Understanding the US Ban on Importing Forced Labor Goods

Law360, New York (April 17, 2017, 11:29 AM EDT)—Since 1930, the U.S. government has prohibited the import into the United States of goods "mined, produced, or manufactured wholly or in part" by convict, forced or indentured labor.¹

The sweep of this prohibition is potentially very broad. Approximately 21 million people around the world are currently subjected to forced labor, including millions of children.²

Enforcement of this prohibition was relatively rare until February 2016, when Congress, on a bipartisan basis, repealed the so-called "consumptive demand" exception to the import ban. That exception had allowed goods into the United States, despite their production by forced labor, if the domestically produced supply of the goods was not sufficient to meet domestic demand for the goods.³

On Feb. 24, 2016, President Obama signed the Trade Facilitation and Trade Enforcement Act (TFTEA), which eliminated the consumptive demand exception. This amendment of U.S. law was motivated by significant attention to the importation and sale in the United States of forced labor-produced goods such as seafood, cocoa and cotton.⁴

Since the legislative change in February 2016, U.S. Customs and Border Protection (CBP) has already taken four enforcement actions against imports due to forced labor concerns, as contrasted with just 39 actions against importers in the 86 years prior to the TFTEA.⁵

Further, the Trump Administration has emphasized the need to fight much more aggressively against "unfair" trade. This law may become one of the tools employed actively in that effort, with China, among other countries, being a potentially important target.

Importers of goods into the United States are advised to be aware of this issue and take actions to mitigate the risk of forced labor products in their supply chains. The following discussion provides background on the law as amended, and can serve as an initial reference for companies importing goods that may be subject to forced labor concerns.

How Does the Tariff Act of 1930 Define "Forced Labor"?

The Tariff Act of 1930 defines "forced labor" as "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." The statute also prohibits goods made by convict labor and/or indentured labor.

These definitions can overlap in practice with child labor, defined as work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development.⁶ Goods made by child labor are included in the forced labor prohibition discussed here if they are the product of forced or indentured child labor.⁷

The U.S. government may use the International Labor Organization's indicators of forced labor in assessing the risks presented by particular goods and countries, including abuse of vulnerability, deception, restriction of movement, physical and sexual violence, intimidation and threats, retention of identity documents, withholding of wages, debt bondage and others.⁸

How Does CBP Investigate and Enforce the Prohibition on Importing Goods Made by Forced Labor?

The first step toward triggering an enforcement action under the Tariff Act of 1930 is a report by “any person” to a CBP officer that merchandise produced by forced labor is being imported, or is likely to be imported, into the United States.⁹

If the CBP officer believes the report may be true, the officer must submit a report to the CBP commissioner providing details on the possible violation of law.¹⁰ The commissioner next investigates the report, considering information provided by "foreign interests, importers, domestic producers, or other interested persons."¹¹

If the commissioner believes there is sufficient evidence of forced labor, he or she will decide how to proceed, which will depend on how compelling the evidence appears to be. CBP may issue a detention order (also known as a "withhold release" order) if the "information available reasonably but not conclusively indicates that merchandise" to be imported has been produced with forced labor.¹²

Alternatively, CBP may issue an official finding of cause, which would be published in the Customs Bulletin and the Federal Register, if the investigation finds probable cause that a class of merchandise is produced with the use of forced labor.¹³

To challenge a CBP detention order, an importer must establish by satisfactory evidence that the merchandise is not a product of forced labor by submitting a certificate of origin for the goods and a statement detailing the importer’s efforts to ascertain the source and production processes used in the production of the merchandise.¹⁴

If the commissioner finds the merchandise is admissible, the goods will be released. An importer can challenge a CBP finding of cause by invoking CBP's administrative process.

This requires appealing to higher authorities in CBP within 30 days of the ruling, detailing the nature of and justification for the objection. If this appeal is denied, the importer may appeal to the Court of International Trade within 30 days.¹⁵

When and Under What Circumstances Does CBP Enforce the Prohibition on Importing Goods Made by Forced Labor?

In the 86 years between the Tariff Act of 1930 and the Trade Facilitation and Trade Enforcement Act of 2016, CBP issued only 39 "withhold release" orders or official findings of cause.

