Are You Using Forced Labor in Your Supply Chains?

Are You Using Forced Labor in Your Supply Chains?

The Use of Forced Labor in Supply Chains is Receiving Increased Scrutiny by CBP

Recently, senior members of U.S. Customs and Border Protection (“CBP”) have made it clear in public appearances that they are going to be increasingly focusing on examination of supply chains for the purpose of excluding products that may be using forced labor. CBP will also be publishing proposed rulemaking in January 2020 on what it has described as “Merchandise Produced by Convict or Forced Labor or Indentured Labor Under Penal Sanctions" which “would generally bring the forced labor regulations and detention procedures into alignment with other statutes, regulations and procedures that apply to the enforcement of restrictions against other types of prohibited merchandise.” Together, these developments make it clear that the focus on the use of forced labor in supply chains is moving to the top of the agenda in CBP enforcement efforts.

This effort has been building for a few years and is reflected in the recent increase in Withholding of Release Orders (“WRO”) that have been issued. A WRO means that a company is barred from importing any product identified in the WRO until further notice. Of particular interest is the CBP focus on the use of foreign workers in Southeast Asia and elsewhere that are hired by employment agencies under contract to manufacturing facilities. This is becoming increasingly common, especially in countries like Vietnam, Cambodia and Malaysia which are seeing increased manufacturing activities as production moves out of China. Each of these countries is experiencing an acute shortage of unskilled workers.

How Do You Know if There Is Forced Labor in Your Supply Chains?

The Fair Labor Association has been in the forefront in safeguarding workers’ rights in the workplace. To this end they have issued guidance in helping to identify abusive practices which are recognized internationally and in the U.S. as constituting the use of forced labor. Some of the main indicators identified by the FLA are the following:

•   Are foreign workers required to pay a recruitment fee in order to gain employment?
•   Are foreign workers prevented from quitting their jobs due to indebtedness to the agency?
•   Does the employment agency retain their identify and/or travel document?
•   Are wages withhold or not paid timely by the agency?
•   Are there abusive working or living conditions?
•   Are workers forced to work excessive overtime hours?
•   Are workers not paid premium wages for overtime?
•   Is their freedom of movement restricted?

What Should You Be Doing to Guard Against the Use of Forced Labor in Your Supply Chains?

CBP teams are constantly visiting foreign suppliers for a variety of reasons. For example, CTPAT members undergo a foreign supplier verification once every four years. Suppliers to importers who claim a tariff preference under a free trade agreement are regularly audited abroad. The recently passed Enforce and Protect Act has also resulted in regular CBP visits to overseas suppliers. In all such cases, regardless of the stated purpose for the visit, CBP has been asking questions about the labor used in the production of the product that it is reviewing.

Just as a prudent importer will do the necessary examination to ensure that it is entitled to claim a tariff preference under an FTA, or that its supplier is properly vetting employees under the CTPAT program, it is incumbent on that importer to also ask questions about the use of temporary workers which are hired through a third party employment agency in order to ensure that their suppliers are fully complying with the prohibition against the use of forced labor. Some actions that a supplier can be asked to take include randomly interviewing temporary workers to ascertain whether they have been improperly charged recruitment fees, or had their documents confiscated or asking the employment agency to open up their files for audit. Waiting until after a product is manufactured and imported into the U.S. is too late to start asking these questions.