Tuesday 12 July 2016

Follow up on US CBP forced labor seizures


On April 23, I posted about an unexpected result of the Trade Facilitation and Trade Enforcement Act of 2015, which had passed in February. See here:


In that post I predicted that this would become a more significant factor in global trade then it had been previous to TFTEA. I just wanted to follow up on that with a couple observations; however, the jury is still out on whether or not I was accurate in my prediction!
At the time I wrote the original post, there had been 2 "withhold release" orders since TFTEA, in contrast to only 39 times in 85 years (and not at all in 15 years previous to TFTEA). How many times has this power been used by US CBP since my post? Well, as far as I can tell, only 1 more time[i], which is still significant (no activity in 15 years, 3 times since TFTEA), but not earth shattering. However, I still feel confident that this is a new dynamic for global supply chains that compliance officers need to take seriously.
Perhaps more telling than the enforcement in the last 3 months is the amount of communication and publicity around the subject. Here are some highlights that may convince you the new reality is here to stay:
·         On May 2nd, following the TFTEA, US CBP announced the creation of a new task force. This Trade Enforcement Task Force will “focus on issues related to enforcement of antidumping and countervailing duty laws, and interdiction of imported products using forced labor[ii]. (My emphasis)
·         On May 2nd, US CBP Commissioner R. Gil Kerlikowske referred to the following in his remarks to the Joint Annual Meeting of the American Iron and Steel Institute: “core priorities like interdiction of products manufactured using forced, convict, or child labor”[iii]
·         The Commissioner warned the public of the following, in a June 1st announcement: “It is imperative that companies examine their supply chains to understand product sourcing and the labor used to generate their products,” and followed this with: “CBP is committed to ensuring U.S. values outweigh economic expediency and as part of its trade enforcement responsibilities, will work to ensure products made with forced labor do not cross our borders”[iv]
The reader must make their own appraisal, but it seems to me that US CBP is signalling to trade to get ready: this is going to be a significant initiative.

As you consider whether or not this is significant, I want to remind the readers about the similarly intended California Transparency in Supply Chain Act[v]. This California law, effective since 2012, requires affected companies to disclose what efforts (if any) they are taking to combat slavery and human trafficking throughout their supply chain. This law stops at the requirement to disclose, and makes no minimum effort requirements. Therefore, you could be 100% compliant simply by stating you have absolutely no plan to eradicate slavery from your supply chain. However, that may be bad PR, and so most companies do in fact speak to some level of effort.
This is where the risk appears: your statement (as required under the law) must be accurate and truthful or you risk a lawsuit (such as the class action lawsuit against Costco[vi]) or worse: could this be a False Claims Act violation?
Lastly, I just wanted to mention another new possible development: Canada may very well end up with similar laws. A recent World Vision report[vii] demanded that Canada enact laws to restrict commerce that uses forced labour. There is no indication yet that this will happen, but as a Canadian I can say doing so would fit squarely with the agenda of the current government.
If you take one thing away from this, I hope it is that your company needs a strategy for dealing with possible forced labour in your supply chain. You need it to ensure the new US Customs enforcements don’t affect you. You need it to comply with California’s law. And you just may need it to comply with new laws we haven’t yet seen. I happen to think it’s also just the right thing to do….
Please leave comments on this if you disagree: I’m curious to know what the rest of the industry thinks!

Kevin Riddell




[i] https://www.cbp.gov/trade/trade-community/programs-outreach/convict-importations
[ii] https://www.cbp.gov/newsroom/national-media-release/2016-05-02-000000/cbp-creates-trade-enforcement-task-force
[iii] https://www.cbp.gov/newsroom/speeches-and-statements/2016-05-02-000000/commissioner-kerlikowske%E2%80%99s-remarks-joint-annual
[iv] https://www.cbp.gov/newsroom/national-media-release/2016-06-01-000000/cbp-commissioner-issues-detention-order-stevia
[v] https://oag.ca.gov/sites/all/files/agweb/pdfs/sb657/resource-guide.pdf
[vi] https://www.consumerproductmatters.com/wp-content/uploads/sites/13/2015/11/Sud-v.-Costco.pdf
[vii] https://nochildforsale.ca/resource/supply-chain-risk-report/

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