Xinjiang China, Malaysia, Turkmenistan, and Zimbabwe share an attribute that is significant for labor and employment lawyers: goods from each country are subject to a Customs and Border Protection (CBP) “withhold release order” (WRO). Such merchandise is detained at the U.S. border, unless the importer can prove that forced labor has not been used in any aspect of making the goods. The goods may become subject to seizure and forfeiture. Major supply chain reconfiguration may become necessary.
In the front page case involving the Chinese ethnic minority Uyghurs, cotton and tomatoes from the Xinjiang Uyghur Autonomous Region (XUAR) are covered by a January 13, 2021 WRO. This WRO was preceded by narrower WROs, as well as a July 2, 2020, “business advisory” from the Departments of State, Treasury, Commerce and Homeland Security, warning that “businesses. . . that choose to operate in Xinjiang or engage with entities that use labor from Xinjiang elsewhere in China should be aware of reputational, economic, and, in certain instances, legal, risks associated with certain types of involvement with entities that engage in human rights abuses, which could include WROs, civil or criminal investigations, and export controls.” The 2021 WRO extends to all “downstream products,” wherever made whenever the product incorporates cotton or tomatoes from Xinjiang. CBP’s Goodsinvestigation yielded evidence of “debt bondage, restriction of movement, isolation and threats, withholding of wages, and abusive living and working conditions,” sufficient to “reasonably indicate” the use of prohibited detainee, prison or other forms of forced labor.
Until recently, business leaders, labor and employment lawyers, and human rights advocates have focused on minimally enforceable international conventions prohibiting “modern day slavery,” and on “soft law instruments” such as the U.N. Guiding Principles on Business and Human Rights. Morality, reputation, and avoidance of consumer backlash have further motivated businesses to reduce risks of extreme exploitation in global supply chains.
Section 307 of the Tariff Act of 1930, 19 U.S.C. § 1307, by contrast, is “hard law,” with big “teeth.” It forbids importation of goods “mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor under penal sanctions.” “Forced labor” includes “all work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily,” plus “forced or indentured child labor.” Goods detained at port of entry may be exported elsewhere, or the importer, within three months, may prove to CBP that no elements of the goods were produced with forced labor. If the evidence is insufficient, however, CBP may seize and forfeit the merchandise. 19 C.F.R. §§ 12.43, 12.44. In certain cases, CBP also may assess penalties upon importers. 19 U.S.C. § 1595a.
Until 2016, a “consumptive demand exception” made Section 307 inapplicable to goods not “mined, produced, or manufactured in such quantities in the United States as to meet the consumptive demands of the United States.” Repeal of that exclusion set the stage for the provision’s invigorated use. Any person can bring the use of foreign forced labor in imported goods to the attention of CBP. NGOs, particularly Solidarity Center, have become active in filing petitions utilizing Section 307.
Importers must ensure that no forced labor is used anywhere within the supply chain, “including the production and harvesting of the raw material.” They must “trace the supply chain from point of origin . . . , to the production and processing of downstream products, to the merchandise imported into the” U.S. through purchase orders, invoices, and proof of payment for the raw materials and each stage of the processed materials, transportation documents showing how the product moved at various stages in its production, and “supporting documents related to employees” who performed the work. The Department of Labor even provides a “Comply Chain App,” https://www.dol.gov/general/apps/ilab-comply-chain.
Uyghur forced labor must be suspected in virtually any product using raw agricultural materials from Xinjiang, risking exclusion from the U.S., but businesses have had trouble tracking remote layers of subcontractors. Efforts are underway to develop electronic supply chain recording. A growing number of companies, in the meantime, are reconstructing their supply chains. In a business nightmare, as major brands such as H&M have proclaimed to western audiences that they will eliminate cotton from Xinjiang from their products, the Chinese government has encouraged Chinese consumers to retaliate through massive consumer boycotts and to switch their allegiance to Chinese brands.
Although extreme, the Uyghur situation is far from isolated. During FY 2020, CBP issued twelve WROs, the most ever in a single year. Thus far in FY 2021, CBP has issued four. Cotton and cotton products from Turkmenistan are under a 2018 WRO. Supply chains with links to anything produced by labor from North Korea, whether working in North Korea, China, or elsewhere, are subject to a WRO and to other foreign policy-based sanctions. WROs apply to fishing vessels accused of using forced labor to harvest seafood. Tobacco products from Malawi are under a WRO. Disposable gloves produced by Malaysia’s Top Glove Corporation achieved notoriety recently. Malaysian palm oil products have been detained at the U.S. border.
Labor and employment lawyers should address the urgency of eliminating forced labor in American supply chains. It would be ironic in the extreme, and devastatingly sad morally, if labor and employment lawyers lagged behind trade and customs attorneys in highlighting this imperative when counseling their clients. Moreover, forced labor and heightened national security considerations are viewed by many commentators as moving companies towards re-shoring many types of production. It is American labor and employment lawyers whose expertise will be necessary, working together with foreign counterparts, if substantial reinvestment in U.S. production is to be done properly, as a matter of law, economics, and business ethics.