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25 September 2020
On 14 September 2020 the Department of Homeland Security through US Customs and Border Protection (CBP) issued new withhold release orders (WROs) aimed at entities involved in the import, downstream manufacturing or sale of certain apparel, cotton, hair products and computer parts.
There are reports that CBP leaders have indicated that other WROs may be under consideration on other apparel and agricultural products.
CBP has issued five WROs on certain products from China, finding that they are produced with forced labour in the Xinjiang Uyghur Autonomous Region or Anhui Province. Some of the WROs became effective as early as 25 August 2020. These WROs come as part of an increased pressure campaign by CBP to prevent goods made using forced labour from entering the US stream of commerce. In combination with previously reported WROs covering products from China since September 2019, this raises the tally to nine. The new WROs effectively ban these products made by these companies or areas from being imported into the United States.
The products covered by the new WROs include:
As noted in a July 2020 advisory from the US Department of State, Xinjiang reportedly produced 84% of Chinese cotton. Given the extensive production of cotton from a region that CBP has found to use forced labour, importers, producers and retailers must act now to mitigate the risk of supply chain disruption and penalties. Adding to this urgency is the fact that although CBP's press release was issued on 14 September 2020, the five WROs were backdated, one to as early as 25 August 2020. Thus, these WROs may adversely affect merchandise that is currently being shipped to the United States or which is already in CBP's custody.
19 US Code (USC) 1307 prohibits imported merchandise that was "mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor under penal sanctions" into the commerce of the United States. Thus, goods produced in whole or in part with forced labour are prohibited from entering the United States. Shipments suspected of being produced with forced labour will be detained by CBP and excluded if CBP determines that forced labour was used in the production of the goods.
Further, one company recently paid CBP $575,000 to settle penalty claims issued as a result of allegations that it had imported or sold products made using forced labour (for further details please see "CBP gets tough on forced labour: turning supply chain risks into advantages"). The penalties in this case were imposed pursuant to 19 USC 1307 and likely 19 USC 1595a. Under 19 USC 1595a, CBP may issue civil penalties against importers for entering, introducing or attempting to enter or introduce merchandise that is prohibited or restricted. This appears to have been the first time that CBP has imposed penalties under these provisions for goods believed to have been made using forced labour.
CBP will likely continue to take an active approach to issuing and enforcing WROs and may even deploy region-wide rather than company-specific WROs. Further, CBP is expected to pursue monetary penalties against companies that it suspects of violating forced labour provisions. Accordingly, entities that may be affected should develop and implement systems that demonstrate supply chains free from forced labour.
For further information on this topic please contact Anthony V Lupo, David R Hamill, David Salkeld or Natan Tubman at Arent Fox LLP by telephone (+1 202 857 6000) or email (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com). The Arent Fox LLP website can be accessed at www.arentfox.com.
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