January 15, 2021

Dialing Up its Forced Labor Enforcement Efforts, CBP Issues Order Barring All Imports of Cotton and Tomato Products from China’s Xinjiang Region

On January 13, 2021, United States Customs and Border Protection (CBP) issued an order blocking all imports of cotton and tomato products from China’s Xinjiang Uighur Autonomous Region. The order, intended to address CBP’s findings of the use of forced labor of ethnic Uighur Muslims, is CBP’s seventh enforcement action in the last four months that targets goods from Xinjiang — and is, by far, the most sweeping to date.

The announcement came just one day after Canada and the United Kingdom announced similar measures.

Background

Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307) prohibits the importation of merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced or indentured labor. Since 2016, CBP has ramped up its enforcement of Section 307 and, in particular, has issued more withhold/release orders (WROs) which may be issued when information “reasonably but not conclusively” indicates to CBP that goods are made in whole or in part using forced labor.

As explained in our recent client alert on December 2, 2020, CBP issued a WRO blocking all imports of cotton and cotton products from Xinjiang Production and Construction Corps (XPCC), a Chinese state-owned company operating in Xinjiang. The move was likely prompted, in part, by a sustained campaign by labor and human rights groups, as well as members of Congress on both sides of the aisle, who have been vocal in their calls for CBP to halt imports of cotton and agricultural products from Xinjiang.

January 13th WRO

As announced, the January 13 WRO goes much further than the previous one. Per the latest WRO, CBP is directing all personnel at all U.S. ports of entry to detain cotton and tomato products grown or produced by any entities operating in Xinjiang, not just XPCC. According to CBP, its investigation uncovered information “reasonably indicat[ing]” that cotton and tomato products in Xinjiang are made, at least in part, using detainee or prison labor. Specifically, CBP cited evidence of “debt bondage, restriction of movement, isolation, intimidation and threats, withholding of wages, and abusive living and working conditions.” CBP included the following examples of covered products: apparel, textiles, tomato seeds, canned tomatoes, tomato sauce and other goods.

Despite its breadth, CBP’s latest action may be a prelude to potential action on Capitol Hill. In September, the U.S. House of Representatives passed — by a vote of 406 to 3 — the Uyghur Forced Labor Prevention Act (UFLPA), which would:

  • Prohibit the import of goods manufactured and/or produced in Xinjiang unless CBP determines by “clear and convincing evidence” that the goods were not produced wholly or in part by convict labor, forced labor or indentured labor under penal sanctions; and reports such a determination to Congress.
  • Establish new disclosure requirements for publicly traded U.S. companies knowingly engaging with entities involved in certain activities in Xinjiang.

The bill, which stalled last month in the U.S. Senate, is expected to be re-introduced in the new, Democratic-controlled Congress.

While congressional action remains pending, CBP — in addition to issuing WROs — continues to leverage its broad enforcement authority under 19 U.S.C. § 1509(a). Section 1509 permits the agency to conduct examinations, issue summonses, compel testimony and impose civil penalties in enforcing the agency’s laws and regulations. In enforcing WROs specifically, CBP has utilized Section 1509 to obtain information about companies’ supply chains and policies and procedures in place related to those supply chains to create a risk profile for future enforcement activities.

International Action

Amid these latest CBP actions, some of the United States’ top trading partners are escalating their own forced labor enforcement efforts as well.

On January 12, 2021, the U.K. announced a series of new measures targeting goods in the Xinjian region, including, but not limited to:

  • A review of export controls as they apply to Xinjiang.
  • The assessment of financial penalties for organizations that fail to satisfy statutory reporting requirements related to forced labor.
  • New guidance to U.K. businesses outlining the risks associated with maintaining supply chains linked to Xinjiang.
  • New guidance for the development of procurement rules aimed at excluding suppliers “where there is sufficient evidence of human rights violations in supply chains.”

That same day, Canada also announced "parallel" measures that include a prohibition of imports of goods produced, wholly or in part, by forced labor; a “Xinjiang Integrity Declaration” for Canadian companies; new export controls; and new guidance for Canadian businesses associated with Xinjiang-related entities.

For More Information

It is anticipated that increasing global focus on forced labor practices will continue for the foreseeable future, underscoring the need for both U.S. importers and exporters to carefully review (and potentially reassess) their supply chains. Faegre Drinker has assisted clients at all stages of government trade inquiries and assessments, from responding to questionnaires to successfully implementing strategies to protect supply chains and ensure regulatory compliance. If you have any questions about these matters, please contact one of the Faegre Drinker professionals below or any member of Faegre Drinker's Customs and International Trade team for further details.

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