On September 8, 2021, US Customs and Border Protection ("CBP") revised its responses to a set of Frequently Asked Questions (FAQs) to provide guidance on the recently issued Withhold Release Order ("WRO") on silica-based products made by Hoshine Silicon Industry Co., Ltd. ("Hoshine"), a company located in Xinjiang, China, and its subsidiaries. Our August 16 Legal Update discussed the potential impact of CBP's earlier FAQ response suggesting that finished products containing a small percentage of silica-based products sourced from Hoshine might not be subject to the WRO, effectively creating a de minimis standard. In the most recent FAQ responses, CBP has walked back its previous guidance and now advises that whether a finished good containing a de minimis amount of material covered by the WRO should be blocked is a question that could be considered by a court in determining the statutory intent of US law on the use of forced labor (19 U.S.C § 1307).
Neither the underlying statute nor CBP's implementing regulations for the statute contain a de minimis provision. CBP's most recent guidance suggests it is not willing to rely solely on its authority to enforce the law to create a de minimis standard.
What Is a Withhold Release Order?
Section 307 of the Tariff Act of 1930 prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by convict labor and/or forced or indentured labor, including forced child labor. As noted in our March 2020 Legal Update, an exemption previously available to importers mitigated the practical impact of Section 307 by allowing for the importation of merchandise produced with forced labor if consumption of the merchandise in the United States exceeded the domestic production capacity. However, the Trade Facilitation and Trade Enforcement Act of 2015 (“TFTEA”), signed by President Obama on February 24, 2016, amended the Tariff Act of 1930 by eliminating the exemption and giving CBP more leeway to pursue enforcement. Since the enactment of this amendment in 2016, CBP has issued over 20 WROs under the legal authority of Section 307.
A WRO can be issued based on CBP’s own self-initiated investigation or on information gathered from outside sources, including whistleblowers and non-governmental organizations. Pursuant to the relevant regulations, any person (inside or outside of CBP) who has reason to believe that merchandise is being, or is likely to be, imported into the United States and is produced using forced labor can submit that information to the CBP commissioner. Section 307 defines “forced labor” as “all work or service that is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself [or herself] voluntarily.” In practice, CBP uses the UN International Labour Organization’s (“ILO”) indicators on forced labor1 to inform its identification of forced labor practices in the WRO process.
Importers often do not know that CBP is investigating a forced labor allegation until it issues a WRO. Based on the information provided, the commissioner (or a delegate) will conduct an investigation and may issue a WRO when information reasonably, but not necessarily conclusively, indicates that the merchandise is made wholly or in part with forced labor. CBP will prevent the admission into the United States of all merchandise within the scope of the WRO. Importers will be told to export or destroy any of the merchandise in the United States that has not cleared customs.
WROs are typically issued against imports of specific merchandise manufactured in a specific country by a specific company. However, as with the WROs on cotton and tomato products from Xinjiang and tobacco from Malawi, CBP can issue region- or country-wide WROs targeting merchandise made “wholly or in part” by forced labor. These WROs cover both the targeted article and any merchandise produced downstream that incorporates the targeted article.
1 The 11 indicators are (i) abuse of vulnerability, (ii) deception, (iii) restriction of movement, (iv) isolation, (v) physical and sexual violence, (vi) intimidation and threats, (vii) retention of identity documents, (viii) withholding of wages, (ix) debt bondage, (x) abusive working and living conditions and (xi) excessive overtime. See https://www.ilo.org/global/topics/forced-labour/publications/WCMS_203832/lang--en/index.htm.