On June 17, 2022, DHS published its long-awaited strategy guidance document which shed light on how UFLPA will be implemented, and what evidence may be provided to rebut the presumption that the goods were made with forced labor. This article provides an overview of the type of evidence importers should have readily available when importing goods into the United States. For general guidance on preventing the importation of goods produced with forced labor and how importers should audit their supply chain to ensure non-use of forced labor, please refer to our Bloomberg Law article, “U.S. Customs Targets Use of Forced Labor”.
The Uyghur Forced Labor Prevention Act (UFLPA) establishes a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in the Xinjiang Province of China or by an entity on the UFLPA Entity List are prohibited from importation into the United States under 19 U.S.C. § 1307. However, if an Importer of Record can demonstrate by clear and convincing evidence that the goods in question were not produced wholly or in part by forced labor, fully respond to all CBP requests for information about goods under CBP review and demonstrate that it has fully complied with the guidance outlined in this strategy, the Commissioner of CBP may grant an exception to the presumption.
Clear and convincing evidence is a higher standard of proof than a preponderance of the evidence, and generally means that a claim or contention is highly probable. See e.g., Colorado v. New Mexico, 467 U.S. 310 (1984) (a forced labor case holding that complainant did not meet “clear and convincing” burden of proof because it failed to show that the evidence is highly and substantially more likely to be true than untrue; rather, the fact finder must be convinced that the contention is highly probable).
CBP will employ a risk-based approach, dynamic in nature, that prioritizes the highest-risk goods based on current data and intelligence. Currently the highest-risk goods include those imported directly from Xinjiang into the United States and from entities on the UFLPA Entity List. CBP will also prioritize illegally transshipped goods with inputs from Xinjiang, as well as goods imported into the United States by entities that, although not located in Xinjiang, are related to an entity in Xinjiang (whether as a parent, subsidiary, or affiliate) and likely to contain inputs from that region.
Below is a list of high-priority sectors for enforcement:
- Cotton and Cotton products
- Silica-Based Products (including polysilicon)
- Silica is a raw material that is used to make aluminum alloys, silicon, and polysilicon, which is then used in buildings, automobiles, petroleum, concrete, glass, ceramics, sealants, electronics, solar panels, and other goods.
- Tomatoes and downstream products
In addition for general guidance on how CBP will be implementing the UFLPA, please refer to our prior article “Uyghur Forced Labor Prevention Act (UFLPA): What You Need To Know.”
DHS Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the PRC.
On June 17, 2022, per statutory requirement , the U.S. Department of Homeland Security (DHS) published the Strategy to Prevent the Importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China. The purpose of this publication is to provide guidance as to how the UFLPA will be implemented, and how it plans to prevent the importation of goods made with forced labor to enter into the United States. Below is a summarized guidance for importers with recommendations and guidance as to what evidence importers may provide to rebut the presumption that the goods were made with forced labor under the UFLPA as mentioned by DHS’ June 17, 2022 and earlier guidance published on June, 13, 2022 by CBP of evidence required. The guidance for importers provided information on three topics:
1) Due Diligence,
2) Supply Chain Tracing, and
3) Supply Chain Management
What does due diligence mean?
DHS stated that for purposes of the guidance, due diligence includes assessing, preventing, and mitigating forced labor risk in the production of goods imported into the United States. An example of effective due diligence, may include the following elements:
- Engage stakeholders and partners
- Conduct a Forced Labor Risk Assessment
- Develop a written code of conduct
To perform a forced labor risk assessment, importers map their supply chains to identify any steps within the chain at risk of using Forced Labor. Such factors used to determine whether a risk exists are, but not limited to:
- Origin of imported goods or any raw materials or components in the imported good.
- Transactions among entities along the supply chain tied to the specific imported goods.
- Locations and identities of entities in the supply chain.
A written code of conduct should provide a framework on how you address the risk of forced labor in you supply chain. In addition, DHS recommends the written code of conduct be incorporated into supplier contracts. We separately recommend that you include your conditions on your purchase order as well.
Importantly, DHS noted that for supply chains that touch the Xinjiang or involve entities that use labor transferred from Xinjiang, the code of conduct MUST explicitly forbid the use of forced labor. Furthermore, as mentioned in our prior DTL post “U.S. Customs Targets Use of Forced Labor ,” importers should review the DOL’s Comply Chain principles and create a compliance system as a business practice.
What Does it Mean to have an Effective Supply Chain Tracing System?
DHS has defined supply chain tracing, as the ability to demonstrate chain of custody of goods and materials from the beginning of the supply chain to the buyer of the finished product. An effective Supply Chain Tracing system is one that identifies who their suppliers are and labor sources at all levels of the supply chain system. Generally, there are three common practices importers may engage in for effective supply chain tracing:
- Mapping: Importers should be able to map out their entire supply chain, including suppliers of raw materials used in the production of the imported good or material. Mapping allows the importers to identify who is doing the work at each step in the process of the supply chain and under which conditions the work is being done.
- Identity preservation: This requires importers to preserve each product input to be packaged, processed, and traced separately from other product inputs or modifications throughout the supply chain. However, under this method product inputs are not allowed to be commingled at any point in the supply chain.
- Segregation: This approach allows importers to commingle inputs, as long as each input to be commingled is fully traced and documented. It is essential to demonstrate that the inputs are free of forced labor prior to commingling. As an example, importers should have readily available evidence that indicates the source of each component of the good and documents showing how the imported goods was made from raw materials to finished good, by what entity, and where.
Supply Chain Management Measures
Importers should also have Supply Chain Management Measures in place, that reflects the measures taken to prevent and mitigate identified risks of forced labor. DHS identified that effective measures include:
- Having a process to vet potential suppliers for forced labor prior to entering a contract with them; requiring that supplier contracts necessitate corrective action by the supplier if forced labor is identified in the supply chain; and
- Outlining the consequences if corrective action is not taken, such as termination of the contractual relationship.
- Having access to documentation, personnel, and workers for verification of the absence of forced labor indicators, including at the recruitment stage.
DHS noted as well that, under 18 U.S.C. Section 1589 (b), failure to take appropriate remedial action could expose an importer to potential criminal liability if the importer continues to benefit, financially or by receiving anything of value, from participating in a venture engaged in forced labor, while knowing of or recklessly disregarding the forced labor.
For additional guidance as to the type and nature of evidence that CBP will require if the goods are subject to the UFLPA, please refer to the following:
Diaz Trade Law has significant experience in a broad range of import compliance matters including forced labor issues. For assistance with importer due diligence in relation to forced labor requirements; or for assistance in submitting documents to dispute the use of forced labor, contact our Customs and International trade law attorneys at [email protected] or call us at 305-456-3830.