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.
During the hearing, Senators called for stronger laws, increased enforcement, and greater transparency of US law prohibiting the importation of goods made with forced labor. Lawmakers also called for more action to punish bad actors, moving beyond simply stopping the importation of certain goods and issuing fines. In particular, Senator Elizabeth Warren stated, among other things, that corporations should be held accountable for their work supporting forced labor.
Now, CBP is reflecting this shift in increased supply chain enforcement. On May 29, 2021, CBP directed personnel at all US ports of entry to seize disposable gloves produced in Malaysia by Top Glove Corporation Bhd., following a record speed forced labor Finding.
CBP has the authority to issue Withhold Release Orders (WRO) when information “reasonably indicates” that merchandise was mined, produced, or manufactured, wholly or in part, in any foreign country by forced, prison, or indentured labor. Furthermore, upon sufficient evidence, CBP will publish a more formal Findings and may begin seizure of imports.
With regard to the gloves, CBP issued its forced labor Finding following a months-long investigation that began when CBP issued a related WRO in July 2020. For context, in October 2020, CBP issued its first forced labor Finding in nearly 25 years pertaining to a Chinese Stevia manufacturer, which took place four years after a May 2016 WRO.
The record speed in which CPB issued its most recent Finding likely reflects an increased trend in the US to combat forced labor in the supply chain of imported products. A trend Brenda Smith, the recently retired executive assistant commissioner of CBP’s Office of Trade, who noted in remarks to the press that Congressional stakeholders are now looking at ways to modernize both the statute and CBP regulations to make the process more responsive and efficient.
This shift underscores that simply having auditor services in place to verify supplier practices is not sufficient to ensure acceptance of such goods in the United States. As in previous blog posts, we urge shifting supplier compliance away from companies’ operational functions and into the legal department to ensure best practices in this rapidly-evolving area.