Follow up # 3 on US CBP forced labour seizures

Not a whole lot has happened related since my last post on the subject (Click to see last post on topic), but there have been some developments which are worth mentioning:

First, there has been a new detention order issued for Peeled Garlic from Hongchang Fruits and Vegatbles[i]. That makes for 4 so far this year after a period of none in 21 years.

Second, US CBP has begun a new TFTEA web page, which (among other things) covers the repeal of the consumptive demand clause[ii]. (The banner from that page is atop this blog post).

Third, the issue of forced labour and enforcement was given a spot in the most recent quarterly enforcement newsletter from US CBP[iii].

Lastly, forced labour is specifically listed as a topic at the upcoming US CBP East Coast Trade Symposium[iv].

Overall I still maintain my position that this trade issue will not go away, and will only become more important. I encourage anyone with overseas supply chains to pay attention. A good starting place is the Department of Labor list of goods produced by forced labor. While not directly binding, CBP alludes to it multiple times and I would say any item on that list is at high risk of enforcement from CBP[v].

Stay tuned….

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[i] https://www.cbp.gov/trade/trade-community/programs-outreach/convict-importations

[ii] https://www.cbp.gov/trade/trade-enforcement/tftea

[iii] https://www.cbp.gov/sites/default/files/assets/documents/2016-Jul/Quarterly%20CBP%20Trade%20Enforcement%20Bulletin-%20FY%202016%2C%20Quarter%203.pdf

[iv] https://www.cbp.gov/trade/stakeholder-engagement/trade-symposium

[v] https://www.dol.gov/ilab/reports/child-labor/list-of-goods/

Could Canadian Extra Territorial Export Rules Be Coming?

As a Canadian working for a US multi-national, I have long been familiar with the extra territorial application of US export law. US export controls, whether ITAR or EAR sectors, apply not just to the physical movement of goods from the US, but also the future re-export of those goods to a third country. They can even control goods not made in the US, if they are made with sufficient US content or US ownership.

Canadian export rules, in contrast, have focused on the simple physical movement of goods from Canada to a second country. There have not really been controls on foreign made Canadian content goods, or even subsequent re-exportation of Canadian goods. There is a limited scope offence of “diversion”, whereby a Canadian commits an offense by assisting in diversion. However, this is limited to automatic firearms and the few countries listed on the area control list[i]. Similarly, there are no real controls over what your foreign subsidiary does. For example:

Canadian subsidiary in Country A sells goods to Country B, that would have required a permit had they shipped from Canada.

The good news is the role of Compliance Manager in Canada tends to be a little simpler than the equivalent role in the US.

In light of a recent development, however, there are signs this could change. Here is the development:
In 2012 Canadian company Streit sold armoured vehicles to Libya and Sudan[ii]. This was done through their UAE facility (manufactured and shipped from UAE). Had these vehicles exported from their Canadian facilities it almost certainly would have required an export permit. This was recently denounced by a UN panel, prompting a Canadian government response. A good blog post with links to relevant articles can be found here:

http://www.canada-usblog.com/2016/09/07/questions-are-being-asked-about-application-of-canadas-trade-restrictions-to-sales-by-streit-group/

What interests me the most, is what may come of all this. A couple key comments I have seen lead me to speculate that extra territorial application may get added to the Canadian rules in the near future.

Defence Minister Saijan said “we will be bring(ing) in regulations” when discussing the topic of Canadian subsidiaries operating abroad in “fragile states”[iii].

Global Affairs Canada spokesperson Francois Lasalle said this about the UN report: “the armoured vehicles were manufactured and shipped by the company's branch in the United Arab Emirates, and therefore the sale is outside of the federal government's arms export regulatory regime”. However, they followed up with this key statement:

“there will be "more rigour and transparency for Canada's export controls system," and that legislation will be coming this fall[iv]”

In a September 24 article in the Globe and Mail, the following observation is made:

“A parliamentary committee is preparing to take a hard look at the export controls Canada places on foreign sales of military goods and whether sanctions and embargoes meant to stop arms shipments by Canadians have sufficient teeth[v]”

In light of imminent legislation to make Canada compliant with the recently signed Arms Trade Treaty – a key Liberal platform piece, this is something we may want to pay attention to….


P.S. - how ironic would it be if Canada does implement some extraterritorial measures, in light of the Canadian law called the Foreign Extraterritorial Measures Act, which was passed to block other countries from imposing their rules on subsidiaries in Canada!

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[i] The Export and Import Permits Act has two key diversion offenses: Sections 15(1) and 15(2):

http://laws-lois.justice.gc.ca/eng/acts/E-19/page-7.html#docCont

[ii] http://www.cbc.ca/news/politics/streit-statement-south-sudan-1.3731184

[iii] http://www.cbc.ca/news/politics/streit-loophole-sajjan-1.3719273

[iv] http://www.cbc.ca/news/politics/streit-south-sudan-1.3711685

[v] http://www.theglobeandmail.com/news/politics/commons-committee-to-scrutinize-arms-export-controls/article32042251/

Follow up # 2 on US CBP forced labor seizures

Just a quick entry here, to give an update on some new developments on this subject, since my first two posts:

First post on forced labor

Second post on forced labor

Since those posts, a couple key developments tell me this is a story that has yet to be fully told.

First, on July 27, CBP Commissioner Kerlikowske raised the matter in his opening remarks to the Commercial Customs Operations Advisory Committee (COAC)[i]:

“And as you know, enforcement of the nation’s trade laws is a core mission for CBP, and I want to announce the new Forced Labor Working Group focusing on this key enforcement priority.

Following the Custom’s Bill’s repeal of the “consumptive demand” loophole, we have been working with industry, civil society organizations, and others to rigorously enforce the law and prevent the import of goods made with forced, convict, or child labor into the United States.”

He further went on to say:

“The role of industry in this issue is clear, and we must work closely with importers, brokers, and companies who want to do the right thing to clarify standards for their supply chains.”

I find this second statement very interesting. Is this hinting at a trusted trader type strategy? Perhaps a CTPAT type model, but targeting forced labor in supply chains? How about CTPAFL? No, to many letters…. Regardless of my conspiracy theories, this is just further evidence that CBP has no intention of dropping the matter, whatever their future plans are exactly.

Another development comes from the private business side. Recently Descartes’ SPL division “Descartes MK Denied Party Screening” added a new list type to their offering, called “Customs and Border Protection Forced Labor”.  They explain the list as: “The manufacturers listed have Withhold Release Orders (WRO) issued by the Commissioner”.

Descartes MK is a leader in the generation of SPL content[ii] for automation, such as in SAP GTS, and their inclusion of this content is a good indication that we can expect to see the list grow.

I’ll keep checking in on this subject, and I encourage anyone reading this to start the process of a supply chain review for forced labor. As I mentioned in my last post on the subject, there are other good reasons to do so.

P.S.: I’m a little surprised that Descartes called the list “… Forced Labor”. I was really hoping to see “… Forced LaboUr” from a Canadian company, eh! Ok. If you’re not Canadian, you probably didn’t get that one….

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[i] https://www.cbp.gov/newsroom/speeches-and-statements/2016-07-27-000000/commissioner-kerlikowske%E2%80%99s-opening-remarks

[ii] https://www.descartes.com/documents/descartes-mk-denied-party-screening-list-offerings