On December 14, 2021, House and Senate negotiators reached agreement on a version of the "Uyghur Forced Labor Prevention Act." The House passed the bill late Tuesday night, and the Senate approved the bill on December 16. While the Chinese government denies that Uyghurs are subjected to forced labor, the White House has indicated that President Biden supports taking more aggressive action against China's use of forced labor and is expected to sign the bill.
The compromise bill creates a rebuttable presumption that goods “mined, produced, or manufactured wholly or in part” in the Xinjiang Uyghur Autonomous Region ("XUAR") of China or by certain other entities in China are made with forced labor and must be prohibited from being imported into the United States. Under preexisting law, US Customs and Border Protection ("CBP") could only issue a withhold release order ("WRO") based on a "reasonable suspicion" that forced labor was being used. Importers must provide "clear and convincing evidence" to demonstrate that the import ban should not apply before they will be allowed to enter goods into the United States. This provision takes effect 180 days after the bill is signed into law.
The legislation requires CBP to conduct a rulemaking process and publish guidance on appropriate due diligence, evidentiary standards, and how importers can meet the requirements to demonstrate goods have not been produced using forced labor. Specifically, CBP must provide guidance to importers on the evidentiary standard that must be met to demonstrate that goods originating in China were not mined, produced or manufactured in XUAR and were not produced using forced labor. While the approach CBP will take on regulations and standards is not yet clear, the agency has been providing guidance in the context of existing WROs and is likely to incorporate its current practice into the formal regulations.
The legislation also requires CBP to produce a strategy for preventing the importation of goods from China produced using forced labor, including—but not limited to—in XUAR. In preparing the strategy, CBP must conduct a public hearing and hold open a comment period of at least 45 days to allow importers, producers, NGOs, etc., to provide input. The CBP strategy must list products produced using forced labor, entities that export such products to the United States and entities that produce products using materials from XUAR. CBP’s strategy also must include an enforcement plan, which may include the use of WROs and must include a list of high-priority sectors for enforcement. The legislation requires CBP to include cotton, tomatoes and polysilicon on this list, as these products are already subject to WROs.
Dropped from the final compromise bill was a provision from the original House bill requiring companies to notify as part of required Securities and Exchange Commission filings when they "knowingly" engaged in activities with certain entities or affiliates related to XUAR.
If the legislation is, as expected, signed into law this week, the presumptive import ban will take effect in mid-June 2022.
This law will add to CBP’s toolkit as it continues to ramp up enforcement of US forced labor laws that have generated an unprecedented number of WROs over the past five years.
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 prior 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 labor to inform its identification of forced labor1 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.