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Forced Labour Enforcement and Supply Chain Due Diligence

Posted September 16, 2016

The Commercial Enforcement division of U.S. Customs and Border Protection (CBP) has published a brief Fact Sheet concerning forced labour in supply chains, stressing the importance for companies to exercise due diligence in order to avoid involvement with these types of goods.

According to the Fact Sheet, “To combat the risks of child and forced labor in your operations and global supply chains, you should have a comprehensive and transparent social compliance system in place.”

The document provides links to a number of resources that can assist companies without such a compliance system, that will help strengthen systems already in place, or more generally assist with conducting supply chain due diligence.

The reason this issue is now gaining a higher profile is largely due to a significant 2016 amendment to the Smoot-Hawley Tariff Act of 1930, and, in its wake, stepped up enforcement activity by Customs and Border Protection.

The background to this change was explained at some length in a recent blog posting by Sandra Lee Bell with the multinational law firm DLA Piper:

Section 307 of the Tariff Act of 1930, as amended, essentially prohibits the importation into the US of any goods mined, produced or manufactured with the use of convict labor or “forced labor.” What is very clear in the statute today regarding what is covered by the “forced labor” term of art actually was the subject of a long debate during the course of legislating the amendments to this provision of the 1930 Tariff Act.

During that debate, the Senate amendments were accepted; but the House Conference responded by adding in the so-called “consumptive demand” exception, which was created to "prevent the application of these provisions to articles such as rubber and tea, which are not produced in the United States, and [for]… which our domestic production does not satisfy our consumptive needs.” As a result, the amendments to section 307 under the Tariff Act of 1930 expanded the scope of the definition of forced labor, but at the same time created an exception that would swallow up the entire prohibition covered by the expanded definition.

In February 2016, the legal loophole was finally closed when President Barack Obama signed into law the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). Tucked away in the last title of the TFTEA, under a heading that reads Title IX—Miscellaneous Provisions, was Section 910, “Elimination of Consumptive Demand Exception to Prohibition on Importation of Goods Made With Convict Labor, Forced Labor, or Indentured Labor”; Report.”  The title of the section, indeed, was longer than the legislative text itself, which reads: “Section 307 of the Tariff Act of 1930 is amended by striking ‘The provisions of this section’ and all that follows through ‘of the United States.’”

With these spare words, after 86 years, the original purpose of the 1930 Senate amendment could at last be realized.

In addition to outlining the avenues of appeal and redress in the event of a customs enforcement action, Bell’s article reiterates a number of sound recommendations about steps importers can take to avoid unintentionally running afoul of the reinvigorated forced labour statute in the first place, such as seeking advice from customs experts, completing a supply chain audit, and keeping up to date on administrative rulings and various informed compliance publications regarding the issue.