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Department of State Releases 2017 TIP Report

The Department of State has released its 2017 Trafficking in Persons (“TIP”) Report.  As with prior versions of the annual report, the State Department reviewed efforts made by more than 180 countries to address the minimum Prosecutorial, Protective, and Preventative standards necessary for effective anti-trafficking measures, as these standards are outlined in the United States’ Trafficking Victims Protection Act (“TVPA”).

The release of the report is notable because it can directly impact contractors’ diligence obligations for supply chain review under the Federal Acquisition Regulation (“FAR”) Human Trafficking Rule (located at FAR § 52.222-50).  As we have highlighted in previous articles, for those contractors required to submit compliance plans to the government, such plans should be appropriately shaped to the “nature and scope of activities to be performed for the Government . . .  and the risk that the contract or subcontract will involve services or supplies susceptible to trafficking in persons.”  See FAR § 52.222-50(h)(2)(ii).  Additionally, as set forth in a recent proposed memorandum, which remains the clearest articulation of the government’s views on supply chain diligence obligations to date (covered in a prior post), contractors are expected to take steps to “identify high-risk portions of [their] supply chain[s].”

For these reasons, movement of a particular country up or down in risk classification in the TIP Report may greatly impact a contractor’s supply chain risk profile, especially if the contractor sources a significant amount of goods or materials from that country.  Even where countries are not designated under the Trade Agreements Act for direct importation and sale of goods to the U.S. government, to the extent that contractors rely on these countries for the supply of materials or components to be “substantially transformed” in the U.S. or a designated country, those contractors will bear heightened risk of non-compliance under the FAR requirement should a country fall in placement.

Although this year’s TIP Report was recently revised for increased clarity per the recommendation of a late 2016 GAO Report, it continues to classify countries by the same “Tiers,” that it has in years past.  Tier 1 countries “fully meet the TVPA’s minimum standards for the elimination of trafficking,” and consequentially are considered to be relatively low risk.  Tier 2 countries “do not fully meet TVPA’s minimum standards but are making significant efforts to bring themselves into compliance.”  Tier 2 Watch List countries are still considered to be “making significant efforts to bring themselves into compliance,” but may have only made commitments to take action over the next year, or have yet to stem the absolute number of trafficking cases.  Finally, Tier 3 countries fail to meet TVPA standards and are not considered to be taking significant steps to come into compliance, either through commitments or otherwise.

For 2017, Iceland and China each fell in placement, while Malaysia and Afghanistan moved up in placement.  Per the classification standards mentioned above, Iceland is now on par with Afghanistan in terms of basic classification — both are now Tier 2 designated countries.  Malaysia is now also a Tier 2 designated country, moving up in placement from the Tier 2 Watch List.  The People’s Republic of China, in contrast, fell to a Tier 3 classification this year, greatly increasing its risk profile.  (Hong Kong, however, remains on the Tier 2 Watch List.)

In light of these changes, and recent indications that the Trump Administration remains committed to “devoting more” to anti-trafficking programs, contractors would be advised to make sure that their supply chain compliance and diligence programs are updated to reflect the latest information on country risk profiles available from the government.

© 2020 Covington & Burling LLP


About this Author

Jennifer Plitsch, Litigation attorney, Covington

Jennifer Plitsch is co-chair of the firm’s Government Contracts practice group where her practice includes a wide range of contracting issues for large and small businesses in both defense and civilian contracting. Her practice involves advising clients on contract proposal, performance, and compliance questions as well as litigation, transactional and legislative issues. She has particular expertise in advising clients on intellectual property and data rights issues under the Federal Acquisition Regulations and Bayh-Dole Act, and has significant experience in...

Ryan Burnette, Covington Burling Law Firm, Government Contracts Attorney

Ryan Burnette is an associate in the firm’s Government Contracts practice. He advises companies in all industries on a range of contracting issues, including compliance with complex regulations, assistance with potential corporate transactions, bid protest litigation before the Government Accountability Office, and public policy matters.

Prior to joining Covington, Mr. Burnette served in the Office of Federal Procurement Policy in the Executive Office of the President, where he helped to manage government-wide contracting regulations and policies affecting more than $400 billion dollars worth of goods and services each year. While in government, he was responsible for the development and implementation of several contracting-related Executive Orders, and he worked with White House and agency officials on matters affecting contractor disclosure and agency responsibility determinations, labor and employment issues, IT contracting, commercial item acquisitions, performance contracting, GSA Schedules and interagency acquisitions, competition requirements, and suspension and debarment, among others. Additionally, in the wake of significant incidents affecting the program, Mr. Burnette was selected to serve on a core four person team that lead reform of processes affecting virtually all Federal background investigations, directly resulting in the creation of the new National Background Investigations Bureau.

Alexander Hastings, Litigation and e-discovery lawyer, Covington

Alex Hastings advises clients across a broad range of government contracting issues, including advising clients in transactional matters involving government contractors and assisting defense contractors and pharmaceutical companies in securing and performing government contracts.

Mr. Hastings also advises clients concerning best practices in e-discovery. He assists in investigations and litigations that involve complex e-discovery issues and has represented clients in matters involving the U.S. Department of Justice, Securities and Exchange Commission and the...