Can Importers Challenge Section 307 Detentions in Federal Court? The First Test Case

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 prCompliance word cloudoduced 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.

Continue Reading

Strategies for Responding to Withhold Release Orders

This is a Cross-Post from ISM.  Please contact Sarah Rathke, Ludmilla Kasulke, Marisa Darden, and Ericka Johnson with any questions.

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.

CBP Likely To Issue More WROs Based on Forced Labor Allegations

Recent developments in Congress and now unprecedented action by U.S. Customs and Border Protection (CBP) likely signal increased supply chain enforcement may be coming – and US importers should take notice.

As discussed in our previous blog entry, on March 18, 2021, the Senate Finance Committee held a hearing titled, “Fighting Forced Labor: Closing Loopholes and Improving Customs Enforcement to Mandate Clean Supply Chains and Protect Workers.”  In his opening remarks, Chairman Ron Wyden (D-OR) unequivocally stated that forced labor, which is “modern day slavery”, occurs in countries that are part of the American supply chain and that the US should use its economic muscle to defeat forced labor around the globe.

Continue Reading

Big Changes to the Buy American Act for US Government Contractors

Recent modifications to regulations and federal government acquisition policies portend big change for contractors across the US, and their suppliers around the world. Breaking away from traditional political positions, former President Donald Trump and newly-inaugurated President Joe Biden each took steps in January 2021 to revise Buy American Act (BAA) requirements, which could have significant impacts on companies doing business with the US government.

Read the full insight on our website.

Congress Contemplates National Manufacturing Guard Act of 2021

As almost every industry has discovered, the COVID-19 pandemic has highlighted weaknesses in American supply chains.  The sudden and severe lock-down on international shipping and materials and components shortages have made it clear how dependent United States consumers are on other countries.  A number of U.S. Senators therefore have introduced bipartisan legislation seeking to directly address these weak points.  Senators Marco Rubio (R-FL), Chris Coons (D-DE), Maggie Hassan (D-NH), and John Cornyn (R-TX) announced this week that they are co-sponsoring the National Manufacturing Guard Act of 2021, which would create federal resources focused on the security of U.S. supply chains. Continue Reading

Trend Alert:  Increased US Oversight of Forced Labor in Supply Chains

Continuing the trend toward increased oversight of forced labor in supply chains (see our post from last week on groundbreaking German legislation in this space), on March 18, 2021, the US Senate Finance Committee will hold a hearing on “fighting forced labor.”  Specifically, the hearing will focus on “[c]losing the loopholes and improving customs enforcement to mandate clean supply chains and protect workers.”  This may signal a continued trend in the US to combat forced labor in the supply chains of domestically imported products.

This trend began in February 2016, when President Obama signed the Trade Facilitation and Trade Enforcement Act (TFTA) of 2015.  This law repealed the “consumptive demand” loophole in the Tariff Act of 1930, which allowed the importation of certain forced labor-produced goods if the goods were not produced “in such quantities in the United States as to meet the consumptive demands of the United States.”

By closing this loophole, the TFTA strengthened U.S. Customs and Border Protection’s (CBP) ability to target, restrict, and issue Withhold Release Orders (WRO) to detain or exclude suspect shipments – and the statistics show that this is happening.  From 2000 and 2015, no WROs or formal findings were issued.  Today, there are a total of 47 active WROs and 7 formal findings.

In general, CPB has the authority to issue a WRO when information “reasonably” indicates merchandise was mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labor – including forced child labor.  If the CPB determines that this relatively low standard of proof has been met, the burden then shifts to the importer to prove that the goods in question were not made using prohibited labor.  Furthermore, upon sufficient evidence of forced labor, CPB will publish their formal findings on the Customs Bulletin and in the Federal Register.

Notwithstanding this increased authority, it is unclear what exact “loopholes” or “improvements to customs enforcement” will be discussed during the upcoming hearing.  At a minimum, we can anticipate a continued trend to combat forced labor in the supply chain of domestically imported products.  Last month the Finance Committee Chairman Ron Wyden (D-OR) stated that the panel would “put a special focus on ending the import of goods produced with forced labor.”

To that end, while no government witness will appear, at least four industry and NGO witnesses will testify, including representatives of the United Steelworkers, the Human Trafficking Law Center, the United States Fashion Industry Association, and Sourcemap, which is a supply chain tracking company.

