FLETF Released Strategy Guidance. Join SPB Webinar To Learn More!

Christmas came early this year.  Ok, not really, but the Department of Homeland Security, which chairs the Forced Labor Enforcement Task Force (FLETF) released its strategy guidance on the Uyghur Forced Labor Prevention Act on June 17, 2022—four days ahead of schedule.  Click here to view FLETF’s strategy guidance.

SPB will be hosting a webinar this Thursday, June 23, 2022 at 11am EST to discuss the Uyghur Forced Labor Prevention Act, FLETF’s strategy guidance and best practices for organizations in light of the new guidance. You may register for the event here.

SPB Partner In Law360 Discussing Ocean Shipping Reform Act of 2022

Yesterday, SPB supply chain partner Sarah Rathke was quoted in Law360’s article entitled, “New Ocean Shipping Regs On Deck, But Inland Woes Persist,” discussing the substance and likely impacts of the new Ocean Shipping Reform Act of 2022, which cleared Congress and is expected to be signed into law by President Biden soon.  Read more here.

CBP Issues Operational Importer Guidance Relating to UFLPA

Late Monday, June 13, 2022, Customs and Border Protection (CBP) issued its long-anticipated Operational Importer Guidance to guide importers before the Uyghur Forced Labor Prevention Act (UFLPA) enters into effect on June 21. As a reminder, beginning on that date, CBP will apply a rebuttable presumption that goods coming from the Xinjiang region violate a long-standing ban on the importation of goods made with forced, indentured, or prison labor.  CBP’s guidance is the first of documents expected to be released by federal government officials and provides preliminary background on the expected UFLPA’s process and enforcement, how to request exceptions to the rebuttable presumption, additional resources, and the types and nature of information that CBP may require.  The document is available on CBP’s website here.

No later than June 21, the Department of Homeland Security, which chairs the Forced Labor Enforcement Task Force (FLETF), is expected to release a broader strategy document required by UFLPA.  On June 23, we will be hosting a webinar on the FLETF strategy and CBP implementation efforts.  You can register here. We hope you can join us for this timely discussion.

CBP Hosts Webinar on Uyghur Forced Labor Prevention Act Implementation

On June 1, 2022, US Customs and Border Protection’s (CBP) Office of Trade Relations hosted a webinar on forthcoming implementation of the Uyghur Forced Labor Prevention Act (UFLPA).  Half of the webinar focused on the history, enactment, and text of the UFLPA (discussed in this blog’s previous posts here, here, and here), while the second half addressed questions from online attendees.

Starting June 21st, imports into the United States subject to the UFLPA will be subject to the detention process set out under 19 U.S.C § 1499.  As a result, any goods imported into the United States from the Xinjiang region will immediately be detained, excluded, or seized.  If an importer believes its goods are free of forced labor, then the importer will need to show by clear and convincing evidence that forced labor was not used to make the goods, or any input thereof, no matter how small.

During the webinar, multiple participants asked what evidence would be considered “clear and convincing” to overcome the rebuttable presumption.  While CBP officials did not list the exact evidence needed to overcome the presumption, they did indicate that the bar to rebut the rebuttable presumption will be very high and offered a few pieces of advice—such as submitting any evidence in English—to aid in a quick review of the evidence while goods are detained.

CBP officials also indicated that they will issue strategy guidance relating to the UFLPA within the next week, while the Forced Labor Enforcement Task Force will issue its required guidance on June 21st—the date UFLPA goes into effect.

The launch of UFLPA implementation later this month is expected to lead to significant delays, as CBP holds shipments and works to compile and submit the necessary information to rebut UFLPA’s presumption.  Our firm is working with clients daily to prepare for June 21st, including by reviewing supply chains and advising on CBP and the Forced Labor Enforcement Task Force’s guidance issued to date.

CBP Releases Known Importer Letters and Enforcement Guidance relating to the Uyghur Forced Labor Prevention Act

Earlier this year, U.S. Customs and Border Protection (CBP) released a statement on its website that it would be issuing letters to importers identified as having previously imported merchandise from locations or entities potentially subject to the Uyghur Forced Labor Prevention Act (UFLPA).  Well, CBP stuck to its word and just recently released two sample Known Importer Letters.

