Human Exploitation in Global Supply Chains
Nov 06, 2024Human Exploitation and the Global Supply Chain
Are your suppliers shipping you materials produced by forced or child labor?
The United States Department of Labor (DOL) recently published an updated version of its List of Goods Produced by Child Labor or Forced Labor. The 2024 report highlights 204 goods from 82 countries identified as “likely produced by child labor or forced labor.” The document is an important reference for any business conducting due diligence into their suppliers and supply chains.
The report also features several studies that trace products tainted with forced or child labor through unusually complex global supply chains and has added 43 goods that have components or parts that are produced with child labor or forced labor. These goods include “cotton textile products from China and Vietnam produced with Chinese cotton, food and beverage products linked to child labor in cocoa industries in Ghana and Cote d’Ivoire, and sugar products tied to forced labor in the sugarcane industry in the Dominican Republic.
United States Customs and Border Protection (CBP) encourages all stakeholders in the trade community to continually scrutinize their suppliers and supply chains to ensure that goods imported into the United States are not mined, produced, or manufactured, wholly or in part, with prohibited forms of labor (e.g., slave, convict, indentured, forced, or indentured child labor).
The law and your supply chain
Under federal law — 19 USC 1307 — it is illegal to import goods made “wholly or in part” with forced labor — a phrase CBP understands as encompassing forced labor at any point in the global supply chain. If evidence indicates that forced labor may exist in the upstream supply chain for a given product, that downstream product is at risk of trade disruption. Companies involved in trading such products face the risk of legal consequences, including civil and possible criminal penalties. The new DOL report also contains substantial new information about downstream consumption of content tainted by forced labor, information that is actionable by CBP in the context of forced labor trade enforcement.
More recently, the Uyghur Forced Labor Prevention Act (UFLPA), which took effect on June 21, 2022, prohibits the importation of goods made in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China (XUAR). The Act codifies a presumption that the importation of any “goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part” in XUAR is prohibited by federal law. The UFLPA authorizes the Forced Labor Enforcement Task Force (FLETF) to develop a strategy for supporting the CBP’s enforcement of the UFLPA, and the CBP subsequently requested $70.3 million from Congress for additional employees, technology, and training.
In March 2024, Congress passed an appropriations bill for the Department of Homeland Security that included a few illuminating funding increases. DHS received an additional $20 million over the previous year’s budget for the purposes of combating forced labor at all United States ports of entry. Congress also allocated over $420 million for CBP’s Office of Trade, which exceeded the agency’s request by over $10 million. The funding bill explicitly stated that these additional funds would be used to “restore proposed cuts to CBP’s combating forced labor activities.” Finally, $20 million was earmarked specifically to hire 150 new officers. These financial infusions into the DHS and CBP budgets clearly express the federal government’s interest in empowering the agencies to scale up UFLPA enforcement.
What’s getting detained?
When the UFLPA became effective in the summer of 2022, the FLETF focused its resources on three priority sectors: polysilicon (a refined silicon material used in, among other things, semiconductor devices), cotton, and tomatoes. During the next two years, CBP adhered to those priorities, with electronics, apparel, footwear, textiles, and agricultural products accounting for more than 70 percent of shipment detainments. In 2024, CBP has exhibited an increasing focus on electronic products. Of the $830 million in imports detained during the first quarter of 2024, nearly 94 percent involve the electronics industry.
At the CBP’s 2024 Trade Facilitation and Cargo Security Summit in Philadelphia, Laura Murphy, a DHS policy advisor, said that the CBP would act aggressively to ban more Chinese companies from exporting merchandise into the United States. “We’re really focused on enhancing and expanding the entity list,” she said. “We expect many more entities to be coming in the next few months.” Indeed, the UFLPA Entity List continues to grow, and there is irrefutable evidence that a record number of detainments have already occurred this year.
If the CBP suspects a shipment contains products produced in whole or in part by forced or child labor — and any product of Xinjiang, China origin — the CBP will detain the shipment and inform the importer. The importer can choose to immediately export the merchandise or try to get it cleared and released into the United States by demonstrating that the product does not involve forced or child labor, nor involve any companies named explicitly in the UFLPA Entity List.
Rebutting the government’s suspicions and getting a detained shipment released will require the importer to demonstrate — with “clear and convincing” evidence — that the goods in question were not produced wholly or partly by forced labor. The importer must also respond to all CBP requests for information about the products or materials under review and demonstrate compliance with the CBP’s guidance.
Avoiding the risks
If you inadvertently transact business with suppliers known to engage in illegal forced or child labor practices or who are on the UFLPA Entity List, your shipment may be detained or denied entry into the United States. Obviously, this will inhibit your ability to stock your shelves and produce your products. It is crucial to screen partners and suppliers — including the suppliers of your vendors — against the UFLPA Entity List. Depending on your industry, this could be a daunting task. To avoid these risks:
- Consider adding language in buying contracts prohibiting goods produced by forced labor or child labor and for products sourced from the XUAR region of China. Be sure to extend the language to include goods and materials from subcontractors.
- Conduct regular audits of your suppliers for forced labor and XUAR sourcing.
- Create or amend written manuals, procedures, and any other written guidance to include a high-level statement of policy from senior management stating the firm’s commitment to not using goods produced through forced labor anywhere in the supply chain.
If you have any questions about your supply chain and compliance with federal law — or have had a shipment detained for noncompliance — don’t hesitate to contact Orr & Reno for assistance.
