The Biden Administration made its first step in outlining President Biden’s China trade policy including a new tariff exclusion process that will effect some. Rory Murphy and Nicole Golden discuss the two notable takeaways from a US business perspective. Read the full article here.
Recent legislation aimed at reducing commodity-driven illegal deforestation around the world calls for transparency in companies’ global supply chains. Our colleagues Ludmilla Kasulke and Yiannis Vandris discuss the details of the Fostering Overseas Rule of Law and Environmentally Sound Trade (FOREST) Act in their article here.
As Milla Kasulke reports at our Capital Thinking Blog, the Department of Defense is seeking comments on four supply chain topics identified by the agency, in connection with President Biden’s February 24, 2021 Executive Order entitled, “America’s Supply Chains.” Comments are due later this fall. Find out more here.
We made the Wall Street Journal today in an article discussing recent efforts by suppliers to provide for greater price flexibility in their supply chain contracts, quoting supply chain partner Sarah Rathke. While price escalation clauses are well known in some industries (for instance, energy) and in some geographical markets (for instance, at times, in Latin America), US-based manufacturing supply chain contracts largely do not address price adjustment to account for scarcity and/or inflation – which sometimes are one and the same thing. Contracting 101 might suggest that if suppliers fear inflationary risk, it might be sensible to include a price escalation clause tied to a well known index, such as the US Consumer Price Index. More often, however, it is better and more precise to use a published index used for the specific industry or product in question. Other important questions when considering price escalation clauses include how often pricing should be re-examined, whether prices can be adjusted down as well as up, and whether to include pricing caps.
Read the article here.
Companies based or doing business in agricultural areas in the U.S. could soon be under increased scrutiny from the federal government, including Congressional investigators, stemming from labor trafficking of unaccompanied migrant children and teens.
This year alone, over 90,000 minors attempted to cross the U.S. When stopped at or near the border, the children are placed in shelters managed by the U.S. Department of Health and Human Services (HHS) while arrangements are made for their placement. To avoid overcrowding and decrease the time spent in HHS custody, the department quickly works to find placement for the children with relatives, foster programs, or other U.S. sponsors.
Unaccompanied migrant teens are at a heightened risk of being subjected to labor trafficking. Many teens are coerced into leaving their native countries by promises of a better life in the U.S only to face harsh working conditions. To illustrate – in 2015, a federal indictment revealed that HHS released several children to traffickers who forced them to work at egg farms in Ohio after promising the children good jobs and the chance to attend school.
HHS Office of Refugee Resettlement recently stopped releasing children to both Enterprise, Alabama and Woodburn, Oregon, out of concern for the wellbeing of the children released into the area. This moratorium was prompted by HHS’ awareness of an influx in sponsorships coming from agriculture-dense areas – Enterprise is populated with chicken slaughterhouses and Woodburn is filed with agricultural land.
The Department of Justice Human Prosecution Unit also uncovered that dozens of unaccompanied teens were being released to the same sponsor and forced to work in poultry processing industries and similar facilities in other jurisdictions.
As the federal government become aware of these practices and grow concerned with what happens after the children are released from HHS custody, companies could be subjected to increased federal oversight from both HHS and DOJ, and possibly auditing to make sure they are not involved in the labor trafficking.
Companies should also be aware of the potential for increased scrutiny from Congress. Congressional investigators at the Senate Permanent Subcommittee on Investigations have focused on labor trafficking of migrant children, and have issued several reports calling for changes to the oversight and monitoring of migrant children to prevent these abuses.
There is also some risk that companies may someday be held liable for producing goods with the use of the forced labor of migrant children.
Similar to the proposed Uyghur Forced Labor Prevention Act, the influx in unaccompanied minors being sponsored in high agricultural areas could create a rebuttable presumption that the goods were produced by trafficked migrant children, resulting in heightened scrutiny and auditing.
As federal oversight in this area increases, companies should assess their workforce and supply chain to ensure that they are taking adequate steps to guard against abuses of migrant children, and to prepare to address questions from federal regulators and Congress about their practices.
U.S. companies importing certain products from China may be facing additional supply chain challenges in the near future. On July 14, 2021, the Uyghur Forced Labor Prevention Act (“UFLPA”) was passed unanimously by the U.S. Senate. It now moves to the House, where it is expected to pass easily—a previous version of the bill passed 406-3 in September 2020. The UFLPA sets a new standard for goods produced in Xinjiang, banning all goods unless Customs and Border Protection (CBP) can firmly establish that the goods were not made using forced labor. The UFLPA reverses the previously-applied burden of proof, creating a presumption that goods produced in Xinjiang involve forced labor.
Well, that took no time at all. On May 19, 2021, the first class action was filed against the owners of the Colonial Pipeline by a putative class of customers, based on alleged elevated fuel prices as a result of the cyberattack. Consumers are obviously the end-point of this and almost any supply chain, but there are bound to be B2B lawsuits as well, by entities at both ends of this critical supply chain point. We’ll be tracking these, so stay tuned!
Read the full article here.
Please join us on Tuesday, May 25 at noon EDT for Colonial Pipeline Hack – Understanding cyber-attacks, supply chain breaks and data breach litigation issues.
Over the last week, Americans have been riveted by scenes of panic buying at the pump after a ransomware attack shut down the Colonial Pipeline, a critical source of fuel for the entire East Coast. For the first time, many are reflecting on the supply chain and national security implications of cybersecurity attacks on everyday life.
Please join us for a case study on the Colonial Pipeline ransomware attack, where our experts will discuss the cybersecurity, supply chain and litigation considerations companies need to know to mitigate their risks arising from cyber incidents.
This program is pending 1.0 hour of CLE in AZ, CA, LA, NJ, NY and OH. If you require another jurisdiction please contact Robin Hallagan.
If you would you like to attend, please register here.
U.S. Customs and Border Protection (CBP) is stepping up enforcement of U.S. laws prohibiting the importation of goods made with forced, indentured, or prison labor. While existing regulations provide importers with recourse to seek release of improperly detained shipments, these procedures can be challenging to navigate and may require legal action.
On April 15, Virtus Nutrition LLC (“Virtus”) filed a complaint at the U.S. Court of International Trade (CIT), challenging the detention of a shipment of “palm oil distillates and palm stearin.” CBP detained the shipment pursuant to an Withhold Release Order covering palm oil and products containing palm oil produced by Sime Darby Plantation Berhad and its subsidiaries, joint ventures, and affiliated entities in Malaysia. Virtus states that it provided CBP with “extensive information concerning the manufacture of the merchandise in the subject cargo, including records concerning the growth and harvesting of palm fruit bunches, the extraction of oils from that fruit, and the refining of the oils into the products contained in the subject entry.” CBP confirmed receipt of the information. About one month later, CBP notified Virtus that it had decided to exclude the shipment from entry into the United States, saying “[t]he petition that you submitted…requesting that CBP either revoke or modify the [WRO] provided insufficient information to deem the merchandise admissible.” Virtus timely filed a protest, which was also denied, on the grounds that Virtus was “unable to trace production back to the harvesting of the palm kernel/seed as required by the [WRO]” – a fact Virtus challenges, as it claims to have submitted that information to CBP.
With increased global supply chain awareness and monitoring, there has been a parallel increase in border actions prohibiting or suspending the importation of goods made with forced or child labor. Accordingly, Squire Patton Boggs’ supply chain team has published an article in Inside Supply Management Magazine entitled, “Strategies for Responding to Withhold Release Orders,” discussing these issues.
Read the full article here.