to make their goods.

Other countries have adopted similar anti-slavery laws, including Australia, the United Kingdom and the European Union. In addition to China, countries that also are targets for international anti-slavery activities include Mexico, Malaysia, Ethiopia, Thailand and Nepal. All of these have been identified as having significant slave labor operations in their economies.

How the Law Is Enforced

The federal government relies on a network of international government and non-governmental organizations as well as its own agencies to monitor and report on slave labor around the world. Some Republican legislators have leveled criticism at the Biden administration for its reliance on the International Labor Organization, a United Nations body that has criticized U.S. child labor policies.

Given the advancing state of enforcement, consulting firm BBDO says, “It is imperative that importers have a comprehensive process in place to fully vet their suppliers, including confirming that the supplier can verify the sources of all inputs used in the manufacture or production of the imported merchandise. Companies effectively need their supply chains to be ‘comply chains.’”

This is especially true because once Customs & Border Protection (CBP) has seized imported goods it determines came from companies banned under the UFLPA, it is extremely difficult to get them released back into the importer’s possession.

In addition, comments made by Customs officials at a public symposium earlier this year made clear that the evidentiary hurdle for having detained merchandise released (and presumably to avoid detention) is much higher than most shippers realize, notes Hannah Kreinik, an attorney with the law firm of Barnes, Richardson & Colburn.

Most detentions require an extensive review by CBP officers, which likely will take longer than the 30 days set by the law. The law permits two extensions of time for importers seeking to demonstrate that their goods are free of forced labor. “Importers should prepare to spend over a month, possibly two or three, to prove the admissibility of their merchandise for release from CBP detention,” Kreinik advises.

Since the law’s adoption, the scope of UFLPA enforcement expanded beyond products, materials and companies originally listed by CBP as being “high priority,” according to attorney Robert Kossick of the Harris Bricken law firm. Along with the originally cited cotton, tomatoes, polysilicon and silica-based products, more recent additions include aluminum, steel, auto parts and PVC.

Preventing shipments from being seized requires work, and it is even more difficult to get them back after they have been detained. Textiles made from cotton, for example, are among the major exports from Xinjiang, the Chinese province where most of the slave labor production originates, particularly that involving Uyghurs. Earlier this year, CBP reported it is highly focused on the cotton industry and cotton products from Xinjiang for UFLPA enforcement.

“Companies appear to need spy-level intelligence of their supply chain going as deep as the raw yarn used in the cotton garment, and commercial invoices or payments for each region that supplied yarn for the final product,” Kreinik observes.

Eric Batt, director of the Apparel, Footwear and Textiles Center of Excellence and Expertise, suggests providing CBP with each lot number’s specific bill of lading from the fabric mill, the line number for where the yarn was spun, and the yarn documentation separately for cotton analysis. He also suggests that the finished apparel should include packing lists, bills of lading, purchase orders, materials lists and commercial invoices for every level of the garment's transportation.

According to Batt, importers should be prepared to have all of the supplier information for each lot included in their shipping containers available for CBP to review.

Lithium needed for production of batteries used in electric-powered vehicles and parts used to make solar panels also originates in the affected Chinese region, and that has created a huge complication for those seeking to impose a zero-emissions regime on the U.S.

Regardless of what kind of product is being imported, however, being able to clear one shipment through a CBP UFLPA applicability review does not necessarily insulate future shipments from detention, Kossick warns. Although the CBP is working on high-tech solutions to identify supply chains that have no connection to slave labor with greater detail, U.S. businesses should continue to rely on the current product and company lists.

Steps You Need to Take

Many experts agree that companies involved with China trade should take specific steps to avoid the risk of becoming the target of CBP enforcement:

Map your supply chain.

BBDO recommends that you conduct risked-based mapping of supply chain partners that outlines the supply chains in their entirety, including regions, suppliers, etc., that the importer believes will pose the most risk to validate the supply chain is free from the use of forced labor.

