WASHINGTON — The U.S. government is getting tougher on imports made by overseas forced labor and the fashion world is watching nervously.
In a move that could have significant implications for retailers and fashion brands that import billions of dollars’ worth of merchandise from around the globe, U.S. Customs and Border Protection issued a detention order on several products imported from a Chinese company for allegedly being made by forced labor.
The move followed the enactment of legislation in February that removed a decades-old exemption limiting the authority of Customs to detain goods that were suspected of being made by forced labor. The new law has also left a lot of unanswered questions for importers, such as on what information authorities had based the detention and how U.S. companies with goods in detention could prove they were not made by forced labor.
CBP commissioner R. Gil Kerlikowske issued the “withhold release order” against several imported products, including viscose rayon fiber, calcium chloride, soda ash and caustic soda manufactured or mined by Tangshan Sanyou Group, based in China. The company’s Web site notes it has subsidiaries throughout China and a trading office in Hong Kong.
“CBP is committed to vigorously enforcing the legal prohibition on the importation of goods manufactured with forced labor,” Kerlikowske said. “CBP will do its part to ensure that products entering the United States were not made by exploiting those forced to work against their will, and to ensure that American businesses and workers do not have to compete with businesses profiting from forced labor.”
CBP said the order is based on information obtained by authorities “indicating that the Tangshan Sanyou Group and its subsidiaries utilize convict labor in the production of the merchandise.”
“It is illegal to import into the United States goods made, wholly or in part, with convict labor and/or forced labor — including forced child labor — and/or indentured labor under penal sanctions,” the agency said. “CBP issues withhold release orders when information available reasonably indicates merchandise in violation of [the statute] is, or is likely to be, imported.”
It was unclear to which companies the detained goods were being shipped or who was behind the complaint that led U.S. officials to take the action. Customs did not respond to a request for further information.
While most brands and retailers take diligent steps through corporate social responsibility policies not to use forced or child labor in their supply chains, the illegal practice is still often used by factories, farmers and mining companies in numerous countries worldwide.
According to the International Labour Organization, an estimated 168 million children toil in agriculture, manufacturing and services globally. Of that total, about 85 million children are engaged in hazardous work. Another six million are estimated to be in forced labor.
President Obama signed the new Customs and trade enforcement bill into law in early February that removed something known as the “consumptive demand” exemption.
For decades, Customs officials were prohibited from detaining imports if those products weren’t made in sufficient quantity in America to meet total U.S. demand. With the removal of the exemption, Customs can now detain all imported products suspected of being made by forced labor based on due diligence.
David Spooner, a partner at Barnes & Thornburg LLP who was the chief textile and apparel negotiator at the U.S. Trade Representative’s office from 2002 to 2006, said the seizure of the shipment by Customs “should be a concern to U.S. apparel producers and, frankly, fabric producers.”
“This imported viscose rayon that Customs seized was bound for some U.S. fabric-maker,” Spooner said. “The ink is barely dry on the law and Customs is already taking advantage of its ability to seize goods made by forced labor.”
The U.S. Department of Labor releases an annual list of products made by forced or child labor, as well as another watch list on child labor, in which a number of major apparel-producing countries, including Bangladesh, China and Vietnam, have been cited for the practice in industries including apparel, textile and footwear manufacturing, and cotton production and gem and metal mining.
“I am confident Customs will reference the DOL’s annual report when it decides its enforcement priorities,” Spooner said. “If I were an importer I would [be aware] that the DOL puts out that report every year on countries utilizing child and forced labor, and a couple of big apparel exporters — Bangladesh and Vietnam — were cited in the last report for using child labor in the apparel industry.”
Spooner added, “The obvious implication [of the detention] is that apparel brands and retailers are facing a major new risk in their supply chains….Customs can — and now apparently is — seizing imported goods it suspects were made with forced labor and that includes child labor. That didn’t happen before.”
Judy Gearhart, executive director of the International Labor Rights Forum, said the group was pleased “to know that this is coming into effect and that Customs will take action when products are under suspicion of being made by forced labor.”
“They have to be stopped at our ports,” Gearhart said. “With globalization the way it is, the more technology we have and transparency in the global supply chain [and now Customs enforcement], the more we will find out what kind of products are coming through our ports and stop them before we aid and abet forced labor by buying those goods.”
“We have been working and will continue to work to improve traceability in the global supply chain for more transparency and accountability,” she added, noting that groups can now “enlist Customs to help us.”
Gearhart said ILRF will be “doing our best to leverage this law to stop forced labor products from coming into the U.S.”
Hun Quach, vice president of international trade at the Retail Industry Leaders Association, “I can’t imagine CBP just blanket banning T-shirts made in Vietnam because the country is on the DOL list. That would impact so many different companies throughout the global value chain.”
Quach said, “From a compliance perspective, that would cost us a lot of money to prove every single time for every shipment that we are compliant. This would be on top of the millions of dollars retailers spend on customs compliance and responsible sourcing. With CBP’s limited resources, we would want them to take a risk-based approach.”
RILA plans to work with Customs to ensure a fair and transparent process, she said.
“At the end of the day, our companies are good corporate citizens,” she said. “They have processes in place to ensure their supply chains are compliant with U.S. law.”
Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, said the detention raises concerns, noting that retailers are waiting to hear from Customs what the process will be and what the new Customs rules will look like.
“Kerlikowske said yesterday they will be open and transparent, and work with NGOs and importers on the new process,” Gold said. “There are still a lot of questions about how it is going to work and there is concern surrounding what procedural mechanisms there will be and if goods are detained, how you get them free and clear.”
He added, “There needs to be a process in place for investigations to see whether or not the claims are accurate. That’s what Customs is in the process of putting together and, hopefully, it will provide more clarity once they put out guidance.”
Julia Hughes, president at the U.S. Fashion Industry Association, said the group’s counsel was reviewing the statute.
“The impact will depend on the process,” Hughes said. “Most companies already ban the use of forced labor by their suppliers, so we would be surprised for major manufacturers to be charged. However, we will be talking with CBP and look forward to better understanding the targeting process.”