Introduction
Forced labour ban on imports
DHS and CBP guidance
CBP expands enforcement
Comment


Introduction

The Department of Homeland Security (DHS) recently released a department-wide strategy to combat human trafficking, child exploitation and forced labour in the supply chain.

The strategy will build on current efforts to interdict imports of goods made with forced labour that US Customs and Border Protection (CBP) has been enforcing since the passage of the Trade Facilitation and Trade Enforcement Act in 2016.

Notably, CBP has taken numerous steps to detain merchandise that violates the ban on forced labour and has expanded its enforcement efforts regarding imports that used forced labour to industry outreach and audits of importers.

DHS has noted that it is already taking steps to prevent the importation of goods produced with forced labour, including:

  • inspecting imports;
  • investigating suspicious trade activity;
  • issuing notices to detain or seize particular goods at US ports; and
  • pursuing criminal prosecutions against individuals and companies.

In its new strategy, DHS announced that it intends to take additional steps, including:

  • increasing its investigative and enforcement capacity – DHS will expand its capacity to assess civil penalties and pursue criminal prosecutions against US importers for violations of forced labour authorities;
  • improving education and outreach to industry partners – DHS will educate industry on the threat of goods produced with forced labour destined for US importation and improve:
    • trade alert reporting;
    • due diligence policies; and
    • compliance assistance tools; and
  • encouraging international partners to adopt reciprocal safeguards.

Forced labour ban on imports

Section 307 of the Tariff Act 1930 (19 USC § 1307) prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured child labour – including forced child labour. Subject merchandise is subject to exclusion through withhold release orders (WROs) enforced by CBP or seizure and may lead to criminal investigation of the importers.

When WROs are issued, importers of all sizes are often faced with the difficulty of having to prove a negative (ie, that their goods are not made with forced labour). According to CBP, importers should update their practices, procedures and documents to address forced labour and the nationality of workers, with respect to not only immediate vendors but also suppliers of materials further back in the supply chain.

DHS and CBP guidance

CBP has published the following guidance for use as a starting point to develop procedures:

  • an Informed Compliance Publication on Reasonable Care; and
  • a forced labour webpage, which includes active WROs and findings, Organisation for Economic Cooperation and Development guidance on multinational forced labour prevention measures and forced labour fact sheets.

In order to demonstrate that reasonable care was exerted, importers are expected to have documented controls in place that can mitigate the risk of importing merchandise made with forced labour, as well as a comprehensive and transparent social compliance system. The Informed Compliance Publication on Reasonable Care lists 12 questions to indicate that an importer has exercised reasonable care to avoid forced labour. The expectation is that importers must, at a minimum, have taken reliable measures to ensure that imported goods are not produced wholly or in part with:

  • convict labour;
  • forced labour (including forced child labour); or
  • indentured labour (including indentured child labour).

DHS's website provides additional guidance on due diligence steps to take in regard to the use of North Korean labour in the supply chain. The answer to question 8 – "What steps should my company take to ensure North Korean workers are not in my supply chain" – provides particular steps that DHS agencies will likely assess when reviewing imports or importers for forced labour issues. These steps include:

  • implementing a high-level statement of policy demonstrating the company's commitment to respecting human and labour rights;
  • undertaking a rigorous continuous risk assessment of actual and potential human rights and labour impacts or risks of company activities and relationships, in consultation with stakeholders, including:
    • governments;
    • local business partners; and
    • members of civil society, such as local communities, workers, trade unions, vulnerable groups and non-governmental organisations;
  • integrating these commitments and assessments into internal control and oversight systems of company operations and supply chains; and
  • tracking and reporting on areas of risk.

Importers should also monitor recent reports on child or forced labour. For example, the International Labour Organisation recently published a child and forced labour monitoring report on the Uzbekistan cotton harvest.

CBP expands enforcement

Recently, the enforcement effort has expanded from WROs to include a review of forced labour procedures by the CBP Office of Regulatory Audit. According to CBP:

Audits can reveal an importer's knowledge of forced labor and the steps being taken to oversee its supply chain. For example, auditors check records and related documents, interview company officials and look for clauses in vendor contracts warning against forced labor.

Importers should have a comprehensive and transparent social compliance system in place to combat child and forced labour.

Other enforcement measures taken by CBP include the following:

  • A Forced Labour Division was added in November 2017 to develop enforcement cases for the Office of Field Operations. The division also reaches out to stakeholders with webinars and other tools that help importers to operate within the law.
  • Tips from the public, stakeholders and other agencies are actively pursued because goods made by forced labour look the same as legitimate shipments.
  • Forced labour intelligence is gathered by building relationships with those close to the issue (eg, sales representatives, lawyers, account managers and associations).

Comment

This increase in enforcement measures indicates that forced labour will be a DHS and CBP priority going forward. Importers need to be prepared for the resulting expansion of a broad range of enforcement efforts, particularly when sourcing high-risk goods or goods from high-risk countries. Companies that have a robust compliance process are more likely to detect a risk of forced labour and answer those critical questions. Importers should review existing processes and assess practices along the supply chain, as well as conduct employee training.

For further information on this topic please contact Teresa Polino or David Salkeld at Arent Fox LLP by telephone (+1 202 857 6000) or email ([email protected] or [email protected]). The Arent Fox LLP website can be accessed at www.arentfox.com.