As such, in anticipation of increased legislative oversight, companies should consider revisiting a few best practices for global supply chains, including: (1) developing a comprehensive supply chain map and profile to understand the entirety of the chain of production, from raw materials to finished goods; (2) requiring a written code of conduct for all suppliers, including minimum labor standards; and (3) conducting regular risk assessments and audits to detect and deter the use of forced labor.  While some or all of these practices have traditionally been auditing functions in many companies, now may be an opportune time to transfer their management to the legal department, to ensure compliance with the developing laws in this area, and to receive the protection afforded by the attorney-client privilege.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates.  This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Germany Considers Enacting First-Ever Law Requiring Companies To Both Monitor And Control Supply Chain Practices

Earlier this month, the German government resolved to approve a new supply chain law that would impose unprecedented obligations on German companies to control labor and control practices – not only of their own operations, but within their supplier as well.  Determining that “voluntary compliance” supply chain laws, which require companies to monitor and report but not control or correct labor and environmental abuses in their supply chains, are not effective, Germany’s new law (Lieferkettensgesetz, in German) promises to impose substantial fines on companies whose suppliers engage in pernicious labor or environmental practices.

To date, no other country  has imposed such a law, which is expected to be formally approved in the coming months, and to come into force in 2023.

The Lieferkettensgesetz will require affected companies to establish systems for regulating their supply chains. Companies will be obligated to monitor their supply chains for any potential labor and environmental abuses and develop secure reporting systems for potential victims. If a company became aware of any abuses, it would have a responsibility to respond and correct them. Penalties are set to be relatively harsh, with companies making more than 400 million euros a year subject to fines as high as 2 percent of their annual sales, and be barred from receiving government contracts for as many as three years.

For now, only companies with more than 3000 employees will be subject to the requirements. Smaller companies should still be aware however, as the bill is set to expand to companies with 1000 employees after one year.

This is, of course, a real game-changer (wirklich bahnbrechend, in German) for supply chain investigatory and compliance work.  Long thought to be an auditing company’s function, this law will inevitably bring supply chain mapping into the legal department.  And with good reason:  With substantial legal penalties at issue, legal risk is better managed if preliminary investigative work can be performed under the attorney-client privilege umbrella.

And of course, like most compliance laws, this is unlikely to stay in German.  Calls have already begun to expand for Lieferkettensgesetz-like laws to be adopted in the remainder of the EU.  We will continue to monitor this law – and similar initiatives – with analyses of how best to prepare for compliance and manage the associated risks.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates.  This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Upcoming Webinar: Please join us for 2021 Outlook: Rail Industry Trends

Please join us on Thursday, March 18 at 1PM EDT for 2021 Outlook:  Rail Industry Trends.

In partnership with Commtrex and Arthur J. Gallagher Insurance, Risk Management and Consulting, we have assembled a panel of industry leaders who will provide keen insights into current issues and trends regarding the ever-evolving future of rail, including the policies that will impact the Rail Industry under the Biden Administration, recent supply chain complications, and how best to manage risk moving forward.

Our expert panel includes:

  • Bill Shuster, former US Congressman and Chairman of the House Transportation and Infrastructure Committee, Squire Patton Boggs
  • Sarah Rathke, Supply Chain Expert, Partner, Squire Patton Boggs
  • Kevin Woods, National Director – Railroad Services, Arthur J. Gallagher & Co.

The panel will be moderated by Peter Gould, Denver Office Managing Partner, Squire Patton Boggs.

If you would you like to attend, please register here.

Cross Post from Legal Era: “Product Liability in Asia”

This is a Cross-Post from Legal Era.   Please contact Sarah Rathke, David Goh or Bindu Janardhanan with any questions.

SPB Hong Kong partners  David Goh and Bindu Janardhanan recently published an article in Legal Era magazine discussing the development of product liability law in Asia and the driving force in the increasing awareness of consumer rights propelled by economic development within Asia.  To read more on the development, summary, and legislation/consumer protection within the Asian product liability landscape, the full article is available here.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates.  This article is for general information purposes and is not intended to be and should not be taken as legal advice.

Cross-Post from CompanyWeek: The new American manufacturing policy should be clear: No job left behind

This is a Cross-Post from CompanyWeek.  Please contact Sarah Rathke with any questions.

It is a new age, and the US faces challenges when competing against the global manufacturing leader, China.  The article here recaps a recent panel discussion sponsored by CompanyWeek (on which SPB partner Sarah Rathke was a panelist), discussing how American manufacturing policy would benefit US industries with the capability of reshoring domestic production.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates.  This article is for general information purposes and is not intended to be and should not be taken as legal advice.