The vast majority of these actions — 26 orders and 6 findings — targeted goods imported from China; the only other countries on CBP's list of enforcement actions so far are India, Japan, Mexico, Mongolia and Nepal.¹⁶

From November 2000 to March 2016, CBP had not issued a single enforcement action. However, in the year following TFTEA's passage, CBP has issued four detention orders:

• Soda ash, calcium chloride, caustic soda and viscose/rayon fiber from China (March 29, 2016).
• Potassium products from China (March 29, 2016).
• Stevia from China (June 1, 2016).
• Peeled garlic from China (Sept. 16, 2016).¹⁷

This uptick in enforcement actions highlights the potential for increased enforcement of the prohibition against forced labor goods, as well as its current geographical focus, which has been limited to China and just a few other countries.

In addition, CBP has received funding and State Department approval to add nine more customs attachés in U.S. embassies overseas. This larger international presence may foreshadow increases in oversight and enforcement of rules against the use of forced labor for U.S. bound shipments.

CBP also has created a Trade Enforcement Task Force within its Office of Trade to focus on interdiction of imports produced with forced labor.

While it is too early to discern how the current administration will prioritize the various tools available to screen imports on this issue, the president's interest in taking a more assertive trade enforcement posture regarding U.S. imports is clear.¹⁸ Accordingly, given the expanded scope of the forced labor provision resulting from TFTEA, importers should be prepared for a potential increase in scrutiny.

What are the best resources for learning about U.S. policy on forced labor?

The Bureau of International Labor Affairs (ILAB) at the U.S. Department of Labor

maintains a list, revised when needed, of goods and their source countries that raise concerns about forced or child labor.¹⁹ The list is intended as a resource for companies in carrying out risk assessment and due diligence on labor rights in their supply chains.²⁰

ILAB's current list contains 139 goods from 75 countries. The list is a helpful resource, as it details the areas of a country where the forced or child labor is concentrated, how widespread the problem is, the ages and other demographics of the victims, the hazards to which child laborers are exposed, the forms of forced labor, and other relevant information.

Sugarcane and cotton are the products most frequently listed in the agricultural sector; bricks are the products most frequently listed in the manufacturing sector; and gold is the product most frequently listed in the mining sector.²¹

While CBP does not target entire product lines or industries in problematic countries or regions, it utilizes ILAB's reports that evaluate specific product imports from a given country. CBP also publishes on its website a list of all "withhold release" orders and findings, including those related to forced labor, which can be a guide (although it would not reveal all pending areas of CBP interest).

Under the TFTEA, CBP must provide an annual report to the House Ways and Means Committee and the Senate Finance Committee.²² The report must detail the number of forced labor-related enforcement actions in the year preceding the reporting period and describe all merchandise denied entry under this part of the Tariff Act.

Reviewing the goods and countries of origin denied entry in these reports, going forward, can help importers anticipate which products and regions may be subject to future enforcement action.²³

What Should Importers Do to Ensure They Are Not Importing Forced Labor Goods Subject to Enforcement Action?

Importers should be alert to the potential issue of forced labor in their supply chains. In addition to checking the U.S. government information mentioned above, many companies review other publicly available information, including reports in the countries from which they import, comments by international organizations, press reports, and other data sources.²⁴

They may draft and issue a policy against using forced labor in their supply chain and communicate that policy to any potential suppliers. They may also perform a supply chain audit and conduct due diligence on outside parties, including subcontractors and suppliers.

Many companies may ask suppliers to certify that there is no forced labor in their supply chain, and to issue their own policy statements on the subject. Company policies also include implementing a strong anti-forced labor compliance program, which could include training employees responsible for importing to spot, investigate and handle potential reports of forced labor.²⁵

It is important for importers to document these and other efforts clearly, to ensure there is a clear record of the company’s compliance in this area, and to help address inquiries by federal authorities, should any occur.

How Will the Trump Administration Enforce the Prohibition on the Import of Goods Made by Forced Labor?

US law is clear that the United States can block the import of goods made with forced labor, and can bring enforcement actions against importers that seek to bring in such goods. Further, with the old consumptive demand exception to the forced labor prohibition now gone, the rules are now both more clear cut and stricter.

President Trump and his team have been outspoken, both during the presidential campaign and in the first months of his term, about trade enforcement in general. This has applied to a number of U.S. trading partners, with China as a particular focus.

The fact that China was the subject of all four of CBP's most recent forced labor enforcement actions may therefore presage a potential new enforcement trend moving forward.

The likelihood of active enforcement of this law is only enhanced by Congress' recent attention to this issue, and the bipartisan consensus it reflects. Importers will want to take note.

Claire Reade is senior counsel, and Samuel Witten is counsel, at Arnold & Porter Kaye Scholer in Washington, D.C.

Amanda Claire Hoover contributed to this article. She is a Harvard Law School graduate employed at Arnold & Porter Kaye Scholer LLP and is not admitted to the District of Columbia Bar.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.