Any day, President Obama is expected to sign into law H.B. 644, also called the Trade Facilitation and Trade Enforcement Act of 2015 – an act that may have far-reaching impacts on U.S. companies that use foreign suppliers. The Act allows the government to confiscate or turn away items being imported that it reasonably suspects were made using forced or child labor. The Act also requires Customs and Border Protection to file an annual report with Congress, describing its enforcement efforts each year.
The Act closes a loophole in the Tariff Act of 1930, a Depression-era law that allowed the import into the U.S. of goods made using convict, forced, or indentured labor, so long as consumer demand for the products at issue could not be met domestically. Since its enactment in 1930, the Tariff Act has been used only 39 times, mostly to bar equipment and machinery made in China during the 1990s. The Trade Facilitation and Trade Enforcement Act enjoyed bipartisan support in both the Senate and the House of Representatives, where it passed with wide margins of support.
Of course, enforcement resources are key to determining what kind of impact this new law will have. Conspicuously, Congress passed this new law without performing any analysis of the impact it is likely to have on U.S. businesses. The Department of Labor, however, maintains a list of 319 foreign goods believed to be made using child labor and 102 foreign goods believed to be made using forced adult labor that include many items, the absence of which would significantly threaten many U.S. businesses.
For instance, the Department of Labor’s list includes bricks and coal from Afghanistan, fruits, vegetables, and other products from Argentina, garments from Bangladesh, sugarcane and fruits from Belize, cattle from Bolivia, Brazilian beef, electronics and textiles from China, coffee from Colombia, coffee and cocoa from various African countries, Kazak cotton, seafood from many regions in southeast Asia, and many different agricultural products from Mexico.
The Trade Facilitation and Trade Enforcement Act is one of several legal measures that the U.S. and other governments have taken in recent weeks and months to combat human trafficking and child labor used in components and ingredients for U.S. goods. Earlier this month, President Obama signed the Port State Measures Agreement, an international trade accord that allows the port officials of signatory countries to prohibit access to foreign vessels suspected of illegal fishing. The Thai government has also taken steps recently to police illegal fishing and the use of trafficked labor in its seafood industry, including by installing satellite tracking devices on some fishing vessels to track the movement of workers on and off those boats.
The key for U.S. companies under the Trade Facilitation and Trade Enforcement Act will be to determine the true origin of their critical supplies and components and to work with their foreign suppliers to ensure they can show that the products at issue are not made using forced or child labor. Audit and verification programs can be established to satisfy this inquiry, but of course any such programs must be shown to be valid and robust – particularly for at-risk products. The implementation of this new law also provides a good opportunity for U.S. companies to review their supplier codes of conduct – and revise them if necessary – to ensure that needed goods will not be rejected at Customs.