US Leads the Global Crackdown on Forced Labor
The US and EU have ramped up their enforcement initiatives to eliminate forced labor in supply chains. Importers, particularly in the fashion, electronics, solar, and automotive industries, should review the updated DOL List of Goods Made with Child Labor or Forced Labor for potential future CBP enforcement targets.
What to Know
In August 2022, US Customs and Border Protection (CBP) targeted $266.5 million in goods for suspected use of forced labor, according to the agency’s operational statistics report.
This includes goods targeted under the Uyghur Forced Labor Prevention Act (UFLPA) and Withhold Release Orders (WROs).
On September 28, 2022, the US Department of Labor (DOL) updated its List of Goods Made with Child Labor or Forced Labor (Forced Labor List) with 32 additional products, including textiles, lithium ion batteries, palm oil products, and solar components. These products could potentially be targets for CBP enforcement in the future, particularly as CBP staffs up its Forced Labor Division.
On September 14, 2022, the European Union (EU) issued proposed supply chain and forced labor regulations, which will affect many multinational corporations.
Updates on the UFLPA and Forced Labor Enforcement
The UFLPA establishes a rebuttable presumption that goods made in whole or in part in the Xinjiang Uyghur Autonomous Region (XUAR) of the People’s Republic of China are produced with forced labor. If a shipment is detained under the UFLPA, an importer can rebut this presumption with “clear and convincing evidence” that merchandise originating or connected to the XUAR was not produced with forced labor.
Alternatively, an importer can demonstrate that the merchandise has no nexus to the XUAR, and therefore is not within the scope of the UFLPA.
CBP has wasted no time in enforcing the UFLPA since it took effect in June 2022. According to reports, CBP “targeted” (identified a shipment for further inspection) 1,452 entries valued at $429 million from June 21 to September 20, 2022. Additionally, according to CBP’s Monthly Operational Update, in August 2022 CBP targeted 838 entries valued at more than $266.5 million for suspected use of forced labor (under UFLPA and WROs). While targeting alone does not mean the shipment was detained, these figures indicate that CBP has been active in inspecting shipments for potential indications of forced labor. In response to detentions, companies have submitted documentation to prove that goods have no nexus to XUAR and are outside of the scope of UFLPA. We have heard conflicting reports regarding whether CBP has released any of those shipments. However, it is unsurprising given the heavy burden of proof under the “clear and convincing standard,” that the agency has reported that CBP has not received a request for an exception from the UFLPA.
DOL List of Goods Made with Child Labor or Forced Labor
The DOL recently updated its Forced Labor List to include 32 additional products, including products from countries such as Ghana, China, and Pakistan. The DOL publishes the Forced Labor List with the goal of raising awareness about unethical labor practices in the production of merchandise around the world. Importers should review this updated Forced Labor List closely, as these products may be targets of CBP forced labor enforcement actions, as the agency continues to bolster its forced labor enforcement division. Specifically, companies in the following industries should pay special attention to new developments: fashion, electronics, solar, and automotives.
Updates to the Forced Labor List
A notable addition to the Forced Labor List is lithium-ion batteries, which is significant considering the current administration’s sustainable energy initiatives and the increased demand for electric vehicles. Another notable category is solar components from XUAR, which will fall under the UFLPA ban. The Forced Labor List removes one line item, cotton from Uzbekistan, which demonstrates that forced labor in the cotton industry can be remediated. A full list of all 32 additions is below.
Table of 32 Additions to Forced Labor List
Forced Labor Recognized by Other Governments
The United States is not alone in its efforts against the use of forced labor. On September 15, 2022, the Trade and Labor Ministers of the United States, Japan, and the EU issued a Trilateral Joint Statement condemning the use of forced labor and committing to eradicating forced labor.
This follows the September 14, 2022, European Commission proposal for a new regulation that would ban all goods made with forced labor. Taking a step further than the US’ UFLPA, the proposed EU regulation would exclude products made with forced labor from being imported into or exported from the EU. Under the proposed regulation, the EU Commission aims to focus on high-risk products, and it will operate a public database containing information about products suspected of being produced by forced labor. Multinational companies should prepare for the impact on their supply chains.
As the United States and other governments continue to adopt and enforce initiatives focusing on preventing forced labor in supply chains, we strongly recommend that companies update their compliance measures. Companies should understand the entities in their supply chains, from raw material suppliers to finished goods manufacturers.