Introduction
What is happening?
What does this mean for importers?

Why now?
What should apparel manufacturers and importers do?


Introduction

Just two weeks into 2021, US Customs and Border Protection (CBP) expanded its enforcement efforts against forced labour in China.

This follows months of increasing pressure from labour and human rights groups and members of Congress to halt imports of cotton and agricultural products from China's Xinjiang Uyghur Autonomous Region (XUAR). In addition, the government is considering seeking increased enforcement authority to prevent certain importers from being able to import into the United States.

What is happening?

On 13 January 2021 CBP issued a region-wide withhold release order (WRO) against all cotton and tomato products produced in the XUAR. Although this follows a previous expansive WRO against the Xinjiang Production and Construction Corps (for further details please see "DHS joins in broad enforcement effort against forced labour in apparel supply chains"), this is the first time that CBP has issued a region-wide WRO.

According to a CBP news release:

This WRO will direct CBP personnel at all US ports of entry to detain cotton products and tomato products grown or produced by entities operating in Xinjiang. These products include apparel, textiles, tomato seeds, canned tomatoes, tomato sauce, and other goods made with cotton and tomatoes. Importers are responsible for ensuring the products they are attempting to import do not exploit forced labor at any point in their supply chain, including the production or harvesting of the raw material.

The authority for the action is provided in 19 US Code Section 1307, which prohibits the import of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labour, including forced child labour. Merchandise is subject to detention and rejection through CBP WROs.

In addition, the Department of Homeland Security (DHS) recently proposed that:

Congress should amend Section 526(f) of the Tariff Act of 1930 (19 U.S.C. 1526) to allow for the United States to seek an injunction against the importers of violative merchandise… and in addition, a civil penalty threshold to match the criminal penalty threshold should be created.

What does this mean for importers?

A region-wide WRO creates serious risk and has far-reaching implications for importers. In issuing the WRO, CBP has increased importers' responsibility to ensure that the products which they seek to import are not made using forced labour at any point in their supply chain, including the production or harvesting of the raw material. Given the industrial realities of these supply chains – such as lack of visibility in upstream harvesters, aggregation and comingling of raw inputs and information asymmetry – CBP's expanded enforcement posture will prove burdensome to importers that are caught off guard. It is now more critical than ever for importers to develop comprehensive compliance plans to reduce risk to operations.

Why now?

According to the same press release, CBP issued this WRO against cotton and tomato products produced in the XUAR:

based on information that reasonably indicates the use of detainee or prison labor and situations of forced labor. The agency identified the following forced labor indicators through the course of its investigation: debt bondage, restriction of movement, isolation, intimidation, and threats, withholding of wages, and abusive living and working conditions.

In addition to what may be the progression of a previously expansive WRO against XUAR-origin goods, CBP's action occurs against a backdrop of:

  • pending legislation that would create a rebuttable presumption that any products imported or sourced from the XUAR are made with forced labour;
  • extensive efforts by CBP to gather information on supply chains in the XUAR through risk analysis and survey assessments; and
  • proposals to enhance penalties for forced labour violations.

Given the change in administrations, with Democrats controlling both houses of Congress and President Biden appointing trade officials that may have an eye on leveraging US international trade policy to address labour practices abroad, CBP's WRO may be a harbinger of the incoming administration's enforcement approach to forced labour.

What should apparel manufacturers and importers do?

Companies in the fashion, luxury and agricultural space must take concrete actions to mitigate exposure to risk, prepare for pending legislation and ensure compliance with recent sanctions of Chinese companies in Xinjiang province by the US Departments of Treasury and Commerce. Reviewing supply chains, increasing visibility and developing comprehensive compliance policies is now more important than ever.

For further information on this topic please contact Robert J Ernest at Arent Fox LLP's Boston office by telephone (+1 617 973 6100) or email ([email protected]). Alternatively, contact Angela Santos at Arent Fox LLP's New York office by telephone (+1 212 484 3900) or email (a[email protected]). The Arent Fox LLP website can be accessed at www.arentfox.com.