The Trade Facilitation and Trade Enforcement Act of 2015 signed by President Obama on February 24, 2016 enters into force on March 10, 2016 significantly strengthens the law prohibiting imports of goods produced using forced or slave labor, including child labor and subjects the goods to US Customs seizure and forfeiture.
US law, The U.S. Tariff Act of 1930, has prohibited imports of goods made with any type of forced labor, but it had a "consumptive demand" exception, which allowed companies to import goods produced with forced labor if the “consumptive demand” for those goods in the United States exceeded the capacity of domestic production. (Section 307 of the Tariff Act of 1930, 19 U.S.C. § 1307.)
Opponents of forced labor imports tried for some time to eliminate the consumptive demand exception, which they saw as a loophole in the law, marking it extremely difficult to enforce. They have now succeeded in doing so as part of a larger trade facilitation and enforcement bill recently enacted by Congress.
The law allows any interested party, including competitors and public interest groups, to petition U.S. Customs and Border Protection (CBP) to investigate whether an import was produced using forced or slave labor in another country. The products most likely at risk for new investigations are likely those already on US Government watch lists. In particular, importers of food products should pay particular attention to the new law.
After CBP has received petitions from customs officers or third parties, CBP can initiate an investigation. If CBP determines conclusively that the goods were made with forced labor in another country, it can seize the goods and commence forfeiture proceedings. If CPB concludes information available reasonably but not conclusively indicates that merchandise within the purview of section 307 is being, or is likely to be, imported, CPB can require the importer to submit additional documentation.
The U.S. Department of Labor (DOL) publishes two lists of relevance to Section 307 enforcement. One list, the Trafficking Victims Protection Reauthorization Act (TVPRA) of 2005, contains 122 products from 58 countries that the U.S. DOL believes are being made or harvested by child or forced labor. The TVPRA list includes such food commodities asbroccoli, melons, olives, cocoa, coffee, eggplants, coconuts, beans, blueberries, several types of nuts, onions, sugarcane, rice, and tomatoes.
Another list involves the Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor, Executive Order 13126 of 1999, which is intended to ensure that U.S. federal agencies do not procure goods made by forced or indentured child labor. The most recent list published last year contains 29 products from 21 countries, including food items such as beans, nuts, cocoa, coffee, rice, shrimp, sugarcane, and tilapia.
Customs enforcement branch officials will likely turn to these lists, along with sources reporting violations, to prioritize the countries, sectors and facilities for investigations going forward.
The new provision is the latest in a trend of cracking down on forced labor in supply chains. For example, the California Transparency in Supply Chains Act recently became effective, and requires companies doing business in California to disclose their efforts to combat forced labor in their supply chains in a prominent place on their websites. The Modern Slavery Act in the United Kingdom imposes a similar requirement.
Accordingly importers should develop compliance systems to identify and combat forced labor in their businesses under these new requirements. Compliance systems should, at a minimum, show that a company made all reasonable efforts to determine the kind of labor used at each point in its supply chain.
Hogan Lovells advises companies on customs proceedings, including Section 307, seizure and forfeiture proceedings, and in establishing best practices for importation into the United States.