New law cracks down on forced labor goods

On December 23, 2021, President Biden signed the Uyghur Forced Labor Prevention Act (UFLPA) into law.  This establishes a new rebuttable presumption that any goods, wares, articles, or merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (XUAR) of China is produced by forced labor. This presumption prohibits the importation of any goods and merchandise under Section 307 of the Tariff Act of 1930 unless the Commissioner of U.S. Customs and Border Patrol (CBP) determines that the importer of record has fully complied with all relevant guidance provided by CBP and has provided clear and convincing evidence that said goods were not produced using forced labor.  The presumption goes into effect June 21, 2022.

While there were previously Withhold Release Orders (WRO) on certain categories of merchandise produced in the XUAR, including cotton and tomatoes, and any downstream products produced outside the XUAR, this is a much more comprehensive, whole-government approach to addressing human rights violations that occur in the region. Even companies who do not import directly from China may be affected by the UFLPA, as downstream goods produced in other countries with goods from the XUAR are also banned under this act.

Impact for importers

Importers who have been identified by CBP as having previously imported merchandise that may be subject to the UFLPA are being issued letters to encourage them to address any forced labor issues in their supply chains prior to the act going into effect. However, not receiving a letter does not indicate that an importer’s supply chain is free of forced labor and may not be affected by the implementation of the UFLPA.  CBP expects all importers to review their supply chains thoroughly and institute reliable measures to ensure that imported goods are not produced by forced labor.

The UFPLA also created an interagency Forced Labor Enforcement Task Force that is in the process of developing a strategy to prevent the importation of goods produced by forced labor from China, which includes preparing a list of high-priority industries subject to the UFLPA and specific enforcement plans for each of these high-priority sectors.  Industries that may be affected by the implementation of the UFLPA include agriculture, cotton, cell phones, footwear, gloves, textiles, toys, as well as oil, coal, copper, silicon, and other mined goods. As of mid-May, there has been no published guidance from the Task Force.

Time to re-evaluate your supply chain

While waiting for additional guidance from the Task Force, importers can take some steps to start identifying and addressing possible problem areas in their supply chains. CBP’s Informed Compliance Publication on Reasonable Care provides a list of questions importers should ask themselves about Forced Labor.  Specifically:

“Forced Labor

Basic question: Have you taken reliable measures to ensure imported goods are not produced wholly or in part with convict labor, forced labor, and/or indentured labor (including forced or indentured child labor)?

1. Have you established reliable procedures to ensure you are not importing goods in violation of 19 U.S.C. § 1307 and 19 C.F.R. §§ 12.42-12.44?

2. Do you know how your goods are made, from raw materials to finished goods, by whom, where, and under what labor conditions?

3. Have you reviewed CBP’s “Forced Labor” webpage, which includes a list of active withhold release orders and findings, as well as forced labor fact sheets?

4. Have you reviewed the Department of Labor’s “List of Goods Produced by Child Labor or Forced Labor” to familiarize yourself with at-risk country and commodity combinations?

5. Have you obtained a “ruling” from CBP regarding the admissibility of your goods under 19 U.S.C. § 1307 (see 19 C.F.R. Part 177), and if so, have you established reliable procedures to ensure that you followed the ruling and brought it to CBP’s attention?

6. Have you established a reliable procedure of conducting periodic internal audits to check for forced labor in your supply chain?

7. Have you established a reliable procedure of having a third-party auditor familiar with evaluating forced labor risks conduct periodic, unannounced audits of your supply chain for forced labor?

8. Have you reviewed the International Labour Organization’s “Indicators of Forced Labour” booklet?

9. Do you vet new suppliers/vendors for forced labor risks through questionnaires or some other means?

10. Do your contracts with suppliers include terms that prohibit the use of forced labor, a time frame by which to take corrective action if forced labor is identified, and the consequences if corrective action is not taken, such as the termination of the contractual relationship?

11. Do you have a comprehensive and transparent social compliance system in place? Have you reviewed the Department of Labor’s “Comply Chain” webpage?

12. Have you developed a reliable program or procedure to maintain and produce any required customs entry documentation and supporting information?”

Documents and proof will be needed

Further, CBP has already provided guidance on evidence required from importers to prove that their products are not produced with forced labor. Per CBP’s FAQ on the XUAR WRO, importers should be able to document and prove:

“Are there examples of information that CBP finds helpful in making this determination? For example, will CBP require chain of custody documentation?

• Importers contending that merchandise detained under 19 CFR 12.42(a) was not produced with forced labor must submit the Certificate of Origin signed by the foreign seller as required by 19 C.F.R. 12.43(a), which may be submitted in electronic form, and a detailed statement from the importer, as outlined in 19 C.F.R. 12.43(b).

Guidance Concerning the Certificate of Origin:

• A standard Certificate of Origin is not acceptable. The required format for the certificate of origin is detailed in 19 CFR 12.43(a). This paragraph includes the exact wording of the certificate that should be signed by the seller/manufacturer.
• The statement required by 19 CFR 12.43(b) should be submitted by the importer, not the seller. The importer’s statement should be sufficiently detailed and include proof that the goods were not produced, wholly or in part, with forced labor.”

CBP also notes that the importer will need to provide supporting documentation of the supply chain that can trace from the goods imported into the U.S. all the way back through the processing and production to the origin of the items.

If you need help evaluating your supply chain for compliance with these new rules, please schedule a no-charge consultation with one of our team members today.