money U.S. Steps Up Enforcement on Apparel Imports Over Forced Labor in Xinjiang
U.S. Customs has taken an enforcement stance that is pushing retailers and importers to rethink their oversight and documented knowledge of their own supply chains.
Since the agency issued a pair of withhold release orders in December and January to halt the import of products made with forced labor in Xinjiang, China, large retailers are starting to see their imports to the U.S. being detained by U.S. Customs officers demanding to see proof about how their products were manufactured.
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As French investigators reportedly inquire into the practices of Inditex, SMCP, Skechers and others on the issue of imports involving forced labor, and the U.S. Congress faces mounting pressure to pass legislation to address the issue, U.S. Customs has taken a central and more aggressive role in enforcing its own updated policies, according to customs and trade experts.
“They’re very enforcement-minded on it,” said Mollie Sitkowski of Faegre Drinker Biddle & Reath LLP, about the CBP. “We’ve had a couple clients be able to prove that the cotton itself in their product was not actually sourced from Xinjiang — they have records indicating it was sourced from elsewhere, like Brazil. But CBP continues to hold the shipment and say, ‘That’s fine, but now you have to prove to us that there’s no forced labor in your supply chain generally.’”
The CBP, which enforces U.S. laws restricting imports made with slavery and other forms of forced labor by preventing importation, has issued two major withhold release orders targeting cotton products from Xinjiang.
In December, it issued a WRO on cotton specifically tied to Xinjiang Production and Construction Corps, and its subsidiaries and affiliates. In January, Customs issued a region-wide withhold release order on cotton and tomato products sourced in Xinjiang, setting off what experts said was the real impact of detaining imports, including by large retailers.
Customs officers target shipments by using the agency’s private internal list of manufacturers with a nexus to Xinjiang, and then identifying shipments that list the manufacturer ID numbers of those on CBP’s target list. Because the agency’s targeted manufacturers list is not public, retailers and importers can’t head off scrutiny by avoiding the manufacturers on that list, experts said.
“Then the importer has the burden of proving the goods were not made with forced labor,” said Angela Santos, partner at Arent Fox who advises fashion clients and leads the firm’s task force addressing the use of forced labor in supply chains.
“So, essentially, they need to have documentation for the entire supply chain…to show that forced labor wasn’t used in every step — [they need to show] affidavits, transportation records, everything,” she said.
The U.S. has enforcement authority over all importers, not just those based in the U.S. If officers suspect fraud, the Justice Department could get involved with its own inquiry.
“The types of investigations that the [DOJ] would undertake would be when there’s some kind of criminal fraud involved,” said David Stepp, partner at Crowell & Moring. “For example, a company manufacturing goods and shipping through a third country to shield the origin information — we see that often when companies circumvent anti-dumping duty orders or other duties that are applied to Chinese goods,” he said.
“That’s where I’d see the DOJ interceding, because that’s when there would be some sort of criminal intent to get around the requirements that are in place,” he said.
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