Date: Monday, June 14th, 2021
Source: Sourcing Journal
So your shipment has been detained by U.S. Customs and Border Protection for suspected forced labor. What do you do next?
Importers who run afoul of one of the agency’s 48 Withhold Release Orders (WROs)—as Uniqlo recently did—can do one of two things: reclaim the goods for export elsewhere or file a protest disputing CBP’s assertion that the merchandise wasn’t mined, manufactured or produced, in whole or in part, using modern-day slavery.
Companies have three months from the date of importation to submit evidence that the merchandise was not made with forced labor, which CBP evaluates on a case-by-case basis, said Dana Watts, a counsel at Miller & Chevalier who specializes in customs law. While the list of criteria isn’t clear, CBP’s enthusiasm for enforcement is. The agency has detained more than 370 shipments allegedly made with forced labor since January.
“It’s a little bit of a gray area of exactly what is needed and how much is needed and what the standard is for proving that something is not made with forced labor and therefore admissible, versus failing to meet your burden of proof and therefore the item is not admissible in the United States,” Watts previously told Sourcing Journal.
CBP’s conclusions are more cut and dry: Merchandise that survives this extra gauntlet is allowed to enter the United States, Watts told Sourcing Journal. Those that don’t—again, like Uniqlo—are excluded.
If the importer doesn’t reclaim the excluded goods within 60 days, CBP considers them abandoned and will “take steps to destroy the shipment,” said Nathan Peeters, a CBP spokesman.
This might happen more often than it might seem. Uniqlo, for instance, operates stores in 25 countries worldwide, so the detention of its men’s shirts, which CBP believed to contain cotton processed by the Xinjiang Production and Construction Corps (XPCC), “didn’t hurt it much,” said Mark Burstein, industry principal at Logility, an Atlanta-based digital supply-chain traceability platform.
“They’re not going to have the product in the States, [so] they’ll send it to Japan, they’ll send it to Europe—they’ll be able to redistribute it,” he told Sourcing Journal. “But with companies that don’t have that global distribution, they then have two choices: abandon the products or destroy [them]. That’s it.”
CBP’s tightening net around cotton and cotton products linked to China’s northwest Xinjiang Uyghur Autonomous Region, where millions of Uyghurs, Kazakhs and other Turkic Muslim minorities are widely believed to be toiling under conditions that strongly suggest forced labor, has sent brands scrambling for cover.
“Everyone had been focused on, ‘Oh, as long as the cotton didn’t come from Xinjiang, I’m safe,’” Burstein previously told Sourcing Journal. “But what this Uniqlo detainment has just uncovered is it’s not just about where the cotton comes from, it’s [about] every supplier [and] every tier.”
Avoiding ties with the XPCC, a paramilitary group that employs 12 percent of Xinjiang’s population and generates 17 percent of the region’s gross domestic product, might be easier said than done as well. The organization boasts more than 862,600 direct and indirect holdings—including minority, majority, control and non-control positions—through different XPCC divisions, according to corporate intelligence platform Sayari.
“These companies touch 147 countries, including the United States, Germany and the U.K., and offshore jurisdictions like the British Virgin Islands,” Sayari analyst Alex Bate wrote in a blog post last August. “They reach as far as 34 layers of ownership from the XPCC.”
The only way brands can sidestep these hotspots is by ensuring they have full visibility of their complex and multi-layered supply chains beyond the first or second tiers.
“When CBP seizes a shipment, it expects to see a clean bill of health for the containers they seized in order to release them,” Leonardo Bonanni, founder, and CEO of Sourcemap, a supply-chain risk platform, told Sourcing Journal. “The best way to give CBP a clean bill of health for a container is to map the entire supply chain, to assess the risks, and to show evidence of a corrective action plan when risks of forced labor are identified. This is what constitutes ‘supply chain due diligence,’ and it’s what customs is looking for.”
Fulfilling this will require a massive amount of time and investment that companies have previously brushed off. But CBP isn’t interested in the suppliers of finished goods, it wants assurance that the raw materials were also produced without the risk of modern slavery, Bonanni said. That granular level of discovery can be dizzying in its depth.
“Mapping your supply chain means asking your suppliers who supply them, which inevitably reveals five to ten times as many suppliers that you didn’t know about,” he said. “Then you need to collect enough data from these discovered suppliers to rule out the risk of forced labor—depending on their risk profile, that can mean collecting transaction records, payroll and compliance certificates, from thousands of companies in your supply chain.”
Customs dinged Uniqlo for “substantial deficiencies” in the documentation the company provided, including timecards, wage payment receipts, daily process reports and other records that demonstrated workers weren’t being held against their will. Chinese customs declarations were “unsigned, undated and generally illegible,” submitted invoices did not reflect fabric composition percentages and a code of conduct letter, dated 2016, was “not current.”
Bonanni’s advice? Don’t wait to start.
VF Corp., which owns The North Face, Timberland and Vans, for instance, announced in January that it is broadening its traceability mapping program by publicly disclosing Tier 1 through Tier 4 supplier information for dozens of products. The scheme currently covers 46 of its “most iconic” products, including JanSport’s Big Student Backpack, Kipling’s Art M Tote Bag, The North Face’s Women’s Down Sierra Parka and Timberland’s Men’s Con 3-Eye Classic Boot. By December, VF plans to uncover twice as many products.
The United States isn’t the only market importers need to appease, either. Canada’s Border Services Agency recently announced new, similar measures to enforce its prohibition of goods mined, manufactured or produced, wholly or in part, by prison or forced labor. Australia and the United Kingdom, too, are facing calls for tougher modern slavery due diligence.
“If you haven’t done it before, it can take one to two months to map your supply chain for the first time, so don’t wait to start mapping your supply chain until CBP [or another customs agency] seizes a container, or your order might not get released until it goes out of style,” Bonanni said.