WASHINGTON — Federal authorities are cracking down on imported products suspected of being made using forced labor and the fashion industry is trying to get a handle on the potential scope of the government’s actions, which could have significant implications for retailers and brands that import billions of dollars’ worth of merchandise from around the globe.
This story first appeared in the May 18, 2016 issue of WWD. Subscribe Today.
Kenneth J.F. Kennedy, senior policy adviser for the Forced Labor Program for the Homeland Security Investigations unit of U.S. Immigration and Customs Enforcement, is on a mission to explain the administration’s enforcement and compliance goals to companies managing their supply chains. The enactment of legislation in February removed a decades-old exemption that had limited the authority of U.S. Customs and Border Protection to detain goods suspected of being made by forced labor. CBP has already issued at least one “withhold release order” since the law took effect, detaining several imported products, including viscose rayon fiber, made by a Chinese company. While major brands and retailers have long had corporate social responsibility plans in place to ferret out worker abuses in global supply chains, they are now facing intensified scrutiny by the U.S. government.
WWD: Some companies have expressed concern about the recent detentions. What message is the government sending to companies? Are you putting them on notice essentially?
Kenneth J.F. Kennedy: The intent of all of this and the laws in question have been in place for almost 100 years at this point. I think that is important to note. This is not something new that the U.S. government is turning around and saying, “We’ve changed everything.” These have been there for many decades. I don’t think the message that we want to send out is, “We’re coming for you.” I think it’s very much that we are all responsible for our actions.
WWD: Does it help a company if they can produce some documents showing that they have corporate responsibility programs or unannounced visits in their global factories?
K.J.F.K.: If goods are being detained, the company has 90 days. If the company can demonstrate that it has looked at its supply chain — and it may not be a finished product at this point because some supply chains are very complicated — but if it’s a work in progress and it can show it is making progress toward its contracting firms and subcontractors, and has standards in place that include things like looking at forced labor or indicators of forced labor, all of that definitely comes into play.
WWD: How far back do you hold a company responsible in its supply chain? Would it be, for example, back to the threads sewn with forced labor in Pakistan into a garment? Who’s responsible?
K.J.F.K.: U.S. law makes the person with a U.S. nexus responsible. If the allegation is, for example, a factory in Pakistan and forced labor is present in a factory in Pakistan and the goods, the raw materials, are brought in and made into a garment, and then it moves to two other countries [for assembly] but it finally hits the U.S., [the problem] is that forced labor is in the supply chain at all. The company that is bringing the goods into the U.S. is responsible for any forced labor in its supply chain.
WWD: Since you go after individual companies in the supply chain, isn’t it like finding a needle in a haystack? With more of this kind of enforcement, will you bring more of this into the light?
K.J.F.K.: I don’t know that it is only enforcement. I think it’s a matter of continued media attention that certainly has arisen in the last three months or so. Between enforcement and media attention, there is a greater amount of trade and industry interest. There’s a huge amount of consumer interest. Put that together with additional trade enforcement, and that will keep this moving. Customers want to know what is in the supply chain and if they are exploiting people by buying whatever it is they buy.
WWD: Do you give corporations some credit for looking at their supply chains and trying to eradicate forced labor? Have they made progress?
K.J.F.K.: We look at the information they provide. We look at whether it is just posting a policy on a web site, or if there’s teeth behind it. Or is it like the Rana Plaza [an industrial complex in Bangladesh that collapsed three years ago, killing an estimated 1,133 workers] allegations where it was the mailed-in checklist once a year of the conditions in a factory? Or is there an unannounced third-party audit system, where people come in and actually speak the language of workers and talk to them about their conditions? You’ll see everything in between there. It’s not just a matter of looking at what is given to us. It’s a matter of saying: Is there a reason you did it this way? Did you find anything you took action on yourself before we came along?
WWD: Does this represent a sea change in the way the government can go after the use of forced labor?
K.J.F.K.: I don’t know that it’s a sea change in the way we can do it. I think it’s a sea change that we’re doing it. Plus, there is support from NGOs and businesses that are progressive. We actually have companies that are pushing us to be more progressive as a society. That’s a very nice place to be.
WWD: Is this a sizeable amount of trade? Are there any estimates of how much trade comes into the U.S. suspected of being made by forced labor?
K.J.F.K.: I’ve seen estimates that have ranged from what I think are way too small to ones that are just enormous. There was one estimate that said the amount of forced labor-produced goods that are actually imported to the U.S. is less than 1 percent of U.S. trade overall. The larger version was more than 50 percent — depending on what definition they were using for forced labor. The Department of Labor has an annual list of goods produced by child or forced labor. There are several countries listed on that list for garment production, as well as footwear, textiles and the mining of gold and diamonds.
WWD: Do you look at that list in your overall review for priority areas?
K.J.F.K.: Yes, we do. Some of the media has been reporting lately that we are just going to take that list and do a blanket ban on any goods on that list. That is not the case for a number of reasons. Number one is that the DOL mandate does not include evaluating whether the [product] actually is imported to the U.S. or not. Many of those goods [on the DOL’s list] are not brought into the U.S. Number 2: The standard to put a good on that list is lower than what we would need to put a withhold/release order in place. The DOL lists are fantastic because they provide bibliographies that we can then use to reference if we get allegations. It’s not just DOL but NGOs and other U.S. government and foreign governments that put out reports all the time that are very useful to us. The DOL list will have garments from Bangladesh, for example. You will not see a withhold/release order [a detention] for that because that would [hurt] the companies that are actively engaging on their supply chain. That would also be problematic for U.S. commerce.
WWD: What is the remedy? Are fines imposed?
K.J.F.K.: There can be fines imposed. There can be judicial seizures and the forfeiture of the merchandise. Once the finding is [made] and the goods are determined to be liable for forfeiture, that starts court proceedings. But companies can continue the process and push back in the international trade court, saying: “You’re wrong. These are not produced with forced labor and here’s how we can document for you.”
WWD: What is ICE’s role?
K.J.F.K.: We have parallel investigations. Where [Customs and Border Protection] looks for a civil or administrative penalty and possible forfeiture down the road, we look for criminal charges against either the officers of the company or the importers, or whoever has knowledge of the forced labor and the nexus that we could prosecute through the Department of Justice. CBP would be the lead on non-criminal matters. We would be the lead on criminal matters.
WWD: So there a criminal [prosecution] aspect of this? If they are using forced labor, can that in and of itself be prosecuted?
K.J.F.K.: It can be prosecuted for having knowledge of this. You can be prosecuted for benefiting from a scheme of forced labor. If all of the company’s stock and officers are located overseas and never come to the U.S., we do not have jurisdiction. We would have jurisdiction over the buyer here in the U.S. if we find out that they knew they were buying goods produced with forced labor — or the importer, same idea. If the location is overseas where the forced labor has a sister corporation here in the U.S., that gives us possible or potential jurisdiction.
Does it have to take the full 90 days for resolution? Can a company be cleared earlier?
The 90-day period is the outside stretch. During that time, of course, the goods are sitting in a warehouse and they are not entering U.S. commerce. So companies are basically losing money because they can’t get their goods to market. Companies normally are incredibly motivated to present as much information as quickly as possible. It would behoove companies to have this information readied. Some companies have corporate sustainability coordinators or social responsibility managers that would have all of this at their fingertips anyway.