In February  2016, President Barack Obama signed The Trade Facilitation and Enforcement Act (2015) removing the controversial, ‘consumptive demand exception’ thereby closing a historical loop hole technically permitting the importation of goods into The United States made by forced labor. Specifically, this Act prohibits goods ‘mined, produced, or manufactured wholly, or in part, in any foreign country by convict labor or/and forced labor or/and indentured labor’ from being imported into The United States.

Under this Act, any party, suspecting that merchandise is being imported in violation of these conditions, may file a petition with Customs and Border Protection (CBP).  Significantly, this petition may be filed by any third party including an employee, an ex-employee or a competitor.  Should CBP determine the allegation reasonably founded it is empowered to issue a withhold release order detaining both current and, also, future shipments into the United States.  Importers would then be required to petition CBP for the release of their shipment(s) by submitting evidence that their merchandise was not, indeed, in violation of the Act.  Should petitions be denied then the seized merchandise must be exported from The United States or deemed abandoned.  Evidence indicates that CBP has already begun a program of increased vigilance. Since the Act was signed at the end of February 2016, CBP has already issued 3 withhold release orders detaining shipments entering The United States.  As this program becomes more ingrained into CBP, Omega is of the view that the number of shipments, detained under this Act, will only increase.

There remain significant unknowns.  CBP has not yet defined the scope of the supply chain which falls under the importers responsibility; tier i, tier ii and so forth.  In addition, CBP has yet to outline how allegations of forced labor will be investigated.  Will CBP visit the origin of the shipment to validate the claim or, instead, will they perform their diligence remotely?  Also, it is unclear as to the type of documentation an importer should submit as evidence that its imports were not subject to forced labor conditions. In all likelihood the burden of proof upon the importer would be onerous. The risks are clear. Companies who have their shipments seized will be exposed to considerable reputational damage for being associated with forced labor. They will suffer the commercial impact of having current, and future, shipments seized as well as the legal costs of petitioning CBP.

Omega recommends that companies importing merchandise into the United States from countries with a risk of forced labor be particularly vigilant. As a first step, companies must have a clear understanding of where their merchandise is actually manufactured. Supply chains are often more murky than they seem.  Forced labor is a broad term ranging from bonded labor through to the withholding of worker passports.  It is important then that you have a clear understanding of the issue, how exposed your supply chains are, and, critically, a means of detecting the forced labor and implementing remediation.

Identifying and remediating forced labor is a complex issue. Omega has vast experience in dealing with the challenge. For more information, please contact us.

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