One of the letters is specifically directed to Customs Trade Partnership Against Terrorism[1] (CTPAT) members,[2] while the other is directed to other U.S. importers. Both letters notify recipients that they “previously imported merchandise from locations or entities potentially subject to the Act.”  The CTPAT letters also indicate that “subsequent entries of such merchandise may result in, among other things, suspension or removal from the CTPAT program, seizure, forfeiture and/or penalties, or other appropriate action under the customs laws.”  The non-CTPAT letters indicate that “any future entries of such merchandise may be subject to CBP enforcement action, including seizure, forfeiture and/or penalties, or other appropriate action under the customs laws.”  You can view the text of each letter here.

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“Is Your Organization Complying With the US Uyghur Forced Labor Prevention Act?” 

The Uyghur Forced Labor Prevention Act goes into effect on June 21, 2022.  The Act creates a rebuttable presumption that “any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China” (or by an entity included on a list required by the Act) is prohibited from importation into the US under 19 U.S.C. §1307.  What does this mean for your organization?  Click here to find out.

The Effects of the Military Conflict in Ukraine on Supply Contracts

Our colleague, Dr. Christopher Eggers,  prepared an insight on how the effects of the military conflict in Ukraine are serious, far-reaching and, ultimately, unforeseeable at the present time. Supply relationships will not remain unaffected, and there are numerous questions regarding the consequences under contract law. Read our full insight.

Supply Chain Investigations and Legal Privilege

Regulators worldwide are increasing their demands that manufacturers and retailers know and understand all aspects of their supply chains as they relate to Environmental, Social, and Governance (“ESG”) goals. Keeping the findings, communications, information, and reports generated in connection with supply chain ESG investigations is imperative to ensure full and candid fact-finding and to manage brand integrity effectively. However, maintaining legal confidentiality is challenging when an investigation includes fact-finding of third parties such as suppliers.  To learn more on how to keep internal investigations privileged, click here.

Raw Material Surcharges Again on the Cartel Radar – German Authority Raids Cable Companies

In one of the first dawn raids of the New Year, the German competition authority have raided the premises of several cable manufacturers. The investigation arose in response to alleged coordination of metal surcharge calculations.

Metal and other raw material surcharges are used in many industries, in addition to the negotiated price, to allow for short-term changes in the metal/raw material procurement costs. They are particularly prevalent where the surcharge accounts for a high proportion of the final products’ total manufacturing costs.  Often, the mathematical formula used to calculate the surcharge is linked to prices quoted on exchanges, and therefore increases or decreases the price automatically.

Despite companies’ increased awareness of the limitations of antitrust and competition laws, surcharge reviews may fall through the gaps of compliance programs.  This may be due to, firstly, there being cut-throat competition in the industry on the base price, with the surcharge perhaps being in place for a decade or more, and secondly, because surcharges are in themselves a permissible instrument for passing on changes in raw material prices quasi automatically into the overall selling price of products, without the need for new negotiations.

However, suppliers are prohibited to form arrangements where they agree to introduce or maintain such a surcharge as a standard throughout the industry, thereby eliminating competition by way of other pricing models.  In past cases, authorities have found that even where the formulas for the calculation differed – the fact the concept had been agreed (potentially decades ago) was anticompetitive.  There have been a number of cases in the past, notably on quarto plates and steel, with the most well-known being Airfreight.  Here, airlines were found to have allegedly agreed fuel and security surcharges.  The case is still pending before the European Courts.

The recent raids on cable manufacturers are a reminder that companies using similar price mechanisms are well advised to review the origins of any surcharge formula to ensure there is nothing historically that could be construed as an agreement or concerted practice to implement a surcharge or continue to apply it.

Establishing Rules of the Road – DHS Soliciting Comments to Support UFLPA Implementation

On January 24, 2022, the Department of Homeland Security (DHS) began soliciting comments on a strategy to ensure goods alleged to have been made with forced labor are not imported into the United States from China, including the Xinjiang region.  The comment window reflects the first major requirement of a law passed by Congress addressing forced labor risks in these supply chains, known as the Uyghur Forced Labor Prevention Act (UFLPA, Pub. L. 117-78).  Over the coming months, administration officials will craft a strategy to implement UFLPA’s new rebuttable presumption that all goods originating from Xinjiang violate the import ban. Importers must be prepared to face this increased scrutiny of these supply chains.

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