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U.S. Customs Expands Enforcement Against Forced Labor Imports with Seizure of Malaysian PPE

Client Updates

On March 29, U.S. Customs and Border Protection (“CBP”) announced that it will begin seizing imports of certain disposable gloves manufactured by Top Glove Corp. Bhd. (“Top Glove”), the world’s leading producer of disposable rubber gloves based in Malaysia, upon determining that sufficient evidence exists to support a finding that Top Glove is manufacturing the products with the use of convict, forced, or indentured labor.1  

The measure highlights both CBP’s expanded enforcement against forced labor imports and the need for U.S. importers to ensure ethical supply chains by maintaining a comprehensive and transparent social compliance system as a critical component of their broader CSR/ESG initiatives. 

The Basics

Section 307 of the Tariff Act of 1930 (19 U.S.C. § 1307) prohibits the import of merchandise mined, produced, or manufactured, either wholly or in part, in any foreign country by prohibited forms of labor, including slave, convict, indentured, forced, or indentured child labor. Such merchandise is subject to exclusion and/or seizure and may lead to criminal investigation of the importer.

When information that reasonably (but not conclusively) indicates that merchandise produced by forced labor is being or is likely to be imported, the CBP Commissioner may issue withhold release orders (“WROs”), or internal instructions to all port directors to suspend the release of specific merchandise into the U.S. commerce pending further instructions as to whether the merchandise may be released otherwise than for export.2

Importers of merchandise subject to WROs may contend, within 3 months after the date of import, that the merchandise is not produced by a prohibited form of labor by submitting (i) a certificate of origin (“Certificate”) signed by the foreign seller; and (ii) a detailed statement (“Statement”) demonstrating the goods were not manufactured with forced labor.3 Alternatively, the importer may export the merchandise to a location outside the U.S. within the 3-month detention period.4

If the importer fails to either re-export the detained shipment or timely furnish the required Certificate and Statement, or CBP determines that the evidence submitted by the importer does not establish admissibility of the merchandise, the detained shipment will be excluded from entry.5

Moreover, if the CBP Commissioner ultimately makes a formal finding that the imported merchandise subject to a WRO is being produced with forced labor (as was the case with the Top Glove products), CBP port directors may seize the covered merchandise and commence forfeiture proceedings.6

Compliance Takeaways

There is no denying that CBP has and will continue to make aggressive use of its import authorities in order to combat the practice of forced labor.  In FY 2020 alone, CBP issued 13 WROs, eight of which were against goods made in China.  So far in FY 2021, CBP has issued four additional WROs (most notably, the January 2021 WRO on cotton and tomato products produced in China’s Xinjiang Uyghur Autonomous Region) and made two formal findings (including against Top Glove).  Overall, CBP maintains 47 active WROs, covering a litany of products from around the world.7

Given the impact that WROs can have on companies and their supply chains, it is critically important for importers to create and maintain a social compliance system that ensures that merchandise is not and will not be subject to a WRO due to forced labor concerns.  Such a system, which should fit within a company’s overall CSR/ESG initiatives, should include a comprehensive set of policies and procedures through which a company seeks to ensure maximum adherence to the elements of its code of conduct that cover social and labor issues.         

In this regard, CBP recommends that companies look to the U.S. Department of Labor’s Comply Chain principles8 for guidance on establishing a best-in-class social compliance system.  While such systems undoubtedly will vary from industry to industry, the Comply Chain principles stress that a good social compliance system nonetheless should be comprised of the following eight components, functioning in a harmonious way:

  1. Engage stakeholders and partners
  2. Assess risks and impacts
  3. Develop code of conduct
  4. Communicate and Train across your supply chain
  5. Monitor compliance
  6. Remediate violations
  7. Independent Review
  8. Report performance and engagement

While a company may not be able to establish complete oversight and control over every actor (e.g., vendors, agents, producers) in its supply chain, it is still vitally important that its social compliance system is set up such that the company not only avoids causing or contributing to forced labor though its own activities, but also seeks to prevent or mitigate adverse labor rights impacts connected to its business operations via relationships with third-parties.

As such, the Comply Chain principles emphasize that social compliance systems should prioritize those areas of a company’s supply chain where the risk of egregious labor abuses is most significant (whether due to the operating context, the products or services involved, or other relevant considerations) and, when necessary, where the company has the greatest leverage to effect meaningful change.

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