According to the international accounting and consulting firm PwC, most companies know who their Tier 1 suppliers are, but information about Tier 2 and Tier 3 suppliers can be harder to find, and you will likely need analytical tools to help stitch together the different types of data and present visualizations that reveal patterns and outliers.

Experts point out that supply chain maps and flow charts significantly influence reviews of imports by NGOs and government officials. Kreinik stresses, “We cannot emphasize it enough that companies, especially those in the cotton industry, should commit to having supply chain maps and flow charts to demonstrate every stage of their production process and have the documentation to support each step.”

Identify the risk exposures.

Once you’ve done the mapping, conduct risk assessments of suppliers to identify actual and potential exposures, PwC recommends. Risk factors related to employee health, workplace safety and fair wages may be obvious. But often overlooked are deficient grievance mechanisms, limits on freedom of association and unauthorized subcontracting

Some industries may face higher risks, such as companies in the retail, consumer products, technology, industrial products, and food, beverage and agricultural sectors. In particular, PwC says that buyers and importers of solar panels, solar panel components, cotton, apparel, tomato products, semiconductor components and vinyl flooring need to be wary because they may be at higher risk of violating the UFLPA.

Quantify potential impacts.

PwC emphasizes that not all risks should be considered equal. You should try to translate what’s happening in your supply chain to its potential impact on your company overall. “Quantifying the impacts of risk exposures for prioritization often depends on the broader objectives and metrics set by various stakeholders, so make sure that your expectations are clear,” PwC says.

Conduct a compliance assessment.

Review the policies and procedures related to each area of production along the supply chain and determine whether they are really functioning in practice. Interview employees and management to help assess compliance levels.

Review other components of your overall culture of compliance: the tone set by top management, company values, code of ethics, communications, training, incentive structures and incident reporting .Guidance from the US Labor Department’s Bureau of International Labor Affairs Comply Chain app outlines areas of due diligence that can help your company complete its assessment.

Remediate process or control gaps.

With a clearer picture of the risks and gaps, you can now plan your mitigation response more effectively. Actions may include alternative sourcing, diversification, and shifting, mitigating, monetizing or accepting certain risks. The key point is to determine which gaps to prioritize and build an effective remediation plan around.

Continuously monitor.

Your supply chain undergoes constant change and review as you respond to various economic, geopolitical and financial pressures. Invest in building an intelligence platform to monitor your suppliers’ changing risk profile and spot early signals of exposure.

The government has made it very clear that at present a mountain of documentary evidence is required to prove that a seized shipment was not produced by slave labor, Kreinik reminds shippers. Some high-tech solutions are being developed and offered by the private sector, but CBP has not yet officially endorsed any mapping or laboratory technologies that will help guarantee detention release.

“This tells companies that CBP will take a holistic approach to review UFPLA detentions, including third-party laboratory or DNA trace evidence testing; however, this will not be the only answer for admissibility,” she explains. “Companies submitting to CBP should have an accumulation of documentation and evidentiary support to show that there was no forced labor in their production line.”

PwC says that the bottom line is that the steps you take to eliminate forced labor from your supply chain will help improve your overall visibility into your supplier network. Combining business and forensic experience with data insights to uncover forced labor can bolster your capability to find other possible illegal or unethical activity in your supply chain.

“Just as importantly, it sharpens your capabilities to quantify the impacts of supply disruptions from natural disasters, trade bottlenecks, new regulations and geopolitical conflicts—all toward building stronger supply chain resilience,” the company says.

Kossick stresses, “Forced labor is now, per FLETF, a top tier compliance and enforcement issue for CBP and the trade. This is not changing or going away. Importers who recognize the magnitude of the ‘sea change’ that is playing out in real time and stay abreast of the fast moving developments that characterize the practice space stand the best chance of avoiding the costly supply chain disruptions that can be occasioned by forced labor-driven detentions.”